The European 100 2014: Seeds of change

It’s been a hard slog, but European firms are finally growing, with combined turnover up by €200m to hit €8.2bn in 2013

This year marks the fifth year in a row that The Lawyer has produced the European 100. Our annual ranking of the continent’s top 100 independent law firms has evolved over that time – the 2010 edition, which looked at 2009 figures, had some gaps that have since been filled as firms have grown, merged and changed and our knowledge of the European legal market has improved. 

The 100 constituent members of the European 100 2014 together brought in about €8.2bn last year. The figure must be caveated slightly: a gradually decreasing, but still significant, number of firms still decline to provide turnover figures. However, a growing number of the turnover figures that are marked as estimates are now guided more heavily by firms, making each successive report more accurate than the one before.

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This is an executive summary. To access the full report with profiles of the top 50 firms and detailed analysis of historical trends, click here.

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The total figure is a rise of just under €200m since 2012, as once again the continent’s legal market was hit by wide variances in performance. Turnover changes ranged from a massive 57 per cent hike at Belgian firm Liedekerke Wolters Waelbroeck Kirkpatrick to an 11 per cent drop at Norway’s Selmer.

Liedekerke’s results, which include strong organic growth, are skewed by the successful completion of several large matters last year. The next largest rises came from Italy’s Bonelli Erede Pappalardo, which said its revenue had risen by 17.6 per cent although it did not provide a figure, and French firm Jeantet Associés, with a hike of 17.5 per cent.

Single-digit growth was the most common result, though. About 30 firms had turnover rises of less than 5 per cent, while there were 16 turnover decreases of less than -5 per cent.

Turnover

Finland, France and Germany were the best-performing jurisdictions last year. Four French firms – Jeantet Associés, Fromont Briens, Racine and De Gaulle Fleurance – had turnover increases of 10 per cent or more. Four Finnish firms – Borenius, Castrén & Snellman, Hannes Snellman and Krogerus – reported revenue rises of more than 8 per cent.

The same went for Germany, with Noerr , Heuking Kühn Lüer Wojtek and Kappellmann und Partner all providing turnover increases of over 8 per cent and Schultze & Braun’s estimated rise in the same region.

Last year, figures for the Scandinavian countries were heavily skewed by the strength of the Norwegian and Swedish kroner, the currencies in which most firms in these jurisdictions provide figures.

In an about-turn, this year the rankings and results for the Norwegian and Swedish firms were adversely affected by much weaker exchange rates between the kroner and the euro. Accordingly the rankings and figures in euros this year show larger negative changes than was actually the case. 

Nevertheless, the economies in both Norway and Sweden were tougher last year. All five Swedish firms in the European 100 reported a turnover drop between 2012 and 2013, ranging from less than 1 per cent at Mannheimer Swartling and Vinge to -8 per cent at Setterwalls.

Things were a bit better in Norway. Steenstrup Stordrange reported a turnover rise of 8 per cent and BA-HR an increase of 11.5 per cent. Haavind’s turnover was more or less stable. Both Thommessen and Wiersholm said revenues had dropped slightly.

Reportedly things were also difficult in Denmark, although with only Gorrissen Federspiel providing a turnover figure it is harder to gauge the reality. 

A recent report by the Association of Danish Law Firms suggested revenue across the market had dropped by 10 per cent, although Danish lawyers point out that very few firms are transparent about their numbers.

Nevertheless, Gorrissen’s turnover was down by just under 5 per cent last year and several of the Danish firms that did not provide figures gave an indication that their revenues had also dropped.

M&A work

For the first time, this year we asked firms for practice area breakdowns. Not every firm gave an indication of the proportion of revenue or the number of partners in key teams, but the majority of those that did were dominated by corporate work.

Accordingly, the picture of growth or decline can be mapped fairly well against M&A activity across Europe. According to Thomson Reuters data, in terms of volume and value, Europe-wide M&A fell between 2012 and 2013. 

But the picture was mixed across the jurisdictions. In France, the total value of deals rose by 54 per cent year-on-year, although the volume dropped slightly. German M&A value was also up by 46 per cent, also with a fall in volume.

The Benelux countries also saw a pick-up in value but a drop in volume.

In Italy, deal volume increased but value fell. Spain saw a dramatic fall in value of almost 75 per cent but volume was down by a lesser margin of 14 per cent. 

M&A value across the Nordic countries fell by 16 per cent, with volume down by only 2.5 per cent.

Headcount

European firms did not do much hiring in 2013, with the total headcount of the European 100 remaining broadly steady at just under 22,000 lawyers. However, many firms are increasing their partner numbers and there was a net gain in partners of 180, from 6,422 partners across the 100 firms to just over 6,600 last year.

A number of firms reduced their support staff headcounts too, perhaps in recognition that clients are still on the hunt for value. Several have increased their fee-earner numbers to address cost issues, while at the same time adding to the partnership to meet demands for advice to be provided by senior, experienced lawyers.

Just over a third of the European 100 have a partner-to-associate ratio of 1:2 or lower. A further third have a ratio of between 1:2 and 1:3, and 22 firms employ between three and five associates for every partner.

Five firms – four of them German – employ more partners than associates. Indeed German firms cluster towards the low end on this metric.

In contrast, Austria’s CHSH Cerha Hempel Spiegelfeld Hlawati and Russian giant Egorov Puginsky Afanasiev & Partners both employ more than seven associates for every partner. CHSH brought its partner-to-associate ratio down slightly last year, from 1:7.9 in 2012 to 1:7.4, while Egorov Puginsky’s remained static at 1:7.1.

The year ahead

Despite the discrepancies in performance, the indications are good that the end of 2013 saw a pick-up in activity. Managing partners in European countries from north to south said the last few months of the year were extremely busy and that activity has continued into 2014. Several commented that things seemed to be returning to “normal” after years of crisis and recession. 

