Tag: Financial results 2022/23

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‘The strategy delivers’: Freshfields sees 8% revenue rise but PEP growth stalls

Freshfields Bruckhaus Deringer has announced its 2022/23 financial results, marking a seventh consecutive year of revenue growth for the firm.

Its revenue has increased by 8% to £1.84bn from £1.7bn in the previous financial year, a similar increase to last year’s 10% rise. Freshfields is the last of the four international magic circle firms to reveal its results. However, unlike Allen & Overy and Clifford Chance, Freshfields is yet to break the £2bn barrier. In its recently released financials, A&O’s revenue increased by 8% from £1.94bn to £2.1bn, while CC achieved a revenue increase of 5% from £1.969bn to £2.062bn.

Freshfields’ profit per equity partner (PEP) has remained flat with a 1% increase to £2.09m from £2.07m last year, in contrast to last year’s solid 8% growth.

The firm has made significant investments in its workforce and operational model, including embedding cloud-based software Salesforce, making 26 new lateral appointments and 30 internal partner promotions, and launching a shared business services centre in Slovakia.

Global managing partner Rick van Aerssen told Legal Business: ‘We are happy with the strategy and the strategy delivers. We will continue on with our global growth strategy.’

‘With the waters being choppier, we think macro trends typically play to a firm like ours, where we have broad offerings and are at the complex end of the market. Where it matters most, we see people increasingly turn to us,’ he added. ‘That is true in terms of products but also where international interconnections are concerned. Take the US – we want to grow our US business, but we can also offer something to our US clients that a lot of US firms can’t offer in Asia and Europe. That is a growth driver for a firm like ours.’

Key mandates from the last financial year include advising UBS Group on its acquisition of Credit Suisse Group and advising Volkswagen and its subsidiaries on its global emissions litigation. The firm was also lead counsel defending Google in the Google digital advertising antitrust litigation and advised the independent directors of Qualtrics on the $12.5bn sale of the company.

The firm also published its second diversity and inclusion annual review. Key highlights include 48% of new partners joining the global partnership being women and doubling the number of black associates at the firm over the last two years. It has also achieved their 5% LGBTQ+ global partnership target three years ahead of schedule.

In its statement, the firm was keen to highlight its US growth ambitions, noting that over the last three years it has delivered advisory services to 70% of the 1,000 largest US corporates in the US and/or globally. It also noted that it has made 14 lateral partner appointments in the US over the last year.

Although unable to give a figure for how much of the global revenue the US offices contributed, Aerssen said: ‘It’s not growth in one area at the cost of one area, we believe in growing the business as such because there are many pockets where we think we can win work.

‘At any given time, we are looking at opportunities to grow the business, we’ve made 14 lateral partner hires in the last year in the US. We’ve always been clear that that is a key pillar of our growth strategy. We want to grow more in the US and internationally, but we don’t have a target number because it’s also a question of opportunity. What this shows is that ultimately the quality of the business is driven by the quality of our lateral hires, we’ve been very fortunate with our lateral hires that we have had such a high quality come into the firm.’

However, the US is not the only Freshfields office looking to grow. ‘London is a key market and still a growth market,’ Aerssen concluded.

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This article first appeared on Legal Business

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Linklaters sees 2% profit decline as revenue falls short of the £2bn milestone

With financial reporting season in full swing, Linklaters is the latest Magic Circle firm to drop its financial results, reporting a 7% revenue increase from £1.8bn to £1.9bn, seeing it fall just short of the $2bn turnover barrier passed by both Allen & Overy and Clifford Chance recently.

Pre-tax profit is down by 2% to £854m from last year’s £872m, translating to a 5% decline in PEP from £1.87m to £1.78m.

Linklaters managing partner Paul Lewis said in a statement: ‘We’re pleased to have delivered a strong financial performance, despite a challenging high-inflation environment and ongoing geopolitical instability.’

He added: ‘Entering the new financial year we have seen a strong deal flow, particularly across energy & infrastructure, high-end M&A and from financial sponsors, notwithstanding the wider slowing of the global M&A market. The challenging economic environment has led to an increase in restructuring and insolvency matters and we have also seen an uptick in regulatory and criminal investigations as well as a rise in class actions, particularly in the tech sector.’

