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Lovells and the Global Elite
Lovells’ world Lovells is still not quite up there with the 15 Global Elite firms. Sure it’s big, but now it needs to tune in to tougher management. Full analysis of the Legal Business Global 50 follows, revealing the intensity of the competition around the world CLAIRE SMITH
THERE USED TO BE A TIME, NOT SO long ago, when Barclays treated Lovells as its number one law firm. Lovells basked in the reflected sunshine of having the one of the UK’s biggest banks as a top client. But things have changed. Lovells is now one of a panel of six at Barclays, alongside DLA, Clifford Chance, Allen & Overy, Simmons & Simmons and Linklaters. DLA’s share of the work has rocketed, while Lovells has plummeted down the pecking order – to such an extent that even Simmons is looking preferable. As sources close to the bank put it, Lovells isn’t hungry enough. ‘If you could put Nigel Knowles into Lovells, now that would be something,’ says one. Lovells – such a strong firm in so many respects – urgently needs to become less comfortable with itself if it’s to keep up with the elite global firms, as charted here by Legal Business.
Going for global In 2000, Lovells faced up to the toughest decision it’s ever had to make. On the brink of a merger with Germany’s Boesebeck Droste, a firm that had spurned an approach from Clifford Chance the year
28 Legal Business July/August 2004
Illustration DAVID HUMPHRIES
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Lovells and the Global Elite
The Global Elite
Turnover 2004
Net income 2004
change from 2003
profit margin
Revenue generation Cost +
Profit
per lawyer
per lawyer
PEP 2004 = REVENUE per lawyer
£100k £200k £300k £400k £500k
change from 2003
THE PRUDENT Cravath, Swaine & Moore New York, 78 equity ptnrs, 0 non-equity ptnrs, 441 total lawyers
Davis Polk & Wardwell New York, 145 equity ptnrs, 0 non-equity ptnrs, 658 total lawyers
Simpson Thacher & Bartlett New York, 145 equity ptnrs, 0 non-equity ptnrs, 637 total lawyers
Slaughter and May London, 129 equity ptnrs, 0 non-equity ptnrs, 724 total lawyers
Sullivan & Cromwell New York, 156 equity ptnrs, 0 non-equity ptnrs, 665 total lawyers
£228.5m
4%
£100.5m 44%
£228k
£381.9m
0.5%
£169m
44%
£324k
£357.4m
-1.4%
£174.6m 49%
£287k
£245.4m
1%
£108m
44%
£190k
£381.3m
-8.3%
£197.3m 52%
£277k
£372.6m
5.3%
£153.2m 41%
£264k
£243m
0.8%
£78m
£75k £158k
= £518,000
£1,289,000
-1.4%
= £580,000
£1,166,000
-1.5%
= £561,000
£1,204,000
-2.1%
= £339,000
£837,000
-5.5%
£297k
= £573,000
£1,265,000
10.3%
£185k
= £449,000
£918,000
-4.7%
= £233,000
£703,000
-5%
= £426,000
£862,000
1.4%
£290k £257k £274k £149k
THE PATIENT Cleary Gottlieb Steen & Hamilton New York, 167 equity ptnrs, 0 non-equity ptnrs, 830 total lawyers
Herbert Smith London, 111 equity ptnrs, 87 non-equity ptnrs, 1,042 total lawyers
Shearman & Sterling New York, 195 equity ptnrs, 35 non-equity ptnrs, 1,070 total lawyers
Sidley Austin Brown & Wood National (US), 288 equity ptnrs, 274 non-equity ptnrs, 1,421 total lawyers
Skadden, Arps, Slate, Meagher & Flom New York, 366 equity ptnrs, 0 non-equity ptnrs, 1,743 total lawyers
32%
£455.7m
-2.4%
£168.1m 37%
£269k
£574.2m
3.7%
£159.7m 28%
£292k
£112k
= £404,000
£554,000
2%
£364.2m 43%
£282k
£209k
= £491,000
£995,000
-7.0%
= £266,000
£624,000
-7.6%
= £323,000
£558,000
-12.7% -5%
£855.6m
-2%
£157k
THE POTENT Allen & Overy London, 406 equity ptnrs, 45 non-equity ptnrs, 2,443 total lawyers
Clifford Chance International, 406 equity ptnrs, 230 non-equity ptnrs, 2,945 total lawyers
Freshfields Bruckhaus Deringer International, 516 equity ptnrs, 0 non-equity ptnrs, 2,377 total lawyers
Latham & Watkins Los Angeles, 415 equity ptnrs, 49 non-equity ptnrs, 1,565 total lawyers
Linklaters International, 339 equity ptnrs, 161 non-equity ptnrs, 2,400 total lawyers
£649m
0.3%
£253.4m 39%
£162k
£104k
£950m
-2.9%
£226.5m 24%
£246k
£800m
0%
£343.1m 43%
£192k
£144k
= £337,000
£665,000
£640.3m
6%
£327.7m 51%
£200k
£209k
= £409,000
£789,800
3.9%
£720m
0%
£227.2m 32%
£205k
£95k
= £300,000
£670,000
-8.7%
£377m
0.5%
£137.6m 37%
£182k
£105k
= £286,000
£523,000
-6.2%
£77k
AND THEN THERE’S… Lovells International, 263 equity ptnrs, 69 non-equity ptnrs, 1,317 total lawyers
There are 15 firms in the Global Elite, and they split into three groups: the prudent, the patient, and the downright potent. All are regularly used by the top corporates and investment banks on both sides of the Atlantic, having achieved worldwide recognition for their brands.
