It is hard to believe that there has ever been a US reporting season that has been as keenly watched by the magic circle as this one. Global market conditions, continued international integration and the weak dollar mean the City’s leaders have never had a better chance of closing the gap on New York’s elite.
Last year, Linklaters joined Slaughter and May as the only UK practices in the world’s 10 most profitable law firms. This year, given the initial results from the US, it looks like Allen & Overy (A&O), Clifford Chance (CC) and Freshfields Bruckhaus Deringer will come tantalisingly close. On a rough estimate, to have an outside shot of making that select band, the UK triumvirate need profits per equity partner (PEP) of at least $2.4m (£1.2m). This means Freshfields needs bottom-line growth of 16%, A&O 17% and CC 18%.
But at this level of the game PEP is a means to an end - the end being to attract the best lawyers in Manhattan. So the key to a sustained profitability drive among the magic circle is turning growth in PEP from a defensive play - keeping hold of your biggest billers in London - to a potent weapon used for strategic hires in key markets.
Of course, growth in New York is supposedly at the top of the to-do list for the UK elite. And this could be - no, should be - the year for the magic circle to make some powerful hires in New York, the kind that start to give them visibility in Manhattan.
But delivering on that promise will not just be down to PEP, it will be as much about nerve in the one market where the magic circle have recently shown very little, even if it is acknowledged that they have been more astute Manhattan recruiters over the last 18 months.
With CC well-stocked again in New York, the smart money is on Freshfields and Linklaters making hires in corporate or finance that have a more starry quality to them. And current indications are that three major City firms are weighing up taking a quality transatlantic team that would make such a splash. But such moves have been mooted before, only for nerves to fail at the last minute. Ted Burke, David Childs, David Morley and Simon Davies may want to wait before they have the full picture of the current state of the US market to fully commit. That will come in May when The American Lawyer 100 - the original trailblazer in lifting the lid on law firm financials - hits desks. They should be reading with interest. In the meantime, Legal Week and AmLaw will be keeping the market well-informed.
Richard Lloyd is chief European correspondent of Legal Week’s sister title, The American Lawyer.