Linklaters reports that it has seen ‘significant growth’ in revenue from high-end M&A with top mandates that include advising Carrier Global Corporation on its acquisition of Viessmann Climate Solutions and HSBC on the sale of its Canadian banking business to Royal Bank of Canada.

Similarly, the firm also gives credit to the performance of its energy sector, with a particular focus on energy transition mandates that made up the majority of energy-related work over the last financial year. Whilst it is public knowledge that Links has struggled to make an impression on the US market, the addition of its energy and infrastructure team in the US has resulted in some mid-tier US mandates, including advising Actis on its new $500m Japanese renewables platform.

Beyond financials, the firm also reported that it had elected 41 new partners and 53 counsel in its latest promotion round, while meeting its 40% global gender diversity target for female partner promotions, and its 15% target for under-represented minority ethnic partners in new partner elections annually in the UK and US.

In the legal tech arena, the firm also reported that CreateIQ, its document automation and contract management platform, ‘grew at a rate of nearly 100% during FY2023 with over 100 digitised templates added, attracting over 300 institutions including major banks, asset managers, insurers and governments. ReportiQ, the firm’s next-generation due diligence reporting platform, ‘has now been used by Linklaters lawyers across 17 offices and external counsel in 21 countries to generate reports on €18bn worth of deals’.

Links is the third member of the Magic Circle to publish its financial results so far, with both A&O and Clifford Chance officially breaking the £2bn barrier. A&O’s revenue grew by 8% from £1.94bn to £2.1bn, while CC recorded a revenue increase of 5% from £1.969bn to £2.062bn.

With Freshfields the last of the four UK elite international firms to post its results, the picture so far is clearly one of modest revenue increases matched by a decline in profitability this year, as firms across the globe driven by transactional work struggle with the downturn in deals.

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‘Outcome still satisfactory’: revenue, profit and PEP drop at Macfarlanes as Mishcon continues growth

Macfarlanes has posted results that show declines in turnover, profit, and PEP for the past financial year. Turnover dropped 2% to £296.6m, while operating profit fell 6% to £151.4m. The decline in PEP was steepest: a fall of 16% took it to £2.1m.

The results mean an end to a  12-year streak of growth that saw its PEP surge past its rivals, with last year’s £2.49m placing it behind just Slaughter and May and Stewarts in the list of firms with the fastest-growing PEP in our 2022 LB100.

‘The 2022/23 financial year proved a more challenging year for our firm due to difficult market conditions although the outcome was still satisfactory,’ said senior partner Sebastian Prichard Jones in a statement.

‘After the exceptional impact of the pandemic, which had a positive effect on our financial performance, in a number of respects this was a year of consolidation. This included an increase in our equity partnership by 10%, which had what we anticipate to be a short-term impact on our PEP figure. This is an investment we were pleased to make. After taking a pause for breath in 2022/23, we remain in a strong position and are confident we will move forward again this year.’

The increase in equity partner numbers offsets the drop in PEP somewhat. And the reference to a difficult 2022 after an exceptional 2021 is well taken: there are few firms who have made similar claims as they announce their latest sets of financial results, with Allen & Overy, Clifford Chance, and Ashurst all recording dips in PEP. Macfarlanes is not the only firm to record a dip in turnover over the past financial year, with Hogan Lovells posting a 7% decline in February.

The picture painted by Mishcon de Reya was more positive. The firm posted financial results that saw total revenue increase by 10% to £255m. While slower than last year’s 23% increase, this continues a positive trend that has seen the firm continue to grow despite setbacks including a Solicitors Regulation Authority (SRA) fine and a failed IPO.

Overall profit has increased  22% to £93m, though the firm notes that the increase in profit was a much more modest 6% if IPO costs were excluded from the previous year’s figures.

Mishcon reported overall profit as a lone metric for the first time this year, describing profit per equity partner (PEP) as ‘too narrow, short term and misleading as a metric for a business as diverse as the MDR Group, which now accommodates both a traditional law firm and many start-ups.’

Group chief financial officer Matt Hotson explained further: ‘Our goal is create long term value – for our clients, our people and the society in which we operate. PEP is not a metric which is helpful in this context nor is it useful for a business like ours with a diversified offering of legal and non-legal services.’