> before, Norton Rose came calling. Lovells’ partners faced a quandary: international expansion versus domestic bliss. They opted for the former, and look at them now. Lovells in the summer of 2004 is huge, proud, and – when it comes to comparisons
30 Legal Business July/August 2004
The prudent have no raft of international outposts, just sheer brilliance in their home markets that leads to ever greater things elsewhere. The patient invest overseas when needs be, but have avoided mergers for the most part. And
with the profession’s Global Elite – somewhat high and dry. Sure, Lovells is truly global – just count the offices. Since merging in Germany, the firm linked up with
then there are the potent. Here, the international brands have been built on the back of significant investment across the globe in the pursuit of the truly full-service international practice.
Ekelmans Den Hollander in the Netherlands and Siméon & Associés in France, and has built its own operation in Italy, which will soon be joined by a Spanish presence. That’s not to mention Asia, which battles on, eastern Europe which waits to fulfil its
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Lovells and the Global Elite
potential, and a US practice that continues to bring in the dollars. All in all, 18 locations in Europe, six in Asia, and two in the States. But while the firm is where it wants to be geographically, it is some way short of where a global firm of such size should be financially. One marker of relative success is the average profits per equity partner figure. A PEP of £520,000 puts Lovells some way behind our Global Elite of 15 firms – see table on p30. Moreover, the LB Global Elite has seven central criteria, and Lovells falls down at the first, critical, hurdle. It has yet to truly excel in either corporate or finance in its home market. What use, critics ask, is being the best IP firm in Europe, or ranking 21st in the world by revenue, if you can’t compete with the world’s best when it comes to doing the deals? Starting this summer, Lovells needs to address that as a matter of some urgency. It can no longer just lie down and enjoy where it’s at.
Potent force Most of Lovells’ management realise the struggle that lies ahead. The most crucial task for them is to accept that the firm never did dominate its domestic market in either finance or M&A (perhaps with Norton Rose, things could have been different), to realise why not, and start doing something about it. Ex-partners say the firm recognised years ago that it had to
THE CRITERIA FOR MEMBERSHIP OF THE GLOBAL ELITE To make it in: ■
■ ■
■ ■ ■ ■
You are a leader in your home jurisdiction in at least two of the three key practice areas: finance, M&A or litigation. You have a disproportionately high number of FTSE 100 or Fortune 250 clients. You’re regarded as serious competition in either M&A or finance by the top firms on both sides of the Atlantic. You have access to the highest quality German lawyers. You’re one of the 50 most profitable firms in the world. A large majority of your partners operate at the apex of their respective fields of expertise. You have at least one overseas office.
LESLEY MACDONAGH, MANAGING PARTNER MacDonagh has been running the firm since 1995 and has seen it grow from 150 partners to 335. She says: ‘The big achievement has definitely been our internationalisation, the intensification of the work we do outside London. We have all worked hard to make the mergers work.’
