Two more “magic circle” law firms have smashed through the barrier of making more than £1m profit per equity partner.
In doing so, Freshfields Bruckhaus Deringer and Clifford Chance join an elite club which includes Slaughter & May and Linklaters, both of which breached the “psychologically important” threshold in the year to April 2006.
The only Scottish-based firm to come close is Dickson Minto, whose profit per equity partner, this year is expected to exceed £1m. Last year the Edinburgh and London-based firm, founded by Bruce Minto and Alastair Dickson in 1985, made a PEP of £949,000 largely on the back of advising major private equity and M&A deals.
Freshfields grew profits per equity partner by nearly 25 per cent from £831,000 last year to £1.036m in the year to April 2007. The firm was matched by rival Clifford Chance, which also revealed a 25 per cent hike in PEP from £814,000 to £1.015m. The figures for both firms are still provisional and audited results are to be published later this month.
Freshfields turned in a net profit of £491m on turnover up 12 per cent to £987m. Commentators were surprised the firm managed to boost its PEP figure, despite the cost of a major restructuring which saw the departure of nearly 100 partners.
Revenue at Clifford Chance, the world’s largest law firm, rose by 16 per cent to £1.194bn. Its managing partner David Childs said: “This progress is testament to the hard work and high calibre of our people everywhere in our network and the strength of our client relationships.” The strong results followed “a brutal costcutting” overseen by Childs in recent years, including the axing of 300 support staff, according to magazine The Lawyer.
Not all lawyers believe PEP is a good yardstick. Guy Beringer, senior partner of Allen & Overy, believes the single-minded pursuit of PEP figures is harmful for the legal profession’s health.
Beringer said: “PEP is not merely an inappropriate star by which to navigate, it is a dangerous and undesirable metric for the legal profession to follow.”
He added that PEP ignores the two audiences that determine the success or failure of a law firm – clients and its people – and fails to reflect a firm’s underlying performance in terms of efficiency and sustainable profitability.
This article was published in The Herald on 11 June 2007