Slaughter and May’s Billion-Dollar Dilemma – Expand or Perish
John Bowie, LawFuel publisher
Slaughter and May, a member of the UK’s elite Magic Circle, has proudly charted a different course to its contemporaries. Rebuffing endless international expansion and a bigger partnership, it has maintained a tightly-knit operation. But is it sustainable?
Where Slaughters’ rivals have worked hard to be able to offer a fully trans-Atlantic service – see Freshfields’ aggressive hiring in the US and Allen & Overy’s merger with Shearman and Stirling, to name just two examples – Slaughters has firmly stood its ground.
The firm isn’t in the habit of sending out press releases on an apparent daily basis, announcing with fanfare its expansion to this or that jurisdiction. It’s similarly reticent to undertake lateral hires at a senior level, eschewing the tit-for-tat approach that has dominated the London scene in recent years, choosing instead to promote homegrown talent.
The results speak for themselves. It is now the most profitable firm, with profit-per-equity partner understood to be around £4 million (Slaughters does not publish its partner profits because it remains a general partnership, rather than an LLP). Meantime its reputation remains sharply defined – deliberately smaller than its rivals, offering a premium product and seemingly untouchable.
The business model, however, is set for choppy waters. Three factors indicate that the Slaughters approach may be unsustainable before very long.
Full-service – only if it’s in the UK
The reality is that some clients expect a full-service, fully-global firm. Not all, but many. That means for cross-border mandates – be it M&A, understanding the regulatory implications of a new product or service, or multi-jurisdictional litigation – Slaughters isn’t in the picture.
Recent data shows US firms have strategically prioritized growth in London in practices such as finance and private equity, offering larger compensation packages compared with UK firms.
Broadly speaking, the firm is fine with that – it goes with the brand. But in an increasingly interconnected world where the impact of tariffs, to suggest just one recent example, will have a global effect for a client with a complex supply chain, Slaughters can’t offer itself up. That may be fine for it on a case-by-case basis, but it just leaves the work open to other firms who truly can be everywhere.
Best Friends – or foes?
In recognition of that, Slaughters has developed an impressive ‘Best Friends’ network, where it will refer work internationally where relevant. The trouble is that those firms have increasingly decided to enter Slaughters’ territory, uncaring of the impact of doing so on that network.
Over the years, Slaughters has worked closely with US firms Davis Polk, Cravath, Swaine & Moore, and Paul Weiss. That might have made sense in a time where the Magic Circle was the be-all and end-all of London’s legal scene. But the impressive expansion of US firms in recent years into the UK means those ‘Best Friends’ are now competing for UK work that Slaughters might have historically considered its own.
There were 548 lateral partner hires in London in 2024, with Kirkland and Paul Weiss among the most acquisitive firms, focusing on leveraged finance, private equity, and restructuring. Additionally, Paul Weiss’s London office grew from three partners in summer 2023 to more than 30 partners, luring talent from Kirkland & Ellis and others.
To take just one example, data from Thomson Reuters and The Lawyer shows that Slaughters and Davis Polk were co-counsel between 2008 and 2013 on 19 M&A deals. However, Davis Polk entered the UK market in 2012 and can now offer trans-Atlantic work in its own right.
The US-based firm has aggressively expanded its London presence in 2024, growing to over 60 lawyers and hiring restructuring partners from Sidley Austin, leveraged finance partners from Linklaters via Cravath, and private equity talent from A&O Shearman.
Without an ability to similarly offer that breadth of work, Slaughters is increasingly finding its own friends are acting more like foes.
Clinging to a Narrowing UK Client Base
Finally, and most pressingly, the firm has stubbornly – perhaps snobbishly – stuck to a client base whose fortunes are themselves dwindling. With the London Stock Exchange’s rate of IPOs in the doldrums, seeing just 18 IPOs in 2024 – the lowest number since Ernst & Young began recording data in 2010, with 88 companies delisting or transferring their listings – and with UK Plcs performing sluggishly amid the country’s wider economic slowdown, the firm isn’t attracting the dynamic and forward-looking clients that other firms enjoy.
Slaughter and May represented 33 clients on the FTSE 100 and 44 on the FTSE 250, more than any other firm, but this dominance may be challenged as the broader UK corporate landscape weakens.
Part of that is its historic reticence to jump on the private equity bandwagon that has helped to make so many US firms so profitable in recent years. What was seen as ‘beneath’ Slaughters has propelled M&A activity and all the spinoff work that comes from it.
Slaughters might be commended for staying loyal to its clients – but UK housebuilders and supermarkets are hardly beacons of financial strength and innovative legal strategies to lead the firm into the future.
Recruitment, including increased lateral recruitment, is another issue. Partners at elite US firms in London command significantly larger sums than Magic Circle firms, with Kirkland & Ellis PEP at £6.1 million and Paul Weiss at £5.1 million. Such intense competition puts pressure on Slaughter and May’s talent retention strategy.
Davis Polk and Cravath have moved to modified lockstep compensation models and adopted non-equity partner tiers, enabling more aggressive lateral hiring, compared to Slaughter’s more traditional compensation model.
\Although Slaughers has by far the highest profit per equity partner of any UK firm, the path ahead may well call for more flexibility in its payment structure as aggressive US firms continue to eye top talent.
Avoiding the Slaughter
The challenges, then, are stark. In a hypercompetitive legal market where talent – on both the client and staffing side – is mobile like never before, Slaughters’ conservativism is beginning to look more like a hindrance than a help.
For now, its Partners sit happy atop generous profits and a tightly controlled unit. It’s unlikely to stay that way for long.