LB says: Is Lesley tough enough? Hailed by insiders for leaving congratulatory voicemails when they win work, she may nevertheless be too consensus-driven to take the hard decisions needed.
crack these markets, but it never quite mustered the energy to take action. Lovells plans to do things in reverse. It has the support areas, it has the international reach, but what it lacks is deal-doing prowess. ‘I think we are a different model to a Clifford Chance or a Freshfields Bruckhaus Deringer,’ says managing partner Lesley MacDonagh. ‘We started with an excellence in a number of practice areas when focus was the flavour of the month. We are very broad-based – we are the top IP firm probably in the world, certainly in Europe – and in many ways we have got a lot of boutiques operating within one firm.’ ‘We have built up corporate and finance while retaining that,’ she says. ‘We came at it from a different angle and we stuck at it. It was quite a tough thing at one stage, but the last few years have shown that broadly based is good.’ The plan, then, is to win the big instructions by wowing clients with the competition and tax prowess. Lovells is building from the outside in, both by practice area and in terms of international expansion. The global network is now in place and must be capitalised on – Spain was the missing link and that will open
later this year, with China also in line for some further investment. Hugh Nineham, head of corporate, is painfully aware of Lovells’ limitations. ‘We are a new firm, we are only four years old really,’ he says. ‘So we have all the challenges of developing that firm into a cohesive fighting unit. ‘We have made huge investments over the last few years and the motto for the forthcoming year is to continue bedding down the integration and to start marketing the proposition.’ Similarly, the support areas are in place, but the central tenets of any global law firm – M&A and finance – must now be sorted out. ‘We never were Slaughter and May 20 years ago, so of course we have got to build up our contacts,’ says MacDonagh. ‘We were pilloried for being too broad, and it is a tougher act to be good at a whole range of things. But if you can do it, why wouldn’t you? The cross-selling opportunities are huge. I think if we hadn’t seen the drop-off in the market we would be really flying now.’
Dealing with corporate There is no doubt that Lovells as a firm has performed well over the last few years. In 2003, it topped the Legal Business composite rankings for financial performance with a 17% increase in turnover and a 9% hike in profits. This year, that’s been maintained: turnover is up £2m to £377m, profits are down only slightly, which is forgivable in this market. What’s lacking on the corporate side is the performance in the deals tables. Advising major loyal corporate clients like SABMiller, Granada (now the merged ITV)
July/August 2004 Legal Business 31
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Lovells and the Global Elite
HUGH NINEHAM, HEAD OF CORPORATE Nineham is the corporate rainmaker at Lovells, responsible for relationships like SABMiller and Alstom, to name but two. He is well aware that he needs to deal with the firm’s underperformance in the M&A arena. ‘The thing isn’t going to happen in a day,’ he admits.
LB says: Aggressive and ambitious, Nineham hopes to lead the corporate charge to the investment banks, though some former colleagues say he has been promising revolution for years. The question is whether his departmental colleagues are with him.
DAVID HARRIS, HEAD OF FINANCE As head of the newly created finance stream for the last two years, Harris has devoted his energies to a diversification of the practice: more work for more banks. Lesley MacDonagh says: ‘We could easily see huge growth in finance – David has done a great job and we have the right people.’
LB says: Harris sees an opportunity and he plans to capitalise. The finance team is also populated by bright young stars such as Adam Freeman in acquisition finance, so it could go far. As relationship partner for Barclays, Harris must keep them sweet too.
> and Prudential is all very well, but there needs to be more of it. Lovells did not make the top 20 of the European M&A tables for 2003, and ranked 15th in 2002. This is the fifth largest law firm on the Continent. Of the top 50 clients, by billings, in corporate over the last three years, eight are in the FTSE 100, six in the FTSE 250, five are Fortune 500 and six are private equity houses (without doubt the jewel in the crown of Lovells’ corporate group). Nineham says: ‘If you looked at the client base you would think this was Slaughter and May or someone, it’s so strong. The chink in the armour is that that hasn’t been converted to high positions in the deals tables, and I accept that. ‘We have always done well by volume but it’s the value where we tend to do less well. But we have a very sophisticated business plan objective to increase
32 Legal Business July/August 2004
cross-border work now, and I’m pretty satisfied we’re getting the message across to the multinationals,’ he says. There are many, both within and without the firm, who bemoan a lack of ambition and drive in Lovells’ corporate practice. It is criticised for a dearth of rainmakers and an international network doing domestic rather than cross-border deals. One of the biggest issues is investment banking, where Lovells must really up its profile. Though six of the practice’s top 50 clients were originally investment bank referrals, with Granada and Equitable Life amongst them, the firm’s
strongest links remain limited to Lazard, JPMorgan and CSFB. Last year, Richard Brown was hired from Goldman Sachs to lead a push into the banks on the equity capital markets side, and that has shown some degree of success: the firm is working for Lehman Brothers for the first time on the M&C Saatchi IPO, for example. Nineham says: ‘We are targeting the banks through a combination of personal relationships, sector skills, and our marvellous tax and antitrust capabilities, which are hugely well regarded by the investment banks. We have a made very focused, structured and dedicated effort to raise our reputation and standing in the investment banking community to where we think it ought to be.’ The firm has a long way to go if it is ever to match the M&A prowess of the members of the Global Elite. ‘I am personally confident that we are as good as anybody,’ says Nineham. ‘Clients and financial intermediaries who work with us are clear about that, but that’s not the same as having that universally accepted. ‘In the domestic market there are only really three firms in M&A, and every other firm has its own way of trying to tackle that. Our ways of addressing it are the geographical spread, and a blend of transactional and sector skills.’ It looks like a good job that Nineham, without doubt Lovells’ strongest public M&A rainmaker, failed to win the senior partner election – he has his work cut out where he is.
