Tag: herbert smith freehills

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Herbert Smith Freehills set for $2bn transatlantic merger with Kramer Levin

Following this May’s A&O Shearman merger, there had been no shortage of market speculation about which transatlantic duo would be next to tie the knot.

However, few would have predicted today’s news that Herbert Smith Freehills is set to combine with New York’s Kramer Levin, a deal which will create a new $2bn, 2,700-lawyer firm.

The proposed tie-up, which the firms announced in a joint statement, remains subject to a partner vote at both firms, but if confirmed, is set to go live on 1 May next year.

The combined firm will be known as Herbert Smith Freehills Kramer – operating as HSF Kramer in the US – and will operate with one single global profit pool, following in the footsteps of A&O Shearman, which also eschewed the verein model.

While HSF is the much larger of the two firms, with 23 offices across Europe, Asia-Pacific, the Middle East, New York and South Africa, Kramer Levin is the more profitable, with 2023 profit per equity partner of $2.41m (£1.87m), according to law.com, compared to HSF’s 2023-24 figure of £1.315m.

HSF’s revenues of £1.3bn will be boosted by around £330m by the deal, pushing it past the $2bn mark and placing it on the fringes of the world’s 25 largest law firms.

While HSF has had a New York base since 2012 – the same year of the merger of the UK’s Herbert Smith with Australia’s Freehills – it has long harboured ambitions to bulk up in the States. In a statement, HSF chair and senior partner Rebecca Maslen-Stannage (pictured) described the deal as ‘transformational’.

‘We have long been committed to expanding our offering in the US and Kramer Levin is the perfect fit,’ she said. ‘The combination delivers immediate growth for both firms from day one.’ Global CEO Justin D’Agostino added that the deal was ‘just the beginning… an excellent long-term, strategic move.’

Kramer Levin is led by co-managing partners Howard Spilko and Paul Schoeman, who described the deal as ‘a one-of-a-kind opportunity’, while also citing the firms’ cultural alignment.

In addition to its three US offices in New York, Washington DC and Silicon Valley, Kramer Levin also has a well-established Paris base, which has been in operation. since 1999.

In terms of practice strength, Kramer Levin has five top-tier Legal 500 rankings, for advertising and marketing litigation; immigration; land use/zoning and both corporate and municipal restructuring.

The US firm also has rankings for commercial disputes, employment litigation and appellate work, adding heft to HSF’s traditional disputes credentials, as well as transactional capabilities in mid-market M&A and private equity.

In the announcement of the deal, the firms cited shared strengths in private capital, M&A, restructuring, securitisation, real estate, white collar corporate crime and investigations, class actions, IP, and arbitration.

This story first appeared on Legal Business.

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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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This article first appeared on Legal Business

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HSF’s accounts show revenue hit £447m amid a 23% profit hike and a sharp fall in debt

Herbert Smith Freehills (HSF) has increased profit and turnover, its latest LLP accounts reveal, while also bolstering its borrowing capacity and significantly reducing debt.

HSF increased revenue 6% to £447m in 2018/19 as operating profit at the Anglo-Australian giant increased 23% to £127.5m. The firm has also bolstered its borrowing capacity following the implementation of a new Revolving Credit Facility put in place in April 2019.

The new facility – which is funded by a syndicate of eight banks – allows HSF to borrow a maximum of £300m, an increase of £25m on the previous facility. Its implementation coincided with debt falling 55% at the firm from £146m to £65m.

The accounts also revealed partners were required to provide extra capital, with overall partner capital increasing by £13.4m over the last financial year. The LLPs state the firm has ‘historically operated with lower levels of direct partner capital than our competitors’ with the increase intending to place HSF more in line with its peers.

Revenue growth in its non-Australian business surpasses the firm’s global performance of a 4% increase to £966m. Moreover, the profit growth comes as the firm reported an 11% increase in profits globally to £307m in July 2019, while profit per equity partner likewise grew 11%.

In a change to it LLP structure, in January HSF finalised its plans to bring its German offices into the UK LLP as a means of mitigating Brexit concerns. The move was implemented last December as City firms in Germany faced a complex regulatory environment in light of the UK’s imminent departure from the European Union.

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This article first appeared on Legal Business.