Corporate: another year of pain without much gain

After a less than inspiring 2011/12, corporate lawyers had their fingers crossed for economic recovery in 2012/13. However, wishful thinking did not translate into cold, hard cash. Global M&A volumes remained relatively flat throughout the course of the financial year, hitting rock bottom in Q1 2013. According to Thomson Reuters it was the slowest quarter for global M&A deal volume since Q3 2004, and the most sluggish first quarter in a decade.

It’s not all bad news, though. Over the course of the 2012 calendar year, worldwide M&A value crept up by a tentative 2 per cent. And, while deal volume may have remained dismal, market confidence appeared to have been rearing its head. In Q4 2012 the value of announced M&A bumped up by 53 per cent on the previous period.


In fact, in Q1 2013 the number of deals valued over $5bn (£3.2bn) rose 63 per cent worldwide. Those account for 31 per cent of deal activity, compared with 21 per cent during Q1 2012.

Since the financial year-end, the market has picked up further. 

A corporate partner muses: “Let’s put it this way – I can’t think of anyone in the department who’s not had significant interruptions to their holiday this summer. And that’s a good thing.”

That said, last year’s troubled markets are clearly reflected in our corporate rankings. A quick glance at The Lawyer’s table of UK law firms by corporate revenue is enough to tell you that 2012/13 was a long, hard slog for most. As one corporate partner notes, “All corporate firms have found it difficult as the volume in the market just isn’t good enough.”

Around half the firms listed saw a drop in the amount of revenue generated by corporate work, with only four making a substantial climb: Clyde & Co , DLA Piper , Freshfields Bruckhaus Deringer and Herbert Smith Freehills . It’s only fair to note that Herbies ’ results were massively distorted by the legacy firm’s tie-up with estimated £370m Aussie firm Freehills during the period.

At the top of the table (see above) firms have been competing for the biggest slice of the corporate pie, with Linklaters ultimately gorging on an estimated £466.1m in 2012/13. Freshfields was next to elbow its way in, putting in a stellar performance across the board to jump up from fourth to second position.

Firms in the mid-table struggled with the year’s limp M&A market. In fact, the firms ranked between the sixth and eleventh spots which failed to secure a high-profile merger in 2012/13 saw their corporate revenues tumble. These include Hogan Lovells , CMS Cameron McKenna , Slaughter and May and Ashurst (which has yet to formally integrate its business with Blakes).

The lower echelons of the table are perhaps even more telling. In the past year, Berwin Leighton Paisner (BLP ) fell out of the top 15, replaced by another post-merger outfit – Clydes . This marks Clydes’ first liaison with the top 15.

3D Links

Linklaters scored a hat-trick in our charts, taking the title of top firm by corporate revenue as well by deal value and volume. That is largely thanks to the firm’s involvement in the world’s four highest-value deals completed during 2012/13, including advising longstanding client BP on the £16.8bn sale of its stake of TNK-BP to Russian state oil company Rosneft.

While non-private equity M&A raked in the bulk of Linklaters’ corporate revenue, its equity capital markets and private equity offerings also contributed significantly to its estimated £466.1m total. Over the past few years, the firm has placed renewed emphasis on its private equity practice, with co-heads Ian Bagshaw and Richard Youle at the helm. According to Merger Market, in the first half of 2013 the firm worked on 18 global private equity announced deals – more than any other UK firm. It was trumped by Clifford Chance in deal value, however. The latter firm racked up $23.9m compared with Linklaters’ $6.1m.

Clifford Chance could have had a tough time in 2012/13 as private equity markets continued to lag, seeing as the practice accounts for around 20 per cent of the firm’s corporate revenue. However, despite the fact that the firm is certainly licking its wounds after the exit of private equity star David Walker for Latham & Watkins in April 2013, the group managed to pull off some slick moves during the financial year in question. In March 2013 it scooped its first job from Cinven, thanks to relationship partner Jonny Myers, advising the private equity house as parallel acquirer of Mercury Pharma and Amdipharm.