The completion of Mishcon’s merger with Taylor Vinters in January 2023 brought it to a total of more than 220 partners. The firm reported around 80 equity partners, which would place  PEP at £1.16m – up almost 11% on last year’s £1.05m, and above its previous high-water mark of £1.1m, set in 2017.

Mishcon showed another year of impressive growth in its consultancy and advisory work, reporting an 81% growth in non-legal revenue. The firm was keen to stress, though, that the overwhelming majority of its revenue still came from its core legal services. Performance across practice areas was ‘pretty even across the firm’, said managing partner James Libson. ‘Even though one may have expected real estate to slow down, it kept its momentum all the way through to year-end. Corporate suffered a little in Q4, but the rest were solid.

‘One sees dispute resolution do better, or at least act as a hedge, in recessionary times. But there’s been a real lag in that this time around, as so much protection has been put into the system. Still, we’re seeing an increase coming through, and we expect that to accelerate over the next year.’

The firm’s strategic focus will be on bedding in its merger. ‘The innovation and early-stage market in Oxford and Cambridge is very important to us’, said Libson. The firm will also continue to extend its Asian offering, including building out its Singapore office and continuing its association with Karas So  in Hong Kong. ‘At the moment it’s a litigation offering,’ said Libson. We’ve brought in three private client partners, one in family and two in tax. Our aim is for that office to reflect the balance of our overall Asia offering, which will focus on litigation, private client, and corporate restructuring for family-owned businesses.’

More broadly, Mishcon also intends to explore options to raise capital. ‘The IPO market remains pretty closed’, explained Hotson. ‘It’s not something we’re actively looking at right now. But we have a strategic view to increasing our access to capital. We would potentially do more deals like we did with Taylor Vinters, which sometimes need more capital to make work. And we need to invest in other things like tech as well.’

Hotson also pointed to the increased availability of litigation funding as an area of opportunity for the firm: ‘We have a medium-term need for increased capital. How we resolve that need is something we debate from time to time, though there’s not  a huge amount of urgency. It’s not constraining our ability to grow now.

‘We explored the IPO as an enabling strategy to allow us to deliver growth. The listed law firm market is a very limited market. Even the private equity law firm market is not very mature. But we think we’ll see more firms take capital in, because there are things they can do with that capital. We may well be one of those.’

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‘Improving growth has not been an easy task’: HSF posts record financials amid challenging conditions

Herbert Smith Freehills has marked a decade of consecutive annual growth with its latest financial results, posting the highest revenue, profit and PEP in the firm’s history.

Revenue has increased by 8% from £1.103bn to £1.186bn, while net profit and PEP are up by a more modest 2% and 1% respectively. PEP moved from £1,163,000 to £1,173,000 for 2022/23.

Speaking with Legal Business, CEO Justin D’Agostino (pictured), said: ‘We are particularly proud of the results this year, especially because there were some significant challenges in all of our markets, including rising costs and tougher trading conditions.’

D’Agostino explained why the firm has fared so well despite the less-than-ideal market conditions: ‘Our clients come from  strong sectors, such as energy, infrastructure, technology and banking. We are also focused on the twin engines of our contentious and transactional practices. That mix results in a very well-hedged global business.’

On the firm’s strategy, D’Agostino elaborated: ‘We launched our new strategy in November 2021, which has been having a positive impact. When we set out our strategy, we set out our choices on the areas we were going to focus on winning market share and grow: private capital, energy transition and ESG. We are seeing significant growth in these areas, and we will see sustainable growth for the next few years.’

Asked which were the firm’s best-performing  jurisdictions, D’Agostino responded: ‘London had an outstanding year, as well as strong, double-digit growth coming from New York. EMEA saw good growth too, with double digits from Milan, Dubai, Germany and Johannesburg.’

He added: ‘The market was tougher than previous years in Asia and Australia. Despite this we still saw double digit growth in Japan and South-East Asia too.

‘On the practice side, our contentious practice did particularly well. We saw increased client demand in class actions, competition and disputes deals. The largest class actions we are seeing are with our biggest clients, such as Google and Meta.’

Probed further on the firm’s US strategy, D’Agostino commented: ‘We have been growing our New York office and we will continue to grow organically there. We are very focused on the US market and real attention will be placed on it by us over the next period.’