Fighting finance To warrant inclusion in the Global Elite, a firm must ‘be a leader in its home jurisdiction in at least two of the three core practice areas – finance, M&A or litigation’. It must also be ‘regarded as serious competition in either M&A or finance by the top firms on both sides of the Atlantic’. There is no doubt that Lovells cuts the mustard on the litigation side – one only has to glance at the current High Court battles with the Bank of England over BCCI. But if M&A is not up there, perhaps finance is the way forward for the firm. Lovells’ future could be with the banks that are, after all, often the most enamoured with international networks. The finance stream separated from corporate in 2002 when the firm
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Lovells and the Global Elite
‘Compared to the Magic Circle, the management team at Lovells is a lot less professional and serious, and the partners are much more relaxed.’ A Lovells partner sounds off
restructured, and it now boasts just over 90 partners to corporate’s 140 or so. The total number of partners stands at 332. MacDonagh says: ‘I would like to see us really capitalise on our position in the banking and finance area now, because I do think that, apart from Clifford Chance and A&O, there is big potential for the ascendancy firms there. We would be the heir apparent – we could easily see huge growth because we have got the skills and now the brand.’ Certainly, the practice has come a long way under the leadership of David Harris. Historically a borrower-led team, the group has won bank panel appointments for ING, Société Générale, Lehman Brothers, CIBC, Standard Chartered and Mizuho Bank. Key clients remain the likes of Barclays, HBOS and Lloyds TSB, but Harris recognised the bank client base had to diversify and the process is well under way. The team has strength in depth that puts it in the chasing pack behind the top two finance firms. In project finance, there has been the work for Tube Lines, the NATS PPP and refinancings, plus work on Rome airport and the Channel Tunnel rail link. There is strong capital markets, repackaging and securitisation, good restructuring work not just on Equitable and BCCI, but also a
significant instruction from ING and work on Welcome Break. In property finance there has been structured sale and leaseback work for CSFB and Nomura; in asset finance Merrill Lynch became a client; and on acquisition finance the team is riding high on the back of private equity, taking roles on both the Debenhams and Scottish & Newcastle buyouts last year. As to progress so far, Harris says: ‘Since the finance stream came into being, we have had one year of really excellent growth and a further year of growth in a difficult market. We have established a good platform but there’s lots more to do. There are still more bank panels to get on and we need to develop our platform in a number of places. There is a lot to play for.’ The international finance platform is now largely in place, through a series of lateral hires rather than as a result of mergers. ‘We have not really benefitted in terms of team growth as a result of our mergers in the same way as corporate,’ says Harris. ‘The firms we have merged with had established corporate practices, whereas in finance we have expanded the teams through
lateral hires. We have now got significant depth, as well as capability in 16 offices.’ There is room to capitalise on the project finance practice more
JOHN YOUNG, SENIOR PARTNER Newly elected Young ran the firm’s übersuccessful corporate insurance practice before taking up his post in May this year.
LB says: Young was the compromise candidate, with the corporate department vote split between re-electing the longstanding Andrew Walker and going for the more aggressive and ambitious Hugh Nineham. Young needs to prove that he has the drive to take the firm up a notch.
July/August 2004 Legal Business 33
>
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Lovells and the Global Elite
KEY COMPARISONS – LOVELLS v HERBERT SMITH One partner at Lovells told Legal Business: ‘We spend a lot of time looking at Herbert Smith. We can’t understand how they’ve managed to build corporate from nothing. They were very lucky to get in on some of the big privatisations in the late
1980s.’ In fact Herbert Smith has had more than luck. The firm has incredibly hungry corporate partners who have managed to cross-sell into the investment banks on the back of litigation, and who have capitalised on strong relationships with
Total lawyers Equity partners Non-equity partners Turnover 2004 change on 2003 PEP 2004 change on 2003 Top of equity Offices (including associated offices) Europe Asia US M&A deals data* European target or acquiror, based on deals completed 2003 UK target or acquiror, based on deals completed 2003
some of the top Wall Street firms.The firm does not boast the size of Lovells, in fact it falls outside the Global 50 by revenue, but like Cravath, Swaine & Moore it still makes the Global Elite on the back of its work and profits alone.
