M&A slump puts squeeze on Stibbe’s partner profits

Herbert Smith’s best friend Stibbe, for years the Netherlands’ most profitable firm, saw its profits slump to €550,000 (£372,674) per plateau partner, as it was hit by the downturn in M&A activity last year.

The firm’s ‘most-profitable’ crown was also stolen. Profits at Loyens & Loeff, its figures boosted by the large number of high-charging (in comparison with civil lawyers) tax partners, reached €650,000 (£440,433) at the top of the lockstep. Be Brauw Blackstone Westbroek registered a similar figure.

Stibbe’s profits fall is revealed in the first-ever round-up of Dutch law firm profitability.

The Lawyer has used a plateau figure for comparison in the Netherlands as opposed to average profits per equity partner. Most of the Netherlands’ leading firms remunerate on a pure and relatively short lockstep. Sylvia den Engelsen, a partner at leading Dutch executive search consultants Legal People, said: “The majority of partners at the top firms will be at the top of the lockstep within five to seven years.”

Top of equity at Stibbe, the Netherlands’ corporate powerhouse, stood at €550,000 (£372,674). Turnover for Europe was €115m (£78.3m). Stibbe did pick up some significant instructions during the year, including advising the Dutch government on the merger between Air France and KLM and UGC Europe in relation to the $6bn (£3.32bn) restructuring of United Pan-European Communications. Despite this, Stibbe’s results represent a significant drop on its 2001-02 levels.

Stibbe was not the only Dutch firm to ride out a rough year. Nauta Dutilh, the largest civil law firm with 82 partners and 287 lawyers in the Netherlands, saw turnover drop from €142m (£96.22m) to €138m (£93.51m). Profits also failed to match Nauta’s excellent 2002. The top of the lockstep was just €460,000 (£311,691).

Indeed, the firm was the least profitable of the Netherlands’ top firms. Nauta’s chairman, Joan van Marwijk Kooy, blamed the drop in gross revenues partly on the spinning off of its Madrid office to Hammonds in May 2003, costing it some €2.5m (£1.69m) in Spanish-generated revenues.

Despite Nauta’s role for Air France in its merger with KLM (as well as roles in Cerberus and General Atlantic’s acquisition of Baan and Dexia Bank Nederland’s disposal of Kempen & Co), it was also exposed to the slackness in the M&A market. It dropped to 10th place in the Mergermarket tables, with M&A down by around 10 per cent down on last year. The traditional breadth of Nauta’s practice, however, which spans insurance, shipping, banking and even high-profile family work, acted as a shield to the M&A dip.

De Brauw topped the Mergermarket table, with 37 deals at a total value of €7.1m (£4.81m). Stibbe trailed in fourth, with 19 deals (€7.7bn/£4.8bn), followed by Houthoff Buruma (16 deals, €5.1bn/£3.45bn), Loyens & Loeff (14 deals, €5.6bn/£3.8bn) and Nauta Dutilh in tenth place, with just eight deals valued at just under €4bn (£2.67bn).

However, De Brauw managing partner Jaap de Keizer said the firm was in consolidation mode in the first full financial year after its split with Linklaters. The partnership continued to shrink, dropping from 81 partners at the end of 2002 to 79 at the end of the last financial year. This figure represents some 17 partners fewer than De Brauw had in 2001.

De Keizer was confident that the results vindicated the firm’s strategy of independence. “We have maintained our position and we believe this model is sustainable,” he said. “The tide has changed in the Netherlands. It favours independence.”

De Keizer added that De Brauw was focusing on building referral links with US firms rather than in the UK, such as its link with Sullivan & Cromwell, with which it recently successfully pitched for ING’s global panel. In the UK, the firm works closely with Macfarlanes, Slaughter and May, Ashurst and Bristows.

De Brauw may be downsizing, but the compact group of partners is helping to keep its profitability up, at €650,000 (£440,433m). As M&A activity levels slowed, it had cause to thank its top-rated litigation practice for beefing up revenues. A plethora of roles in disputes relating to the aftermath of restructurings and hostile takeovers, including HBG, Casino, Getronics and Ahold, kept turnover and profits per partner figures relatively stable.

On the M&A side, De Brauw advised Vodafone in its €771m (£522.4m) public offer for Libertel; Royal BAM group in the €427m (£289.3m) sale of its dredging business to Van Oord; and the Dutch government in its e2bn (£1.4bn) sale of a 12 per cent stake in Royal KPN to Citigroup.

The firm that had the strongest 2002-03, Loyens aside, was Houthoff Buruma. With profits per partner of €520,000 (£352,346), its most productive group last year was its broad corporate and finance team. This includes the restructuring team headed by Rutger Schimmelpenninck and Matthieu van Sint Truiden.

Roles in the restructuring of Enron, SwissAir, Jomed and KPN Qwest (led by Eddie Meijer) drove turnover growth of almost 10 per cent. Real estate and insurance also performed exceptionally well.

That turnover increase of around €8m (£5.42m) reflects the solid year enjoyed by Houthoff Buruma. It was achieved with a similar number of lawyers to last year, although partner numbers increased slightly. Two partners were internal promotions, while Pieter van der Korst arrived from SchutGrosheide on 1 January 2004.

European figures for the Netherlands’ independent firms
Firm Turnover €m (£m) Profits per plateau partner €K (£K) Number of partners Number of lawyers
Loyens & Loeff* 204 (138) 650 (440) 96 660
Nauta Dutilh 138 (94) 460 (312) 96 441
De Brauw 120 (81) 650 (440) 79 355
Stibbe 115 (78) 550 (373) 69 302
Houthoff Buruma 80 (54) 520 (352) 60 310
Source: The Lawyer