Editors' Blog

Linklaters’ results hat-trick will be Angel’s legacy

Posted 5/07/2007 by Alex Novarese

David Childs and Ted Burke must be hoping Linklaters’ incoming managing partner, Simon Davies, proves to be a miserable failure. Because judged on Linklaters’ 2006-07 financial results, it is going to take a major shock to slow down the City’s most successful top law firm of recent years.

The numbers – as seems fitting for Linklaters – tell much of the story. With revenues up £186m annually – equivalent to the entire annual income of an SJ Berwin or Denton Wilde Sapte – Linklaters has smashed straight through the symbolic £1bn fees barrier and then some.

With Linklaters maintaining well above-trend growth for the third year in a row, the firm now looks capable of seizing Clifford Chance's mantle as the world’s largest legal practice within a couple of years.

More significant is the dramatic improvement in profitability since 2004, when the firm’s profits per equity partner (PEP) were a ‘lowly’ £674,000. With profits up 22% this year, PEP has rocketed to £1.294m. Peers have long claimed that careful management of the firm’s partnership has inflated the firm’s PEP but the numbers issued this week as the firm prepares for its limited liability partnership filing don’t offer rivals much comfort. Total profits for 2006-07 stood at £490m, more than twice the level of 2004.

The buying power this will give Linklaters to expand in key legal markets will be crucial, especially as the firm is now aiming to expand its infant US corporate practice. As Legal Week noted earlier this year, 2007 has been the year when London’s top firms have achieved the longtime goal of reaching Wall Street levels of profitability.

Legal Week’s US top 50 results for 2006 showed that $2.5m (£1.25m) was the current PEP benchmark for top Manhattan firms. Aided by the strength of the pound, Linklaters can top that and stretch as far as $3.23m (£1.61m) a year if it ever felt like cutting a star US lateral a top-of-lockstep deal.

Not that this means Linklaters is unstoppable. The question has yet to be entirely answered whether the firm is more masterpiece of financial engineering than London’s top bluechip legal practice. After all, for a firm of its stature, Linklaters’ international network is still oddly patchy and its public M&A practice has arguably lacked its usual edge in recent years, at least compared to that of Freshfields Bruckhaus Deringer.

But gripes aside, Linklaters has capped off a remarkable period of expansion and cemented its position as London’s most influential law firm, with CC and Freshfields clearly borrowing from its strategy in recent years. For Tony Angel, who did not enjoy universal support within the firm when he initially took the helm, the firm’s record of sustained performance is a legacy to be proud of.

alex.novarese@legalweek.com