The UK200 2011
28 February 2011
24 October 2011
12 June 2006
10 February 2011
29 May 2006
Linklaters came in just £19m short of magic circle rival Clifford Chance when it announced its turnover for the 2010-11 financial year, showing that the arms race at the top of the market was back on.
Turnover (£m): 1,200.00
Average PEP: 1,225
Equity spread (£k): 624-1,559
Profit margin (%): 43
RPL (£k): 564
The Silk Street firm posted an annual income of £1.2bn, its highest since 2008-09, when it turned over £1.3bn. The figure represents a 1 per cent increase on the 2009-10 financial year, when the firm brought in £1.18bn.
The hike is roughly in line with the marginal growth across the market.
Profitability is strong, with Linklaters boasting a top of equity of £1.56m, lower only than those of Allen & Overy (A&O), DLA Piper, Gordons and Slaughter and May. Partners at the top of the lockstep, which number some 125, took home £84,000 more than their counterparts at magic circle rival Freshfields Bruckhaus Deringer and a whopping £319,000 more than the top earners at Clifford Chance.
Linklaters’ profit margin lags behind Freshfields’, however, at 43 per cent compared with Freshfields’ 48 per cent. Although those at the top of Freshfields’ equity earn less, Linklaters’ average profit per equity partner (PEP) rose by 1 per cent to £1.23m compared with its rival’s figure of £1.31m. The move towards a partnership consisting of a larger proportion of equity partners is no doubt a factor: just over 93 per cent of partners are part of the equity, or 442 out of 473 partners as an average over the year. Managing partner Simon Davies says a full-equity partnership is not on the cards.
The firm’s performance grew through 2010-11, with revenue in the second half of the financial year up by 9 per cent on the first-half results. Second-half turnover was up by 5 per cent on the same period’s in 2009-10. The firm has reason to be optimistic going forward.
Davies says the firm has broadened its income sources after a period in which its success had to a large extent been based on its ability to capitalise on the volume of distressed M&A work available. It has double figures of energy deals on the go at once and has bolstered its showing in other areas, such as corporate, financial regulatory and capital markets.
But corporate remains the firm’s sweet spot, both in London and abroad, with the M&A team advising on key deals such as the proposed merger of NYSE Euronext and Deutsche Börse, where a Düsseldorf-led team acted for the German stock exchange opposite New York firm Wachtell Lipton Rosen & Katz. Corporate contributed 39.6 per cent of global revenue in 2010-11, slightly up from 38 per cent in 2009-10. Finance turnover dropped marginally relative to the rest of the firm, at 39 per cent compared with last year’s 40 per cent.
If there is one key source of tension in the firm, it is the relative weakness of its private equity practice when put up against its market-leading corporate and banking offering. The small but solid private equity practice is perceived as more of a mid-market outfit, meaning that if the firm wishes to advise on deal financing too, banking partners are either forced to stoop to a level below their usual activity or leave their private equity colleagues with minimal support. It is an open secret that tensions exist
between the two practices, an historical culture clash that has never quite been resolved.
On the international front, Italy and Germany remain core focuses as Linklaters aims to expand on Continental Europe, while the Middle East and Asia stand high on the agenda following an Abu Dhabi launch this year. Asia revenue increased by slightly over 10 per cent, up to £137.6m, while Dubai enjoyed a 13 per cent turnover hike. Revenue out of New York increased marginally.
Davies sees Africa as an opportunity – the firm currently serves the continent out of London, Paris, Lisbon and Brussels – but he claims Linklaters has no plans to open on the ground by following in the footsteps of A&O, Clifford Chance and Norton Rose.
But with rivals such as Clifford Chance beefing up in emerging markets as the
turnover war hots up, Linklaters may have no other option.