Just when corporate lawyers thought it couldn’t get any worse, it did. A terrible 2002-2003 has been followed by 12 months that, at best, have been flat for corporate practices. Lawyers in London and Germany have been hunting largely in vain for big M&A deals.

Only in the spring, beyond the end of the financial year for most firms, did the market in London begin to show genuine green shoots of recovery. And confidence that these will flower is still shaky.

IPOs were again a non-event, which leads one to ask quite what all those equity capital markets teams formed to cash in on the investment banks’ IPO work are doing with themselves.

While AIM has continued to generate work, it remains the sort of mid-market stuff in which the big boys aren’t really interested. And the really bad news is that when the full list spluttered back to life in the first six months of this year, lawyers say that fee rates remained so poor it was hardly worth bothering.

In 2003, it looked as though contingency fees for IPOs and M&A might take off. The highest-profile example was Hugh Osmond’s failed bid for Six Continents, on which Slaughter and May negotiated an uplift from £1m to £15m for a successful takeover.

However, that deal looks increasingly like an anomaly. While clients are pushing for abort rates even in mainstream M&A, they aren’t offering an uplift on successful deals. It’s a lose-lose situation.

Poor market conditions aside, it is more difficult to make a meaningful inter-firm comparison in corporate than in any other sector, with the possible exception of litigation.

There are three problems. First, some firms throw everything but the kitchen sink into the corporate group. For internal accounting purposes, areas as varied as antitrust, commercial, energy, projects and media are included in corporate. We have therefore specified in the table where a firm includes anything other than pure corporate in its figures.

Second, if your firm has a partner sat in Bratislava who does a little bit of everything, do you still categorise them as corporate? Nobody seems to know.

And third, partnership structure makes a real difference. The figures are calculated on profits per partner rather than per equity partner, so revenue per lawyer for firms with a lot of salaried partners, such as DLA or even Macfarlanes, would look markedly different if the figure were calculated on a pure equity basis.

Having said all that, a corporate recession does not treat all firms equally. Make no mistake, falling profits in the magic circle and at City firms such as Ashurst are primarily due to a lack of international M&A. The corporate partners who were driving those firms in 2001 have had little to do in the last two years.

The mid-market held up well, however. Travers Smith Braithwaite, Macfarlanes and the national firms reported either static or improved figures for the corporate department. In Travers’ case, the corporate department was primarily responsible for a 6.5 per cent increase in profits across the firm.

But it’s tough at the top. It’s been anything but a vintage year for the big corporate beasts at the head of our table, Freshfields Bruckhaus Deringer and Linklaters.

To its credit, Freshfields did its best to entertain us by getting thrown off the Marks & Spencer (M&S) deal by its biggest corporate rival, Slaughter and May. As anyone who has not spent the year living in a cave will know, the magic circle firm was caught with its pants down on conflicts by accepting an instruction from Philip Green on his bid for M&S. Freshfields was deemed to be in possession of confidential information that was important to the bid because it had earlier advised M&S on its crucial Per Una contract with George Davies.

Many of Freshfields’ rivals reacted to the injunction with a magnanimous “there but for the grace of God go I”. Others believe it was simply out of line. Either way, the saga could have a major impact on M&A, with the big law firms insisting everyone must now be much more careful about conflicts. An opportunity for the chasing pack to grab a few mandates, perhaps?

In a poor market, Freshfields has held its own in

London, advising on the biggest deals, including the sale of Canary Wharf to Songbird, M&S and Debenhams. The firm will be particularly pleased with the Debenhams deal, which saw it snap up a first instruction from CVC Capital Partners and Texas Pacific partners as part of its London private equity push.

The instruction came thanks to conflicts at CVC’s usual advisers Clifford Chance and Ashurst, but was welcome nevertheless. Freshfields also made ground with Apax, earning an appointment to the private equity house’s first panel, although this was largely down to contacts of property finance partner David Ereira rather than the corporate department.

Less encouraging was the departure of Munich private equity trio Peter Nussbaum, Norbert Rieger and Rolph Fuger to Milbank Tweed Hadley & McCloy. Freshfields has a whopping 25 private equity partners in Germany and is easily the best-regarded firm for this type of work. However, the departure of Nussbaum et al has chopped the heart out of its mega-successful Munich office and rivals will be watching closely to see if the firm recovers this year.

Whatever Freshfields achieved in the private equity market last year, the firm still has some way to go before rivals give it as much credit as Linklaters.

The two firms took very different approaches, with Freshfields putting some of its best mainstream corporate lawyers onto private equity part-time and Linklaters taking on a dedicated private equity team from SJ Berwin three years ago. Former SJ Berwin partner Graham White has since had time to build a practice that is by far the best of any magic circle firm other than Clifford Chance.

As with Freshfields, however, Linklaters’ private equity push has been hurt by foreign defections to US firms. In this case, the source of the trouble was Paris, where private equity star David Aknin defected to Weil Gotshal & Manges last November.

