The European 100 2014: Global calling

For the first time, The European 100 takes a look at the international firms operating in Europe

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The European 100 has traditionally focused exclusively on independent firms. This approach excluded any firm that is a member of a branded international alliance and the European offices of international networks – although many firms operate a Swiss verein or similar structure with limited financial integration, the benefits of cross-referring between offices makes their models quite different to the European 100.

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 .

However, this plays down the impact of international firms on the European legal market. Particularly in France, Germany, the Netherlands and Russia, the big US and UK-headquartered players are dominant in corporate and finance work, with only a few of the larger independents able to compete for the biggest deals.

In Italy and Spain the internationals have always found things tougher, with the volatile market in the former and the size and power of Spain’s big three firms making competition harder.

But the number of lawyers spread across the continent means that the 25 biggest international firms in Europe would all make it into the European 100 by either headcount or turnover.

In some jurisdictions, the international firms are the largest legal employers. This is the case in Germany, where Freshfields Bruckhaus Deringer , CMS Hasche Sigle, Clifford Chance , Taylor Wessing , Linklaters and Hogan Lovells all employ more lawyers than the biggest German independents. This is largely because all entered the country via domestic mergers several years ago and have consolidated the market position held by the legacy German firms.

Headcount

Most international firms were happy to provide a breakdown of their headcount across Europe, splitting the figures by jurisdiction and type of employee. But a handful of firms either would not or could not provide this breakdown, including CMS. The continent’s largest legal network, which has nine member firms in Continental Europe plus several Continental offices for its UK member CMS Cameron McKenna , declined to give figures. 

Three other firms also declined to provide European headcount data – DLA Piper , Linklaters and Norton Rose Fulbright . Freshfields gave us Europe-wide data but did not break it down into jurisdictions. 

On the basis that all these firms are sizeable players in the global legal market, we estimated headcount figures using information available publicly on their websites and extrapolating total staff numbers from the information they provide for The Lawyer UK 200 Annual Report. All the firms were sent the estimates in advance of publication.

Turnover 

Originally we planned to produce a ranking of international firms in Europe based on their European revenues, but only seven firms provided this data. 

Of these, Baker & McKenzie has by far the highest turnover figure, with revenue of over €500m across Europe in 2013, dwarfing Garrigues , the largest independent firm by turnover.

For Bird & Bird , the next-largest firm to reveal revenue, its €182m turnover from Continental Europe is equivalent to 62 per cent of its global figure. The €124.7m produced by Taylor Wessing’s Continental Europe offices, predominantly Germany, represents almost half of the firm’s total income.

Recently-merged King & Wood Mallesons SJ Berwin ’s €69.17m revenue from Europe last year was equivalent to 30 per cent of turnover globally.

Six firms gave an indication of the amount by which their European revenue had increased last year. All grew, with rates ranging from 4 per cent at Baker & McKenzie to a chunky 32 per cent at Greenberg Traurig, although European fees represent just 3 per cent of global turnover for the latter.

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Diversity

Although international firms generally perform better on the diversity front globally than their independent peers in Europe, this is not always reflected in their Continental partnerships.

At Freshfields, for example, women make up 11.4 per cent of the partnership globally but less than 10 per cent in Europe. The same goes for Linklaters.

But some firms do better in Europe. Almost a quarter of Hogan Lovells’ European partners are women compared with 22 per cent globally, and the same can be said of Norton Rose Fulbright. At Osborne Clarke , nearly 19 per cent of European partners are women compared with 12 per cent globally.

Leverage

Most international firms in Europe fall into a similar structure as their local rivals, with partner-to-associate ratios of between 1:2 and 1:3 the most common. Six firms employ more than four European associates for every partner – Linklaters, Freshfields, Shearman & Sterling , Squire Sanders , White & Case and Cleary Gottlieb Steen & Hamilton .

Cleary Gottlieb’s partner-to-associate ratio of 1:5.1 is the highest of the largest international firms in Europe. The firm has 54 European partners and another 275 lawyers. At the opposite end, Kirkland & Ellis , which does not make it into the top 30 international firms in Europe, has 17 partners and just 16 associates, all in Germany.

Network structures

Most of the international firms with a sizeable presence in Europe operate through a number of separate legal entities, but do so in a fairly integrated fashion. Some have a single legal entity for Europe which is part of a larger Swiss verein, for example Dentons , whose Europe LLP is essentially legacy Salans, a former independent member of the European 100.

CMS and Eversheds both operate more unusual structures. CMS is a European Economic Interest Grouping, a popular structure for cross-border companies, while Eversheds has a network agreement with many of its global offices. 

The constituent firms of CMS still operate very much as local firms, and in Belgium, France and Germany are among the largest in their individual markets.

Whether or not the individual legal entities within a European network share liability or profit, the benefits of being part of an international firm can be huge in today’s increasingly cross-border market. As independent firms begin to use more joint pitching to win multi-jurisdictional pitches, international players already have the necessary co-ordination in place.

On the flip side, there are costs in maintaining a global structure and the bureaucracy and politics of big firms continue to drive lawyers to set up their own boutiques.

There have been a number of launches in the past year, especially in Belgium, France, Germany and the Netherlands, and more senior lawyers or keen associates from large independents or international firms keep on leaving to go it alone. Some of these are already making a mark in their local markets, taking clients from their former firms to win roles on chunky mandates.

But international firms have demonstrated their commitment to Europe in the past year, with new entrants to the Belgian, French, German, Italian and Spanish markets among others. Although some practices have slimmed down or withdrawn, most jurisdictions have seen a net gain in the number of firms present.  Notable arrivals include Herbert Smith Freehills in Germany, Osborne Clarke in Belgium and France, and Clyde & Co and White & Case in Spain.

Growth market

The resources that many international firms devote to Europe show that while much of the recent focus has been on developing markets in Asia and Africa, there is an awareness that there is still plenty of money to be made in the continent.

Although a few have cut back in some jurisdictions – for example Shearman & Sterling in Germany and Fried Frank Harris Shriver & Jacobson in France – the emphasis continues to be on growth. We will gain a better picture of this as we continue to look at international firms’ presence in Europe in the coming years, and gain more insight into which jurisdictions will help drive them forward.

International
International

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 .