Freshfields got stuck in to some massive deals over the course of the year. In fact, the firm had a standout year in 2012/13 – the only magic circle firm to see a substantial uptick in turnover, and the sole UK firm to come within a whisker of Linklaters’ sky-high deal value. Despite playing a role in some major deals in Asia, including advising HSBC on the £5.8bn sale of its shareholding in China’s Ping An Insurance Group to Thai conglomerate Charoen Pokphand Group, the firm’s Asian practice fell victim to the region’s chilled equities market in 2012/13. Thankfully, its City base performed with particular strength.

Allen & Overy (A&O ) struggled in the subdued economic climate, experiencing a slow first 10 months in 2012/13. Despite its total revenue inching up by 0.8 per cent during the year, it recorded the lowest deal volume and deal value in the magic circle.

Numbers game

For firms that did not manage to wangle a role on the world’s biggest deals, 2012/13 was all about volume and cross-border capability. And if there is one outfit that has that strategy down pat it is DLA Piper . DLA stormed up the corporate revenue table last year, increasing corporate turnover by 31.9 per cent and snatching fifth position from Norton Rose Fulbright .

The corporate department upped its corporate headcount by almost a fifth, growing from 270 partners to 329.1. Never a firm shy to introduce new faces, the legal giant also merged with 26-lawyer Parisian corporate boutique Frieh Bouhenic in October 2012, opened a Mexico City office and brought in new corporate partners in Germany, the UK and Asia. The remaining new partners were a result of organic growth.


DLA worked on a whopping 103 deals in 2012/13, primarily in its mid-market sweet spot. That’s precisely the same number of deals as Linklaters, despite raking in 89.4 per cent less profit for the pleasure. Among its raft of new clients were airline Etihad and Australian metals group Fortescue, courtesy of its 2011 tie-up with Aussie mates DLA Phillips Fox.

For Eversheds it was a similar story – the firm scooped roughly the same number of deals as A&O, but at a much lower value. Between its commercial tax, competition and general corporate groups, the corporate team raked in 26 per cent of the firm’s total revenue. Last year it was busy cross-selling services to existing clients, and did its first M&A work for longstanding client Tech Data in September. It also snared work from new clients including Mitsubishi and Four Seasons.

Up and Down Under

It’s not just DLA that has benefitted from relationships Down Under in 2012/13, but Herbert Smith Freehills has also been focused on reaping the rewards of its merger with Freehills in October 2012. Despite a flurry of high-profile exits from its litigation team the corporate side of the firm has so far weathered the storm. Its proportion of corporate work is estimated to have inched up over the course of the year, partly due to new work brought in from its Australian colleagues such as BHP Billiton.

While its equities work remained relatively solid, particularly in Asia, public M&A took more of a hit. The firm was lined up to work on the £5bn takeover of Southern Trent by an international consortium which fell through in May 2012. It had more luck on the private side, acting for the likes of PetroChina on its acquisition of an interest in Australian exploration assets from ConocoPhilips.

Another firm with an eye on Australia last year was Ashurst , which is in the run-up to formalising its own merger with Ashurst Australia this year. Despite working on some big-hitting deals, including advising William Hill on its joint £485m bid for Sportingbet, the firm’s corporate revenue flatlined in 2012/13, in line with its overall turnover.

Taylor Wessing ’s mergers with Singapore firm RHT and Central European outfit ENWC helped its corporate revenue inch up by 1.8 per cent last year. 

Corporate partner James Robertson says: “International business has picked up and we’ve had a lot of inward investment from the Middle East and Asia.” The firm’s tech focus has also helped it scoop a number of new US clients.

Robertson continues: “One of our main challenges is to encourage partners to go out internationally. We’re seeing most of our work coming internationally into the UK.”

National service

The year was perhaps more tricky for national firms without immense global networks to prop them up. Slaughter and May ’s UK corporate clients account for between half and three-quarters of its corporate turnover in any given year. It witnessed the biggest dip in our 2012/13 table, despite putting in a good ECM showing, working on the IPOs of domestic clients Countrywide and Esure in early 2013. 

