Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. Legal Market trends: What are they telling us?
This week saw the release of annual market reports into the sector from Legal Week (The Global 100) and Legal Business (LB 100). Below we break down the trends behind the headlines for what this means for you and your firm.
The Global Picture
- Conditions for the world’s largest law firms are getting more challenging, as the current environment of low growth, intense competition and severe pricing pressure from clients looks set to continue.
- Last year, total revenue of the world’s largest 100 firms rose just 2.8% to $99.3bn. This is the lowest annual gain since the recession and the second consecutive year of slowing growth.
- Revenue per Lawyer (RPL) remained essentially flat across this group at $813,000.
- Total net income growth plummeted from 8.6% in 2015 to just 2.7% last year
- This resulted in the first decrease in average profit per equity partner (PEP) across the Global 100 in seven years, with the figure dropping half a percent to $1.59m.
- Average profit per lawyer (PPL) also fell slightly across the group to $317,000.
- As with RPL, the Global 100 collectively struggled to make meaningful gains in this metric, with total growth of just 9.2% during the past six years.
- Latham & Watkins remains the largest law firm by revenue for the third consecutive year. The firm’s revenue climbed 6.5% in 2016 to pass $2.8bn, after significant investment in its London and German offices through a number of high-profile lateral hires.
- Baker McKenzie retained its second place spot, but with more moderate growth. The firm’s revenue increased 1.9% last year to $2.67bn, whilst PEP remained flat at $1.3m.
- Meanwhile, DLA Piper dropped out of the top 3 for the first time as its revenue fell 2.9% to $2.47bn. It currently ranks fifth behind Kirkland & Ellis and Skadden, Arps, Slate, Meagher & Flom.
- American firms accounted for 81 of the Global 100, matching a record set in last year’s survey. This is a sign of the continued expansion of the US legal market, and the further consolidation of the industry worldwide.
Closer to Home
- UK law firms also had a challenging year due to Brexit and the currency fluctuations it produced.
- Despite Allen & Overy (A&O), Clifford Chance (CC) and Linklaters all posting sizeable top line gains of between 9.8% and 16%, this was wiped out once currency fluctuations were taken into account, as the weakening of the pound inflated the results of UK-based firms with large international practices.
- Just three UK firms recorded revenue increases once their results were converted into dollars: A&O, Bird & Bird and Clyde & Co.
- Pinsent Masons and Eversheds Sutherland also performed well in the UK once international fee income was accounted for
- This leads to questions about the long term growth of the sector
In conclusion, how firms develop and execute their strategies will become critical in what is clearly becoming a more challenging and competitive marketplace. How successfully firms do this will depend on how the market itself will evolve going forward, and if we will continue to see dominance of the sector from across the Atlantic.
Movers & Shakers of the week
Bristows appoints Cohen as new joint managing partner
Dechert hires Kirkland & Ellis duo in London
Dechert has made two hires from Kirkland & Ellis’ London office with corporate partner Christopher Field and tax partner Jane Scobie
Mayer Brown to lose financial regulatory duo in London
The Lawyer reports Guy Wilkes and Mark Compton have been reported to be preparing to move to Mischon de Reya and an in-house role at a financial institution respectively.
Linklaters appoints Moscow disputes head with Herbert Smith Freehills hire
Vladimir Melnikov departs his role as disputes head at HSF to join Linklaters global disputes practice
Pinsent Masons boosts financial services offering in Dubai with key new hire
Mark Bicknell has joined Pinsent Masons as a partner, leading the firm’s insurance and wealth management offering in Dubai. He joins from Clyde & Co, where he served as a legal director in the corporate insurance team.
Mayer Brown DCM duo join Hogan Lovells in Frankfurt
Partners Jochen Seitz and Peter Maier will move to Hogan Lovells’ international debt capital markets practice in Frankfurt.
Mergers & Alliances
Kennedys and Plexus rule out merger as news of talks emerges
Dentons set to combine with Ugandan firm as global expansion continues
Office Openings & Closings