Editors' Blog

Global 100 countdown: CC outstrips Skadden by half a billion

Posted 30/05/2008 by Richard Lloyd

Clifford Chance (CC), the world’s largest law firm barring a market-shattering performance from Linklaters, announced its revenues for the last financial year this week, with the top line hitting £1.329bn, up 11% on last year. CC also reported healthy growth in profits with each equity partner taking home an average of £1.151m, up 13% in sterling terms.

To answer the question this blog has posed from the start, CC’s revenues now outstrip Skadden's by roughly $500m (£258m). The gap equates to the total revenues for a handful of other AmLaw 100 firms, including Arnold & Porter and Heller Ehrman. Last year the gap was $350m (£180m) – roughly the size of a quality mid-market City firm like Berwin Leighton Paisner.

Converted into dollars at the Fed’s average rate for 2007 which, with the weakening dollar, gives the UK firms an uplift, this puts CC’s revenues at $2.66bn (an increase of 20.9%) and PPP at $2.305m (up 23.2%) - a shade ahead of Debevoise & Plimpton, Davis Polk & Wardwell and Skadden. This reading slightly flatters the position of UK firms as the pound has this year fallen back from its 2007 highs but the sustained feebleness of the greenback is continuing to enhance the position of London firms competing on the global stage.

Compared with the other UK firms that have reported so far, and which make our live Global 100 rankings, CC’s performance is a little below par. Of course, it’s not to Herbert Smith or Ashurst or Norton Rose that CC managing partner David Childs turns to when he wants to benchmark the firm’s performance. The true measure of the firm’s numbers will come when Allen & Overy, Freshfields and Linklaters announce their financials.

And the expectation is that this elite group will feel the impact of the slump in structured finance and LBO activity and the dearth of big-ticket M&A more keenly than the tier below. As such, the expectation is that, reversing 2006-07, the magic circle will be outpaced by the chasing pack. CC is particularly exposed having a market-leading finance practice, Europe’s top private equity team and heavier exposure to the faltering dollar and US economy than any comparable London rival.

Given that background, Childs must be satisfied with the firm’s performance. The result will also further bolster his own reputation for bringing costs under rigorous control after a 2002-04 period in which the global giant looked in serious danger of losing its competitive edge as profits slumped. To be edging ahead of Davis Polk’s profitability by 2008 would have surely seemed like a pipe dream for CC back in the darkest days of early 2004.

As ever, stay posted to The AmLaw Daily to see how the UK leaders measure up against themselves and the Skaddens of this world and stay tuned for the upcoming Legal Week/AmLaw Global 100.

Richard Lloyd and Alex Novarese