If that continues, 2014 ought to be better for many than 2013. But most are wary of predicting too much too soon. Budgets remain cautious and the emphasis on keeping down costs is high. Meanwhile, the search for better overseas connections continues, with all firms looking to make the most of any cross-border opportunities.

Europe’s legal market is not yet out of the woods, but the overall trend is upwards.

Benelux

The picture emerging from Belgium, Luxembourg and the Netherlands last year was pretty mixed. 

Oot of the large Benelux firms, it Stibbe was the only firm that reported any significant turnover increase, with  revenues rising by 8 per cent from €127m to €136m. 

De Brauw Blackstone Westbroek, Loyens & Loeff and Nauta Dutilh all had flat years, while Houthoff Buruma reported turnover had dropped by 3.2 per cent.

Firms operating in a single  jurisdiction firms performed better than their multi-jurisdictional peers. In Luxembourg, Arendt & Medernach reported growth of 9.8 per cent, providing figures for the European 100 for the first time.

Liedekerke Wolters Waelbroeck Kirkpatrick’s stand-out 57 per cent turnover hike included both organic growth and some large one-off matters. 

Smaller Belgian firm Eubelius also reported a turnover rise, albeit only 1.5 per cent.

De Brauw, Loyens and Stibbe were the only independent firms to feature in Thomson Reuters’ top 10 M&A adviser rankings last year. Loyens topped the table by volume, acting on 38 deals, and was fourth by value. De Brauw was third by volume and came second by value to Allen & Overy .

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France

All of the 12 French firms featured in the European 100 said that revenue had risen last year. 

Of the 12, 11 provided figures – only Bredin Prat declined to talk about its financial results – making the data extremely reliable.

Jeantet Associés recorded the highest turnover increase, with a 17.5 per cent hike between 2012 and 2013 to €39m. Employment-focused Fromont Briens was close behind, with growth of 13.8 per cent to €37m.

Racine made its debut in the European 100 after a 10.1 per cent rise in turnover to €30.5m.

The bigger French firms had a less outstanding, but still decent, year. Darrois Villey Maillot Brochier reported a 2 per cent rise to hit the €50m mark, and August & Debouzy managed to turn around a weaker 2012 to produce a revenue increase of 6.8 per cent to reach €42.4m last year. 

At the top end of the market,
Fidal ’s revenue rose by 1.5 per cent, with work coming predominantly from outside the capital, and Gide Loyrette Nouel had another static year.

When it came to M&A work, brand new boutique BDGS Associés topped the Thomson Reuters league tables by value. Founded
by a group of Gide partners in early 2013, BDGS advised on seven deals worth $17.6bn last year, beating established domestic and international practices in the process.

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Germany

Europe’s legal engine trundled on last year, but like the wider German economy, things did slow down. Nonetheless, the majority of German law firms saw comfortable turnover growth.

The only German firm to report a turnover drop was Buse Heberer Fromm, of 2.3 per cent. This resulted in turnover falling from €39 .7m to €38.8m, so in monetary terms it was a modest decline. 

Most German firms said turnover had grown in single digits, with several reporting growth of 5 to 10 per cent. The greatest growth was at Noerr. The firm’s revenue is closing in on €200m, with a 12.2 per cent rise to €190.8m last year.

SKW Schwarz also saw revenue growth, bringing it into the European 100 in equal 97th position with turnover of €30.5m. Hengeler Mueller and P+P Pollath + Partners were the only German independents to feature in Thomson Reuters’ M&A top 10 for the jurisdiction last year, alongside Hengeler ’s Dutch best friend De Brauw Blackstone Westbroek and seven international firms. Hengeler topped the table by value.

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Italy

With 2013 GDP falling by 1.9 per cent, Italy’s economy is refusing to come out of the rut it has been in for several years. This is impacting on the legal market, but to a much lesser extent than might be expected. 

For most firms growth has essentially stalled. Although Bonelli Erede Pappalardo still did not provide revenue figures, it did say that turnover had grown by a market-beating 17.6 per cent last year.

Gianni Origoni Grippo Cappelli & Partners, which did provide figures, gave a 3 per cent increase to €107m, and NCTM said its revenue was in line with the previous year’s, for the fourth year running.

Once again, Italy’s independent law firms dominated the M&A league tables. Bonelli topped the rankings by value, with Chiomenti close behind. Chiomenti was top by volume, advising on 39 deals.

Smaller firms also got a look-in in Italy. The rankings included d’Urso Gatti e Bianchi, which came fourth behind Bonelli, Chiomenti and Gianni Origoni by value, and corporate boutiques Studio Legale Carbonetti and Gattai Minoli & Partners, which was set up in January 2013 by former Dewey & LeBoeuf Italy head Bruno Gattai.

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Spain

Once again the picture in Spain is gloomy, but with a few rays of light peeping through. Two of the country’s big four firms saw revenue grow last year – Cuatrecasas Gonçalves Pereira by 1 per cent and Uría Menéndez by 2.9 per cent.

Garrigues ’ August financial year-end contributed to 1.7 per cent turnover fall, with managing partner Fernando Vives saying things picked up in the autumn. Gómez-Acebo & Pombo also reported a turnover drop, but the decline rate slowed between 2012 and 2013.

Indeed Uría, Cuatrecasas and Garrigues all had solid years on the corporate front, picking up the lion’s share of what little M&A there was. Uría narrowly beat Garrigues in the rankings by value, with both firms acting on 33 deals last year.

Spain has a new entrant in the European 100 this year, in the shape of Cremades & Calvo-Sotelo. The firm took on the Madrid and Marbella offices of UK firm Irwin Mitchell last year, and enters the European 100 with an estimated turnover of €43m.

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