Linklaters

Linklaters proved in 2005-06 that its three-year reorganisation strategy, which began in 2004 in response to falling profit and stagnant revenue and which resulted in the de-equitisation of several partners, has borne fruit.

PEP broke £1m for the first time. It hit £1.06m, following a staggering 26 per cent increase in 2005-06. The new PEP figure of £1.06m is almost equal to the firm's top of equity figure of £1.07m for the previous year. Top of equity for 2005-06 jumped up to £1.32m, while the bottom reached £528,000, up from £425,000 in 2004-05. Linklaters operates a 10-year lockstep, with the bottom of equity starting at 10 points and culminating in 25 points at plateau.

The impressive increase was driven by a 16 per cent rise in turnover to £935m. It is also the result of a 29 per cent increase in overall net operating profit for 2005-06 and a combined 58 per cent increase over the past two years.

No surprises, then, that Linklaters kicked off this year's salary increases, raising newly qualified lawyers' salaries by 6 per cent to £55,100 to set a new market standard. It also introduced a raft of new work-life balance benefits for the firm's legal and support staff, including a formal 'time in lieu' scheme.

Managing partner Tony Angel attributed the improved profitability to the firm's three-year reorganisation strategy, which ends in April 2007. The strategy has seen the firm adjust its global infrastructure, cost base and partnership, bolstering the profit margin to 40 per cent.

Furthermore, Linklaters' strategy to focus on complex cross-border transactional work for a 'platinum' core group of banking and corporate clients has also helped the firm to achieve its financial targets a year ahead of schedule.

This group of clients will remain a focus for the firm as it looks to develop a new three-year strategy leading up to 2010. The review, launched in September 2006, focuses on growth in China and the US, as well as how to react to the opening up of the legal markets in India and Korea. It also coincided with former corporate head David Cheyne's appointment to a five-year term as senior partner on 30 September, replacing incumbent Anthony Cann, who plans to retire after 37 years with the firm.

Cheyne's appointment was just one of a series of management changes at Linklaters during 2006. Earlier in the year, the firm revamped its senior governance body including the addition of Marc Harvey and Michael Kent to its international board as the Asia and London corporate representatives respectively.

Asia and the US are already key focuses for Linklaters, which spent 2005-06 successfully bedding down its international initiatives. The firm has seen impressive growth across all jurisdictions, with the exception of São Paulo in Brazil, which suffered flooding for three months during 2005.

The booming Chinese corporate and financial markets generated the magic circle firm's most impressive results. The Tokyo office also remains one of Japan's largest and most successful fully merged English, Japanese and US practices.

In New York, Linklaters continues to implement an aggressive growth strategy. The office has grown by a staggering 300 per cent since 2003 under the leadership of highly regarded New York managing partner Paul Wickes. This was despite the notable loss of US head of corporate Mark Palmer and his team to Bracewell & Giuliani.

Meanwhile, Linklaters formally opened an office in Dubai in November 2005 following a raid on magic circle rival Clifford Chance. Linklaters also considered a tie-up in Italy with Milan-based M&A boutique Giliberti Pappalettera Triscornia e Associati in an effort to re-establish a local law capability, but talks quickly stalled.

Much of the firm's success was again driven by the finance and corporate practices. The global corporate group turned over £374m in 2005-06, while finance shot up by 24 per cent to £318m.

The London corporate team accounted for half of the global figure, with a revenue of £160.3m. In fact, the firm's M&A practice has been near unstoppable during the past 12 months, with a string of high-profile deals. One mandate that stood out was Gold Fields' seven-month successful defence against Harmony's $8.1bn (£4.4bn) hostile takeover approach. But Linklaters was also left struggling to rebuild its private equity capability after the defections of partners Graham White and Raymond McKeeve to Kirkland & Ellis in March.

Similarly, London finance grew by 21 per cent to £174m. Capital markets continues to be the largest driver of the group, accounting for around 50 per cent of income, or £159m, with banking generating £111m, or 35 per cent, and projects accounting for £48m. Linklaters was also the only firm where the finance practice's revenue per partner (RPP) broke through the £2m barrier.

However, it was not all positive news for the magic circle firm. It claimed to be too busy for pro bono activities and withdrew its trainee support for human rights campaigner Liberty and the Tate museums, reallocating the trainees to the City. Proof that Angel is still willing to take 'the tough love' approach where profitability is at stake.

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