US firms’ 2009 London financials highlight depth of market woes

The full impact of the financial crisis on the leading US firms is illustrated today, with nine of the top 10 posting reductions in their City revenues for the 2009 financial year.

In figures that will also be seen as an indicator of how UK firms will fare over 2009-10, average revenue among the top 10 US firms fell by 12 per cent and by 5 per cent across the top 30.

Of the top 20 US firms, only Latham & Watkins managed to raise its ­London revenue, albeit by just $1.1m (£705,000), moving it ahead of Mayer Brown and Reed Smith.

White & Case maintained its position at the top of the table, but still suffered a 20 per cent drop in City turnover, while ­second-placed Baker & McKenzie’s revenue fell by 24 per cent to $184.5m.

White & Case London head Oliver Brettle said: “Finance law was obviously affected by the downturn, but we did turn things around pretty fast.”

He added that the firm had posted month-on-month movement since May 2009.

Mayer Brown and K&L Gates experienced the biggest drops, with both their year-on-year London revenues falling by 28 per cent, to $146.3m and $43.4m respectively.
For those at the top it was a case of the bigger they come, the harder they fall: while the top 10 saw turnovers plummet, those in the bottom third of the top 30 saw their revenues increase by an average of 3 per cent in London and 1 per cent globally.

That said, the biggest movement in the table was among those firms in the mid-tier. WilmerHale was the highest riser, moving from 23rd in 2008 to 17th in 2009, thanks to a revenue increase of $8.2m. Jones Day was another strong performer after bucking the trend in 2009, leaping five places to number 11. K&L Gates saw the biggest drop, falling six places to 23rd.

While US firms’ London offices may have struggled, their global performances were far more promising. On average the global ­revenues of the top 10 fell by 6 per cent and by just 1 per cent among the top 30.

Unsurprisingly, the biggest losers were firms with heavy involvement in the financial sector, while those strong in counter-cyclical areas such as restructuring and insolvency appeared to flourish during the downturn.

Among the standout firms were Bingham and Paul Hastings. Bingham’s restructuring and finance litigation practices ­contributed significantly to its London revenue shooting up to $40.8m and to its global revenue increasing by 12 per cent.

But arguably one of the best performers was Paul Hastings: its ­London ­revenue increased by 44 per cent to $39m. It comes after the firm stepped up investment in its London base, most notably bringing in seven partners from Cadwalader Wickersham & Taft.

Paul Hastings London managing partner Phil Feder believes the reason his firm did so well was the strong restructuring and insolvency practices in place before the downturn hit, making it “recession-proof”.

“A lot of the work we’ve done has involved digging through the problems in the capital markets and helping private equity firms deal with their troubled portfolios,” he said.

Cadwalader, with only two partners left in London, dropped out of the top 30 altogether, as did O’Melveny & Myers after its turnover dropped to $25.3m.

Just as revenues were hit in 2009, so too were lawyer numbers, following a year of mass restructurings and redundancies. Associates were hit the hardest - overall lawyer numbers in the top 10 fell on average by 14 per cent and in the top 30 by 9 per cent, while partner numbers stayed relatively stable, falling by just 2 per cent across the top 30.

Global profit per equity partner also remained fairly stable, with 20 firms seeing either increases in profit share or remaining even.

Senior partners at top US firms contacted by The Lawyer said they were confident the worst of the financial storm had passed and vowed to continue to invest in the City.