Lovells 1,317 263 69
Herbert Smith 1,042 111 87
£377m, up £2m
£243m, up £2m
£520,000, down 6% £633,000
£700,000, down 5% £760,000
18 2 7
6 3 0
23rd 15th
7th 6th * Source: Thomson Financial
> across the network, and Barclays has significant operations in Spain that can be mined when the Madrid office finally gets up and running, assuming that DLA doesn’t get there first.
Going global Lovells has been called the White & Case of Europe: a firm that has brought together disparate domestic practices through merger with a plan to raise their game by exporting London clients and contacts. The German market has been tough, but the strategy is paying off, particularly in private equity. The relocation of UK partner Julie Bradshaw to Frankfurt for a few years introduced the offices to key clients like HgCapital, Doughty Hanson and 3i, to the extent that the German team has raised its profile in the local market, which has fed into finance work. Italy performed especially well last year, turning in a profit less than three years after the firm opened as a greenfield site. The team worked on the Peroni deal for SABMiller last year and received high praise from the client. And eastern Europe surprised in 2003, having gone through a
34 Legal Business July/August 2004
turnaround mid-year after running below par. Of the three continental mergers, if there is an issue it is Paris, where the firm is still lacking the killer French rainmaker to deliver the deals. But MacDonagh insists the mergers have succeeded. She quotes figures for the firm’s top 20 clients: 16 now use it in all three regions (Europe, the US and
BOB KIDBY, HEAD OF REAL ESTATE Real estate has done well under the leadership of Kidby – the man behind the infamous Mexican Wave concept that rattled the practices of his rivals. With a seat on the partnership council, Kidby is truly committed to the Lovells culture.
LB says: Lovells’ Mr Nice Guy has done a great job with his practice, acting for massive clients like Prudential. He made it to the final stages of the senior partner contest, but ultimately his softly-softly approach would not have kicked the corporate guys into shape.
Asia), 17 use seven or more offices, and all use more than three offices outside London. ‘The big achievement in the last few years has definitely been our internationalisation,’ she says. ‘There was a series of mergers, but that’s really the easy bit. They have worked, and that’s because we have all worked hard to make them work. I think that’s really set us apart, because if we start downing tools to help someone pitching in Prague, that means we are one firm, and that’s very significant.’
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Energy Law Conference Energy Projects Under Increased Scrutiny 20-21 September 2004
A two-day Conference presented by the Section on Business Law and the Section on Energy & Natural Resources Law of the International Bar Association
Sheraton Suites Calgary Eau Claire, Calgary, Canada
This prestigious Conference will provide an excellent opportunity to update on the latest energy and resources law issues, with particular emphasis on the development of international energy projects. Delegates will have the chance to network with leading practitioners from around the world.
Speaker presentations • State of the industry – today’s challenges operating internationally • Revenue transparency – a case study and discussion based on the Chad Cameroon Pipeline • Energy projects in conflict zones: human rights issues and responsibilities • Indigenous rights and the Development of the Alberta oil sands
Roundtable sessions • What is the role of lawyers in the reporting and booking of reserves? • Recent developments in the resolution of energy disputes • Recent developments in anti-corruption legislation and prosecutions including the proposed UN Convention • Counterpoint: the Yukos case and corporate social responsibility • Environmental rights and the challenges they present to the development of new energy projects
Who should attend? Business and energy lawyers, professionals in the oil, gas and electricity industries, financial institutions, corporate counsel and academics
To register and to receive a copy of the programme when it becomes available, please contact: International Bar Association 271 Regent Street, London W1B 2AQ, United Kingdom Tel: +44 (0)20 7629 1206. Fax: +44 (0)20 7409 0456 E-mail: confs@int-bar.org. Website: www.ibanet.org
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Lovells and the Global Elite