The magic circle firm likes to present this as a trifle rather than a blow, but notably Aknin is already getting work from Wendel Investissement, one of his biggest clients at Linklaters.

Globally, corporate revenue at Linklaters was slightly down on last year, with pure corporate revenue down to about £210m from £216m. (The figures in the table relate to internal categorisation of the corporate department, which also includes many commercial functions.)

The Paris office was a major contributor to Linklaters’ bottom line. France was one of the strongest M&A markets in Europe and Linklaters snapped up two of the country’s biggest deals.

The firm, which was top of Mergermarket’s announced M&A deals table for 2003, had roles on both Alcan Aluminium’s $3.9bn (£2.4bn) hostile takeover bid for French rival the Pechiney Group, and on Sanofi-Synthelabo’s massive E48bn (£33bn) hostile bid for Aventis.

While it hasn’t been all sunshine and smiles at the top two, London corporate lawyers at Allen & Overy (A&O) and Clifford Chance have to fight a lot harder, not least against their own banking partners, which can easily conflict them out of the biggest deals by accepting mandates to advise on the financing.

A&O’s revenue per partner figure looks high, especially since anyone at the firm will tell you it has not been a great year in the London corporate department. Evidence of this is the fact that the firm has already told its corporate assistants there is no business case for partner promotions next year.

However, Clifford Chance makes A&O’s corporate department look like an oasis of contentment. At £1.16m, revenue per partner is significantly lower than that of its competitors. But at least Clifford Chance is moving to solve its woes. Germany is one of the least profitable regions, but here the firm has moved some partners from corporate into litigation.

That said, Clifford Chance needs to be quick because this year its private equity practice, the jewel of the corporate department, had a very close shave.

Last year was when the US firms really targeted private equity in Europe. Clifford Chance’s biggest star, Matthew Leyton, and long-serving private equity partner Jim Baird were almost snatched by Weil Gotshal.

Leyton handles the Permira relationship and is also key to the firm’s links with PPM Ventures, Apax and Candover. Clifford Chance has other good private equity lawyers, in particular Adam Signy, but if the pair had gone it would have been nothing short of a disaster. The duo were offered up to £1.1m each at Weil, but ultimately stayed loyal to Clifford Chance in the hope that it would put its house in order. The firm needs to tackle profitability quickly, or next time it may not be so lucky.

Looking down the chasing pack, it was a difficult year for Herbert Smith and Ashurst. After a few fantastic years for Herbies’ corporate department perhaps a slowdown was inevitable, but the practice had a pretty bad year, with few really good roles in London and a fall in revenue. Having said that, there are few structural problems; the corporate young guns just need to get some choice mandates as things pick up.

Ashurst has moved to streamline its corporate department at all levels, de-equitising several London partners. Earlier this year, the firm stepped up its assistant appraisal system, axing six on performance grounds. It has also relocated a small group of assistants from the relatively quiet corporate department to the strongly performing finance group. All sensible moves, given that profitability across the firm has fallen by around 12 per cent.

On the deals front, however, Ashurst had an excellent year. After a long struggle with the Competition Commission, it finally nailed down the acquisition of Safeway for Sir Ken Morrison and also picked up Freshfields’ mandate on M&S after Freshfields was injuncted.

Lovells also had a good year, with private equity partner Marco Compangoni leading the Barclay brothers’ protracted battle for The Telegraph. The private equity practice, with Compangnoni in London and Oliver Felsenstein in Germany, is undoubtedly the jewel of corporate, but longer-term the firm must prove it is more than a one-trick pony.

Still, at least none of those three firms have the problems of Simmons & Simmons, which is to de-equitise 11 partners in London in a bid to raise average profits per partner to £400,000 next year. Several are likely to come from the firm’s combined corporate-commercial department. Having said that, it does have some talented young corporate partners and has undoubtedly had success with financial institutions in the wake of the Northumbrian Water deal.

There was good news for the UK independents, with both Macfarlanes and Travers Smith chalking up a solid year. Travers took 3i to the wire on the Telegraph deal and has also had success with financial institutions, advising M&S’s largest shareholder Brandes on Philip Green’s bid and Cazenove on Dealogic’s AIM float.

Despite having to give 3i a hefty fee discount after the private equity house narrowly missed out on the Telegraph, the corporate department still helped Travers increase its turnover by 4.5 per cent.

Macfarlanes had a shot at the big time, advising Paul Reichman on the Canary Wharf deal. It also made progress with Goldman Sachs, advising the bank on Deutsche Telekom’s acquisition of a 13.72 per cent stake in Orange.

But the final word of the year has to go to Slaughter and May. Head of corporate Nigel Boardman stepped down in April, having told The Lawyer in January that “eight years spent counting paperclips” was enough. And how did Boardman celebrate his retirement? By getting Freshfields, the firm’s closest rival, thrown off the M&S bid.