Britain’s biggest law firms continue to dominate the world in terms of revenue, despite growing competition from their American counterparts.
Four of the top six firms in a definitive new analysis of the world’s leading 100 firms by revenue were British.
They are Clifford Chance, which remained the world’s largest firm, Freshfields Bruckhaus Deringer, Linklaters, and Allen & Overy. Together they generated more than £3.1bn in gross revenue.
This is despite three American firms – Jones Day, Mayer Brown Rowe & Maw, and Dechert – all having completed substantial transatlantic mergers.
At the same time, many law firms are still struggling with the after-effects of the recent economic slowdown, which put the brakes on the large cross-border mergers and acquisitions market. These deals are vital because they have tended to generate the largest fees.
Though corporate activity has shown signs of life in 2004, advisory firms may wait months for the results to show through.
But while American firms are now establishing themselves in London as significant competitors to UK firms in the key areas of corporate law, private equity and acquisition finance advice, the results also found that the British legal model has become the world’s most successful way to export legal services.
Clifford Chance has 62% of its lawyers working outside the UK, Freshfields 66%, Linklaters 55%, and Allen & Overy 53%. Many big American firms have barely 20% of staff abroad.
British law firms have been able to hold their own against the US competition because they were the first to recognise the value in expanding their businesses by entering into alliances and, more recently, merging with legal firms in other parts of the world.
British firms started to expand into the Continent and Far East more than 20 years ago to be able to offer their clients advice based on the highly-respected English legal system wherever they were in the world.
More recently, Clifford Chance pioneered the cross-border merger with a ground-breaking deal in 2000 that established the firm as a major player on the Continent and took a British firm into America for the first time. This was done through a three-way merger between Clifford Chance, New York-based Rogers & Wells and Frankfurt-based Punder, Volhard, Weber and Axster.
Though UK firms have beaten the Americans to overseas expansion, US law firms, well known for their high profitability, are still beating the Brits for the profits made by partners with equity in their firms. Equity partners at US elite firms, Sullivan & Cromwell, Cravath Swaine & Moore and several others all enjoy average profits of about £1.2m, far exceeding their UK counterparts. Only Slaughter and May has consistently maintained a high level of profitability of £778,000 per equity partner.