The Global 50
Turnover 2004
Turnover 2004 change from 2003
change from 2003
1
Clifford Chance
£950m
-2.9%
26 Greenberg Traurig
£355.1m
2
Skadden, Arps, Slate, Meagher & Flom
£855.6m
-2%
27 Hogan & Hartson
£341m
3
Baker & McKenzie
£830.8m
17.6%
28 Morrison & Foerster
£334.8m
-0.6%
4
Freshfields Bruckhaus Deringer
£800m
0%
29 Paul, Hastings, Janofsky & Walker
£332.9m
2.3%
5
Linklaters
£720m
0%
30 Holland & Knight
£329.9m
-3.8%
6
Jones Day
£682m
12.7%
31 Foley & Lardner
£324.3m
-0.6%
7
Allen & Overy
£649m
0.3%
32 Bingham McCutchen
£314.1m
8.7%
8
Latham & Watkins
£640.3m
6.0%
33 Piper Rudnick
£311.2m
2.6%
9
Sidley Austin Brown & Wood
£574.2m
3.7%
34 Eversheds
£296m
3.9%
10 Mayer, Brown, Rowe & Maw
£508.4m
8.2%
35 Winston & Strawn
£285.8m
11 White & Case
£502.8m
11.7%
36 Orrick, Herrington & Sutcliffe
£277.8m
4.1%
12 Weil, Gotshal & Manges
£497.2m
8.4%
37 Fulbright & Jaworski
£276m
0.4%
13 Shearman & Sterling
£455.7m
-2.4%
38 DLA
£275m
18.0%
14 Kirkland & Ellis
£418.5m
2.7%
39 Paul, Weiss, Rifkind, Wharton & Garrison
£274.7m
0.6%
15= O’Melveny & Myers
£408m
8.3%
40= Pillsbury Winthrop
£273.4m
-1.4%
15= Wilmer Cutler Pickering Hale and Dorr
£408m
1.5%
40= Reed Smith
£273.4m
30.6%
17 Gibson, Dunn & Crutcher
£400.1m
5.5%
42 Vinson & Elkins
£272.9m
-10.3%
18 McDermott, Will & Emery
£389.4m
43 Arnold & Porter
£272.7m
-1.4%
19 Davis Polk & Wardwell
£381.9m
0.5%
44 Hunton & Williams
£269.7m
-0.4%
20 Sullivan & Cromwell
£381.3m
-8.3%
45 Heller Ehrman White & McAuliffe
£266.6m
13%
21 Lovells
£377m
0.5%
46 King & Spalding
£266.4m
22 Cleary Gottlieb Steen & Hamilton
£372.6m
5.3%
47 Debevoise & Plimpton
£252.3m
23 Morgan, Lewis & Bockius
£372m
0.1%
48 Dechert
£251.5m
1.3%
24 Akin Gump Strauss Hauer & Feld
£362.7m
-5.4%
49 Milbank Tweed Hadley & McCloy
£247.7m
-2.5%
25 Simpson Thacher & Bartlett
£357.4m
-1.4%
50 Slaughter and May
£245.4m
1%
> What price Asia? The resignation last month of Greg Terry, head of corporate in Asia, to return to investment banking for Morgan Stanley, is undoubtedly a major blow. Terry joined a
36 Legal Business July/August 2004
-7%
year ago to turn around that business, and was whispered to have all the solutions: he leaves with mission unaccomplished. There are plenty of Lovells
14.5% 6.6%
-3%
3.3% 10%
partners who privately envy Denton Wilde Sapte’s recent decision to close its loss-leading Asian practices. Lovells, not to everyone’s delight, remains in investment mode.
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Lovells and the Global Elite
Terry says: ‘When I joined, Lovells was indisputably first rank in IP, litigation and construction in Hong Kong, and had a corporate practice that had done interesting deals but wasn’t really in the first rank. In the last year Lovells has doubled the number of corporate lawyers in Beijing and opened in Shanghai. ‘Lovells got the first licence to practise law in China, and they put three people up there. Yes, they did some deals, but once it got to 20 lawyers, it gained momentum. The marketing folk are now preparing pitch books on an almost daily basis.’ The next step is Japan, where the firm has committed to expand. ‘I’m really thrilled with the international executive decision to have a go at Tokyo,’ says Terry. ‘One of the things that has astonished me is watching the decisions of people like Freshfields and Dentons out here. The last six years have been very tough for law firms in Asia. Anyone who says they have made a lot of money out here is lying. ‘Therefore, you can understand the partners in London looking at the 2003 figures, and they had SARS in there as well, and saying we have had enough, let’s get out. But actually it is precisely the wrong moment in history to give it up, and Lovells has seen that. ‘What’s happening in China is nothing short of sensational in terms of the number of corporations that have suddenly decided to go outbound instead of just doing domestic stuff. That’s the big game,’ he says. Terry says he has quit the firm because he was nearing the Lovells retirement age of 62 – something he had known about when joining, of course. However, his switch to
MARCO COMPAGNONI, HEAD OF PRIVATE EQUITY The star of Lovells’ corporate efforts so far, Compagnoni leads a private equity team which is now challenging the top-tier firms. His work for the likes of the Barclay brothers, HgCapital and Doughty Hanson puts the firm well up in private equity deals tables, and his right-hand man Derek Baird is one of Lovells’ brightest young stars.
