Linklaters smashes £1m PEP barrier

Linklaters average profits per equity partner (PEP) has broken the £1m mark for the first time following an impressive 26 per cent increase in PEP.

The magic circle giant’s average PEP reached £1.062m for the 2005-06 year, up from £843,000 in 2004-05. This places Linklaters in direct competition with Slaughter and May – the only other UK firm with average PEP above the £1m barrier.

At the same time, Linklaters has reported a 16 per cent increase in turnover to £935m, bringing the firm within touching distance of the billion-pound mark and magic circle rival Clifford Chance, which is yet to reveal its financial results for 2005-06.

A spokesman for the firm attributed the firm’s success to a reorganisation of the firm’s global infrastructure which had improved the profit margin.

Further to this, he said the firm had been implementing a three-year plan which includes a focus on complex cross-boarder transactional work for a ‘platinum’ core group of banking and corporate clients. The firm has already achieved the financial targets of this plan, a year ahead of schedule.

A restructuring of the firm’s cost-base and partnership undertaken over the last three to four years, which included the de-equitisation of several partners, has also had a flow-on effect on profitability.

Linklaters new average PEP figure is almost equal to the firm’s top of equity figure of £1.065m last year. As such, top of equity for 2005-06 has been bumped up to £1.32m, while bottom of equity becomes £528,000, up from £425,000 in 2004-05.

The spokesman explained that the new figures were based off a 29 per cent increase in overall net operating profit for 2005-06, or a combined 58 per cent increase over the last two years.

He said the firm has also seen impressive growth across all practice areas and jurisdictions, with the exception of São Paulo, Brazil, which suffered flooding for three months last year. However, he did admit that the continued resurgence of the corporate and financial markets and the growth of the Chinese market generated the most impressive results.

The increases consolidate the firm’s successful 2004-05 year, when PEP leapt 25 per cent to £843,000 and turnover increased 12 per cent to £805. That increase reversed the firm’s disappointing results for 2003-04, when PEP slumped 8 per cent from £734,000 to £674,000.

The impressive 2005-06 financial results mean that the firm has outperformed its budget by 19 per cent, which will trigger a profit-related pay scheme for all of the firm’s staff. All staff in London will receive a £2,400 bonus, up from £1,900 last year.

Meanwhile, Linklaters kicked off this year’s associate salary increases last month, raising newly qualified lawyers’ salaries by six per cent to set the City’s new benchmark of £55,100.

Linklaters promoted 32 lawyers to its partnership this year, while the firm also raided Clifford Chance for two lawyers to launch in Dubai last November.

The firm is now gearing up for its senior partner elections in the coming months following incumbent senior partner Anthony Cann’s decision to step down from the role. Former head of corporate David Cheyne, finance head Giles White and head of restructuring Robert Elliott have all been linked with the role.