Law firms’ year-end results have dominated the legal press in recent weeks. But it’s always the financial performance of the magic circle that really gets lawyers’ tongues wagging.
So when Lawyer2B.com’s sister title TheLawyer.com reported that Clifford Chance, which posted a 5 per cent fall in revenue from £1.33 to £1.26bn, had lost its crown as the UK’s largest firm by turnover it sent shockwave’s through the legal market.
After years of leading the magic circle Clifford Chance was forced to settle for third place behind Linklaters and Freshfields Bruckhaus Deringer, which announced revenues of £1.29 and £1.28bn respectively. Allen & Overy (A&O), meanwhile, stayed in fourth place even though its revenue jumped by 7 per cent from £1.01bn to £1.09bn.
But measuring a law firm’s success isn’t just about turnover. The other key indicator is profit per equity partner (PEP) (an equity partner owns a share of the business). Indeed, though A&O is the fourth largest firm it’s average profit per equity partner is still £1m. Linklaters and Freshfields tied at the top of the magic circle PEP ranking with £1.44m. In contrast, Clifford Chance’s PEP dropped by 36.3 per cent to £733,000.
Clifford Chance, however, isn’t alone in seeing its PEP fall below the psychologically significant £1m threshold. Other firms that have dropped out of the exclusive £1m club are Ashurst, Herbert Smith and most recently Macfarlanes.
One of the group’s smaller members, Dickson Minto, is yet to release figures but it looks a safe bet to drop below the magic million figure.
Of course, Slaughters is famously secretive about its financial performance, but even if the firm follows the current fashion for a 30 per cent fall in profits, with PEP of more than £2m last year it is unlikely to be toppled as the UK’s most minted law firm.
And it’s obvious why. Slaughters really is the ultimate deals machine. Earlier this week it advised British Gas owner Centrica on a bid for North Sea gas producer Venture Production (read article). The firm is also expected to scoop a mandate to act for flag carrier British Airways on its anticipated £500m rights issue (see story). Oh and there was, of course, the mandate to advise HM Treasury on the bank bail outs.
So it just goes to show biggest isn’t necessarily always the best.