LB says: A fine example to the rest of the corporate department, Compagnoni has got his team out to Europe, cross-selling into the network and into finance. The corporate success story.
Morgan Stanley will be appreciated – the bank has already agreed to instruct Lovells in Asia from now on. ‘I think I will be in a position to continue to build the corporate practice for them in the new job,’ he says. Rainmakers like Terry don’t come along every day – Lovells needs more of them.
Stars and stripes The final piece of the Lovells global jigsaw is the US, where the firm has 60 lawyers spread across offices in Chicago and New York. The practice focuses on insurance and reinsurance, both contentious and noncontentious, as well as providing tax, capital markets and banking support to deals thrown out by the network. The offices work for some of the
‘In many ways we have got a lot of boutiques operating within one firm.’ Lesley MacDonagh
firm’s biggest clients, like ING, Hannover Reinsurance, Swiss Re, AIG and MetLife. Again the firm picked a rainmaker, in the shape of insurance litigator Joe McCullough, who joined ten years ago and has brought in work for the whole network. He says: ‘We don’t really view the States as an investment – we have made money, a lot of money, in the US. The firm is not going to try to grow an M&A capability out here, but we continue to look at areas where having US capability makes sense.’ Lovells has shied away from taking on US firms on their own turf, but has equally dismissed the need to narrow down relationships with Wall Street in the same way that Herbert Smith has with Simpson Thacher & Bartlett, for example. ‘Obviously, if you want to be a global firm you are going to need something in the US, but how much of that we will need to deliver the global product, I don’t know,’ MacDonagh says. ‘That’s why we are keeping it under review. I guess if someone else merges, that will change the market. We don’t rule anything out or in, but there is no sort of immediate need.’ What this year’s Legal Business Global 50 clearly shows is that it is the American firms, increasingly, that drive the international legal market – you only have to look again at the vast differences in their profitability. With that in mind, Lovells could have grown so large that it has ruled out that most obvious of exit strategies, a US merger. Surely it is now too big to woo a top New York firm, should one ever decide to merge? ‘I do think there are fewer brides this > side of the Atlantic than that side, yes,’
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Lovells and the Global Elite
‘If you could put Nigel Knowles into Lovells, now that would be something.’ A Barclays source makes a suggestion
> MacDonagh says. ‘You do have to think about how you remain attractive. Hopefully, if you have got a good business and it has good profits, you will be. You do have to keep in shape, but that’s not something that runs counter to what we are doing anyway. I can’t think of anything we are doing that would make us unattractive.’
Smartening up The new management team’s task cannot be underestimated. Complacency will kill the ascent. John Young has just taken up the post of senior partner after beating incumbent Andrew Walker, head of real estate Robert Kidby, and bookies’ favourite Hugh Nineham. One partner describes the election result as an incredible shock: the practice and office heads had all supported Nineham and his mandate for change. Young was, according to this source, elected by ‘the great unwashed’ of the partnership. Another believes that
Walker’s decision to stand again had precipitated the split in the corporate vote which kept Nineham – a hugely popular figure in the firm – out of the top job. Incumbent senior partners rarely stand unless they are pretty sure they’ll get re-elected. Walker, in this instance, got it seriously wrong. However, as is indicative of this diverse and relatively freethinking firm, plenty of other Lovells partners privately suggest that Young’s win was a vote against the Nineham mandate for corporate expansion and tougher performance targets. Yet more see Young as the great corporate insurance rainmaker, who really understands the need for focused business development, and who
