After such a bad year – and an even worse one predicted – US firms may struggle to remain committed to the London market
The table published today showing the top 30 largest US firms in London by revenue underlines how tough conditions have become for all participants in the legal market.
Total revenue, when compared in dollars, fell at 18 of the top 30 firms. One of the biggest drops came at Cadwalader Wickersham & Taft, which saw a 31.6 per cent decline in 2008, from $54.1m in 2007 to $37m.
The drop in revenue would have been expected at a firm that has endured one of the most torrid periods of any US firm, with two rounds of layoffs and the walkout of a seven-partner team to Paul Hastings.
Other significant fallers include Dechert, where total revenue fell by 18 per cent, from $112m to $91.8m; Reed Smith, down 14 per cent, from $185m to $159m; and Latham & Watkins, down 13 per cent, from $172m to $150m.
Indeed, the majority of US firms saw their City revenues decline during 2008, and few will be putting much faith in seeing a rebound in 2009. One US firm’s London head told The Lawyer that his year so far had been “shockingly bad”.
However, not every US firm in the City is bemoaning the dearth of transactional work. Among the firms that are likely to benefit from the current turbulence is WilmerHale, which has some 35 international arbitration lawyers based in London, augmented by additional lawyers in the US.
WilmerHale joint managing partner Bill Perlstein points out: “The London office was involved in a number of significant arbitrations during the year, involving telecoms, oil and gas and technology investments, as well as a public international law boundary dispute in Sudan.”
Perlstein adds that the firm’s competition lawyers have been involved in several Office of Fair Trading (OFT) investigations and litigation. Notably, WilmerHale obtained a public apology from the OFT for its client Wm Morrison Supermarkets relating to a defamation claim.
But an upturn in disputes is unlikely to keep the behemoths of the London market satisfied during a rocky 2009.
The results for 2008 – and the anticipation of worse to come in 2009 – raises questions over the continuing commitment of US firms to London. However, many in the market remain bullish about the long-term prospects for the majority of US firms.
Jomati principal Tony Williams says: “Most US firms are committed enough to London now to ride out the storm, but they’re looking at the gene pool and may use the current conditions as a way of easing people out.”
Williams adds that, if average profit per equity partner figures in the US continue to fall, then the London offices of US firms would face even more pressure than at present. “Don’t rule out some offices getting smaller, and others will use the downturn to broaden and deepen the office while laterals and teams are more available and cheaper than two years ago,” Williams argues.
Although the vagaries of the turbulent market are the main reason for US firms’ falling fortunes, currency fluctuations should also be taken into account.
Every firm in the table will have been affected to some degree, although those with London offices that bill primarily in sterling may show more significant reductions in the year-on-year comparison in the table as a result of the conversion to a dollar figure.
For example, the sterling figure for 2008 for the London office of K&L Gates was £32.6m, a 3.5 per cent rise on 2007’s £31.5m. Post-conversion to dollars, K&L Gates shows a 6.2 per cent revenue drop.
“We saw an increase in turnover year over year in sterling,” says Tony Griffiths, K&L Gates London administrative partner. “Clearly the dollar equivalence was affected by the drop in value of sterling from September onwards.”
Click here to view table – Top 30 Firms in London by City revenue