HSF’s chief financial officer, Steve Bowers, contextualised the discrepancy between the acceleration in the rate of revenue increase and the reduction of the rate of PEP and profit growth since this time last year: ‘Compensation costs are high because of the intense demand for talent, which remains an issue. We continue to invest and ensure that our employees are rewarded and that we have the right standing in the market for talent compensation.

‘Macro factors such as high interest rates, as well as our investment into digital technology, our core systems, and further investment in our people is the right thing to do with long-term benefits. That means that sometimes there will be a disconnect between profit and revenue growth. You won’t see many firms of our size and scale this year having their best-ever results on those three key metrics.’

He added: ‘The context is important here. If we look at the performance for FY23, you do see client demand soften in a few places, but we are still doing really well. Improving growth has not been an easy task.’

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Financials 2022/23: Taylor Wessing sustains global growth for fifth year in a row

With the financial reporting season in full swing, Taylor Wessing has unveiled its latest results, becoming a €500m firm for the first time.

The firm experienced slower growth compared to the previous season, as it did not achieve double-digit growth as it did in 2021/2022. The firm saw a 4% increase in global revenue to £439m in this year’s financial results, up from £420.6m last year, which its highest recorded international revenue to date.

It witnessed a similar increase in UK revenue, which went up 4% to reach £227.1m, surpassing the figure of £219.3m reported for the 2021/2022 period.

UK profit, however, dropped by 12% from £93m to £87.1m, but it is still the second highest on record for the firm. The firm did not disclose some figures, but PEP is estimated to be £809,000 and RPL in excess of £500,000.

UK managing partner Shane Gleghorn (pictured) told Legal Business: ‘We’re delighted to see growth in both the UK business and international business. We’re very pleased we managed to maintain growth in those circumstances where the markets, certainly in the UK, were more muted in relation to fundraising and corporate work.’

Talking about the latest developments, he continued: ‘We’ve got big investment in our new premises in London, and we’ve moved into new premises in Cambridge and Dublin. There’s been quite a lot of lateral hiring and promotions taking place, particularly across London, Dubai and Dublin. We’ve been growing out our IP offering and broadly speaking, the plan is to create a holistic IP offering across Europe. We’ve started to implement that, and it has been a very significant point of investment for us.’

This year marked the launch of Taylor Wessing’s latest three-year strategy, following the introduction of its previous strategy in 2020, which Gleghorn said resulted in significant revenue growth in the UK, increasing from approximately £157m to over £227m, a growth rate of 44%. Additionally, global revenue also increased from around £365m to approximately £438m, a growth rate of over 20%.

Commenting on the fall in UK profit this year, Gleghorn said: ‘We do anticipate that the profit will improve next year, but it wasn’t an unexpected turn of events for the profit to be flat at this year. We anticipated that the market would be slower in some of our core areas. We are very confident about our profit position because, when you view it in the context of the preceding two years of growth, it is still the second-highest profit that we have ever earned.’

Discussing which practice areas had made the greater contribution, he continued: ‘It’s fair to say it was across the board contributions. In London, patents, private equity, private client, disputes work, and employment have all had strong years. Tech and life sciences have also had a strong year, but there’s no doubt that the second half of the financial year was more challenging for most firms who focus on that area.’

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Financials 2022/23: HFW posts best-ever results

HFW has posted its best-ever financial results for the financial year 2022/23. After a slight dip of 1% to £198.7m in 2022, revenue climbed by more than 13% to £225.3m. Profit per equity partner and revenue per lawyer were up too: PEP rose by more than 17% to £786,000, while RPL hit £455,000.

In London revenue increased by 16%, accounting for about 40% of the firm’s total revenue. The most impressive increases around the world, meanwhile, were in the Middle East (32%) and Australia (24%).

Last year aside, these figures continue a strong upward trajectory for HFW, which has seen the firm grow its RPL almost 25% in four years, and its revenue more than 60% since 2015.

In conversation with Legal Business, the firm explained its success as the result of a strategy focused on broadening its international coverage and extending its offering in its core sectors of aerospace, commodities, construction, energy, insurance, and shipping.

‘We’ve built up a good network’, said managing partner Jeremy Shebson (pictured). ‘We were building foundations, and now we’re looking to build on top of them.’

Senior partner Giles Kavanagh concurred. ‘We have a network of 20 offices around the world. The focus now is to build on the network, not to extend it further.’