is ushering in the belated start of a far stronger new era. One notes: ‘Compared to the Magic Circle, the management team at Lovells is a lot less professional and serious, and the partners are much more relaxed. People don’t really see the need to be anything else.’ Another partner adds: ‘We are so consensus-driven and we pride ourselves on collegiality, but that means we always move at the speed of the middle ground. There aren’t enough people getting out there and getting the work. Too many of our partners feel it is enough to be marketing, even though they aren’t actually bringing in the work.’ What MacDonagh and Young must now do, as the partners ruminate on their elected leaders’ new emphasis on growth, is deliver dynamism, and yet more profitability. Culture, of course, is there to be altered. MacDonagh sums up Lovells’ current state better than anyone else: ‘We feel comfortable now about what we have to offer the best people, and I think what we are seeing at the moment are people caring less about the last x thousand pounds that they might earn, and instead saying: “Do I want to go there, or do I want to go to a place with a nice culture?”’ Sometimes, you can be too nice. LB claire.smith@legalease.co.uk
GLOBAL 50 METHODOLOGY The Global 50 firms The firms that appear in the Global 50 are the top 50 firms in the world, ranked by turnover. Financial years differ – most end in December in the US, and in April in the UK. The most recent year’s figures are used for each firm. Sources A majority of the firms that appear in the Global 50 co-operate fully with its compilation by providing our researchers with the required information. However, we corroborate this information with others who are familiar with the figures. Some firms choose not to co-operate officially with our data collection process and
in these circumstances we rely on figures given to us by trusted but anonymous sources. Turnover Turnover figures do not include VAT, disbursements, interest or anything other than the worldwide fees generated by lawyers for their work during the last financial year. Staffing Full equity partners, non-equity partners and lawyer numbers are all averages for the firm’s last financial year. Total lawyer numbers include partners, associates, assistants and trainees – they do not include paralegals.
38 Legal Business July/August 2004
Non-equity partners We recognise that many firms have evolved a variety of partnership structures and levels. We count only full equity partners in our profits per equity partner (PEP) calculations. Non-equity partners, be they fixed-share, salaried, or laterals on probationary periods, are those that are not full participants in the firm’s profits, though they may have voting rights. We treat profit-sharing with non-equity partners as an expense and it is therefore not included in the net income figure. The net income figure is thus the final profit that is divided between the equity partners.
Merged firms Wilmer Cutler Pickering merged with Hale and Dorr on 1 June 2004. We have nevertheless included the firm as a combined entity for the Global 50. The net incomes and turnover figures of the two firms for the financial year ending December 2003 have been combined. Exchange rates An exchange rate of $1 equals £0.62 has been used for the Global 50 – an average for the year 2003. Year-on-year comparisons are made in pounds sterling, comparing with numbers published in Legal Business in November 2003.
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Legal Business Global 50
The Global 50 Introducing full, new and exclusive analysis of the world’s top 50 law firms. Special focus on each firm’s revenue generation figures, as equated on a per lawyer basis. Also included: 2005 investment plans, top clients, and biggest billers
FIRM FINDER
THE LEGAL BUSINESS GLOBAL 50 REPORTING TEAM: Chris Crowe, Rachael Doeg, Stephen J Doggett, Sam Kenworthy, James Lewis, Richard Lloyd, Anthony Notaras, Vanessa Pawsey, Maria Shahid, Camilla Sutton, Caroline Thorpe
Akin Gump Strauss Hauer & Feld Allen & Overy Arnold & Porter Baker & McKenzie Bingham McCutchen Cleary Gottlieb Steen & Hamilton Clifford Chance Davis Polk & Wardwell Debevoise & Plimpton Dechert DLA Eversheds Foley & Lardner Freshfields Bruckhaus Deringer Fulbright & Jaworski Gibson, Dunn & Crutcher Greenberg Traurig Heller Ehrman White & McAuliffe Hogan & Hartson Holland & Knight Hunton & Williams Jones Day King & Spalding Kirkland & Ellis Latham & Watkins
44 41 48 40 46 44 40 43 49 49 47 46 46 40 47 43 45 48 45 45 48 41 49 42 41
Linklaters Lovells Mayer, Brown, Rowe & Maw McDermott, Will & Emery Milbank Tweed Hadley & McCloy Morgan, Lewis & Bockius Morrison & Foerster O’Melveny & Myers Orrick, Herrington & Sutcliffe Paul, Hastings, Janofsky & Walker Paul, Weiss, Rifkind, Wharton & Garrison Pillsbury Winthrop Piper Rudnick Reed Smith Shearman & Sterling Sidley Austin Brown & Wood Simpson Thacher & Bartlett Skadden, Arps, Slate, Meagher & Flom Slaughter and May Sullivan & Cromwell Vinson & Elkins Weil, Gotshal & Manges White & Case Wilmer Cutler Pickering Hale and Dorr Winston & Strawn
40 44 41 43 49 44 45 42 47 45 47 47 46 48 42 41 44 40 49 43 48 42 42 43 46
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