Freshfields culls finance to focus on corporate
The full extent of Freshfields Bruckhaus Deringer‘s restructuring has been revealed by The Lawyer (5 February).
The Lawyer has revealed that 100 partners will be removed from the equity by the end of the financial year. Freshfields chief executive Ted Burke chose The Lawyer’s February podcast (www.thelawyerpodcast. com) to explain why.
“We didn’t have the financial performance that we think is necessary or appropriate for a firm of our calibre,” Burke explains in the podcast. He goes on to say that, while the £40m restructuring costs will have a significant impact on this year’s figures, the 2007-08 financial year should see an impressive improvement.
The firm is reinventing itself as a corporate powerhouse, with the finance department on the receiving end of much of the pruning. There will be cuts from the asset finance and project finance teams.
The emphasis will be on retaining a strong sponsor-led acquisition finance group to complement its M&A activities as well as keeping resources in restructuring and some structured finance.
In tandem with the partnership restructuring, Freshfields has undergone a sweeping client review that has resulted in an overhaul of its management team. The firm has instituted 12 industry sector heads, who should know their areas inside out. These heads will work more closely with practice area managers to ensure that conflicts are managed better.
Firms institute pedestrian retention plans
One of the biggest issues on managers’ minds during the past year has been associate retention. Most managing partners would agree with CMS Cameron McKenna managing partner Dick Tyler when he asserts that “associate retention is pretty much at the top of my agenda at the moment”.
As the M&A boom takes hold, the competition has shot up for associates with relevant experience. But retention rates of trainees plummeted at most firms during the last recession, meaning there are not enough associates. Added to this, the economic conditions mean that everyone is overworked, while many firms are reducing the size of their equity partnerships to boost profit, making the traditional career path less attainable and desirable.
Law firms are trying to deal with this vicious circle, but most are not being particularly imaginative. Most firms have now installed alternative career paths, which seems to add up to little more than creating a counsel position, an of counsel post or even a senior associate role.
Travers Smith is one such firm, but there is a word of warning from managing partner Chris Carroll.
“The aspiration of assistants these days is not always to work flat-out for partnership. Some seek part-time and flexible working arrangements, which we seek to accommodate,” he says. “Having said that, our business model wouldn’t permit every assistant to stay on in perpetuity in a senior of counsel role.”
Allen & Overy has been ahead of the game with most of these changes and is taking things a little bit further than most. The firm has now placed an associate on the firm’s management team, which is made up of key practice heads, international office heads and support function bosses.
IP boutique Bristows is reeling from the loss of five partners and five associates, who have quit to form a rival boutique named Powell Gilbert. The firm has put partnership promotions on hold as it struggles to come to terms with the loss of a fifth of the partnership.
Bristows is one of the last remaining all-equity partnerships in The Lawyer’s UK 100. At the other end of the spectrum is DLA Piper, which rivals often criticise for having a particularly tight equity partnership, thus inflating profit figures.
Just 29 per cent of its partners own equity in the firm. But DLA Piper doubled the amount of equity partner promotions last year, making up 18 across Europe, the Middle East and Africa.
The firm’s joint chief executive Nigel Knowles told The Lawyer (26 February) that the equity would continue to be increased.
White & Case plans wholesale board shake-up
White & Case is currently discussing what it will do when longstanding managing partner Duane Wall stands down in 2008.
The firm is using the change as an opportunity to reform its management team and start running it in a more corporate fashion, with more time devoted to management.
It is understood that the New York-headquartered firm’s partners favour retaining a full-time managing partner-style role.
But the existing eight-member management board, which is made up of fee-earning lawyers, would be replaced with a two to four-member full-time executive board overseen by the managing partner.
A further management-type committee of fee-earning partners would then be introduced to sit under the executive board to assist with the implementation of strategic decisions.
The firm has had a strong year financially, with a 67 per cent increase in average profit per equity partner in London to $1.28m (£670,000) and a 38 per cent rise in revenue, from $124.7m (£64.92m) to $172.2m (£89.65m).