That said, Kavanagh noted that the firm was not opposed to expanding into new areas ‘where there are good opportunities’. On this front, HFW recently received permission from China’s ministry of justice to open a representative office in Shenzhen. ‘It’s a very big commercial area’, explained Shebson. ‘The numbers are eye-watering, and the opportunities are considerable.’

In addition to the firm’s sector-focused international strategy, Shebson noted the importance of HFW’s strength in contentious work as a factor behind its continued growth in what he called a ‘difficult economic environment’. Results for 2023 showed the proportion of revenue generated by contentious matters held steady at around 70%.

Moving forwards, HFW intends to double down on its existing strengths. In Kavanagh’s words: ‘We are looking to attract laterals, teams, smaller law firms, and even something more ambitious than that.’

This approach has paid dividends over the last year: the firm reports ten lateral partner hires in 2022, and a further six in the first two months of this year.

As for that something more ambitious, Kavanagh was candid. ‘We’re open to discussions, not just with bolt-ons, but with larger-scale firms.’

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‘I want the firm to be more ambitious and more confident’: Stephenson Harwood rebounds with double-digit revenue growth

Stephenson Harwood has reported an 11% rise in turnover to £228m from £206m for 2022/23, the firm’s highest-ever revenue. It comes after the firm reported largely flat financials for the year 2021/22.

This time around, profit per equity partner (PEP) is up 6% to £725,000 from £685,000 in 2021/22. The firm has added 22 equity partners, with 11 lateral hires and 11 internal promotions over the last year, while four partners have retired from the partnership.

Speaking to Legal Business about the revenue increase and the firm’s ambitions Eifion Morris (pictured), the firm’s chief executive, highlighted its five-year strategy, which launched in May 2022 with the aim of doubling the firm’s turnover by 2027. Morris said: ‘We want growth, we want ambitious partners, and we want to grow in all sectors. If you want to double revenue in a short space of time, you need an active program of lateral hires. We have had a lot of radical change in a short period, and we are starting to see that pay off. This is not the endpoint but the start.’

The strategy will focus the business on five key sectors to increase profitable growth: decarbonisation, life sciences, private capital and funds, technology, and transportation and trade. These were identified by the firm as sectors which will see strong growth and development over the next few years.

Stephenson Harwood also intends to maintain its 50-50 litigation-transactional balance. 50% of the firm’s revenue currently comes from disputes, which has always been a notable strength of the firm and several of its contentious practices are ranked in The Legal 500. This includes commodities disputes and pensions dispute resolution, which receive a top-tier ranking; commercial litigation: premium, and contentious trusts and probate, which are ranked tier two; and banking litigation: investment and retail, property litigation, and intellectual property patents (contentious) which are ranked in tier three.

The current revenue breakdown across the firm’s practice areas is finance 24%, commercial litigation 28%, corporate 21%, marine and international trade 12%, employment, pensions and private wealth 10% and real estate and projects 6%.

‘At the heart of our strategy is maintaining and leveraging the 50-50 litigation-transactional balance of the firm. This has been very important for maintaining growth, and we are a very well-hedged business,’ Morris said.

The firm has also been bedding in a new global leadership team as part of its ambitions moving forward. The team is 50% male and 50% female. Morris highlighted the importance of this: ‘With the new global leadership team, I wanted to encourage diversity of background so that the team would bring different ideas and life experience to the table. The team formed during Covid, and we have had to deal with a lot of difficult decisions, but this meant we formed a very strong team.’

Stephenson Harwood highlighted several key mandates for the year across its life sciences, dispute resolution, rail and road, and corporate practices, including advising Bicycle Therapeutics on its radiopharmaceuticals deal with Novartis to develop several oncology radioligand therapies. It also represented Trafigura in the Trafigura v Gupta case and advised on Abellio UK and Nederlandse Spoorwegen management buyout.

Other highlights include advising WindAcre Partnership on its part of the acquisition of Nielsen Holdings, valued at over $16bn and LXi REIT on its £773m debt refinancing.

Looking forward, Morris is committed to raising the firm’s profile. ‘I want the firm to be more ambitious, and more confident. One of our best clients told us that we were “the best law firm you’ve never heard of”. That is something I want to change,’ he said.

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This article first appeared on our sister publication Legal Business.