“It’s not been disastrous,” said M&A head Stephen Cooke, “but hopefully we’re bumping along the bottom.”

A corporate head from another firm muses: “The Slaughters brand is still pre-eminent in the market, but is it hiding some pain as they’re not getting the cross-border deals?”

That said, domestic stalwarts Travers Smith and Macfarlanes held their own over the course of the year. Accounting for around half its total revenue, Travers saw an uptick in corporate turnover. 

Corporate head Spencer Summerfield says: “We had a steady flow of acquisitions and disposal work. It was mostly for the mid-market – there were fewer big deals.” 

ECM work also picked up, plugging the hole left by patchy M&A.

This performance was mirrored by Macfarlanes , whose corporate revenue was boosted from £37.4m to £40.8m by an increase in panel appointments and a buzzing secondaries market. The firm’s expanding international practice was given a helping hand by its private client and hedge fund groups, and a push to increase its share of outbound Chinese M&A.

Ruffled feathers

BLP ’s corporate feathers have been ruffled in recent months by the departure of a swathe of partners, recently including private equity star Raymond McKeeve. Global revenue generated by corporate work dropped by 14.3 per cent last year despite the group investing in new lateral partner hires, including funds specialist Justin Cornelius from Nabarro and corporate partner Julian Stanier from legacy Norton Rose. Simmons & Simmons ’ corporate turnover also dropped by 16.5 per cent after a rocky year for both its UK and international stalls.

Clydes stormed the chart thanks to a £17.7m increase in corporate turnover last year. The figure represents 21 per cent of firm turnover – an increase on 18.5 per cent in 2011/12 and 16 per cent the year before. The boost is a result of the firm’s increasing focus on its corporate insurance practice, which it has been beefing up in Asia Pacific in particular. 

Since the start of 2012, Clydes has increased its corporate presence in Singapore and opened in Beijing, led by corporate partner Lynia Lau. It has been hiring elsewhere too, swiping Dubai corporate partner Rhys Lewis from Holman Fenwick Willan to grow its footprint in the region.


Up: Africa

Several corporate heads cite sub-Saharan Africa as being a particularly strong area for investment last year. In fact, according to Thomson Reuters, the value of announced M&A transactions in the region reached nearly $16bn (£10bn) in the first half of 2013, up by 86 per cent compared with the same period in 2012.

Down: Asia Pacific

Asia Pacific may be touted to become the second largest regional market in the world by 2017, but 2012/13 was a mixed bag for the region. While there was a pick-up in high-quality M&A, capital markets faltered in China for most of the year. As one corporate head puts it, “Anyone who says Asia is going gangbusters is crazy. You hear of people being let go over there as there’s a lot of over-capacity. It’s hard to make money as it’s very price-sensitive.” Outbound M&A remains strong, however – within Asia as well as outside.

Pricing pressure: it’s not all bad

In the past few years clients have become more discerning about the quality of their lawyers and the amount they dish out in fees. This brings a raft of issues for firms of all shapes and sizes.

One legal head says: “I’ve seen people from firms with significant names coming in at low levels on fees. They’re clearly looking to ‘buy work’, or at least do work at levels you wouldn’t contemplate years ago. 

“A lot of firms have big corporate departments, which means they have a lot of mouths to feed. It requires a constant flow of work.”

This increasing pressure from clients on pricing affects all firms but presents a particularly mighty challenge for those of smaller stature. 

One mid-size corporate partner notes: “We don’t say we’re capable of doing 20 workstreams – we might just say we do 10 or 15 well and admit we’re not as strong on the rest. Clients appreciate our directness. They’re not looking
for a one-firm-fits-all set-up – they’re choosing experts for particular fields.”

Another non-magic circle corporate chief muses: “To be honest, the financial crisis has in some ways helped us, as clients had to look at other options.” 

Perhaps pricing pressure has its plus points after all.