Author: Legal Week
14 Dec 2009 | 00:13
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Until recently the world's largest law firm by revenue, the can-do attitude and gumption of Clifford Chance (CC) has made the firm both the poster-boy for the modern law firm and reviled by those who decry the commercialisation of the profession.
Indeed, it is hard to overstate the influence that CC had on the European legal market from the point of the ground-breaking union of London firms Coward Chance and Clifford Turner in 1987 to the equally high profile, if somewhat more problematic, three-way merger with Rogers & Wells in the US and Germany's Puender Volhard Weber & Axster in 2000.
Like traditional arch rival Allen & Overy, the backbone of the 550-partner firm remains its top-tier finance practice, which acts for most of the world's largest banks and maintains across-the-board strength in all the major institutional product lines. But CC is far more than finance, boasting one of Europe's leading cross-border practices in M&A (including what is widely seen as Europe's top private equity team) and a serious property practice.
A very sticky patch in the early Noughties at one stage looked like it might do CC some serious mischief - particularly in the US, where the firm bled partners heavily between 2002 and 2004. However, a stronger period between 2005 and 2007 appeared to have put the firm back on track. This was underlined by its 2007 results, which showed average profits per equity partner breaking the £1m barrier for the first time. At the same time, CC also became the world's first $2bn law firm. In 2008, turnover rose to £1.33bn, with partner profits rising by 13% to £1.151m..
The firm has in recent years, under the robust leadership of managing partner David Childs, been uncharacteristically focused on rigorous management rather than strategic dash.
However, there is no doubt that the firm has been hard hit by the global recession that took hold in 2008. CC's exposure to finance, private equity and property contributed to a punishing 2008-09 financial year, which saw profits per equity partner fall by 37% to £733,000, a steeper fall than seen by its magic circle rivals. The firm also in 2009 announced substantial job cuts, which were understood to have led to 350 job losses globally. By the summer of 2009 CC was putting the finishing touches on a sweeping restructuring of its partnership set to cut back its senior ranks by 15%. The firm will want to put in a more confident 2009-10 if it is to retain its position as one of the leading global law firms.
Where to start? CC has clocked up more history since the merger that created it in the 1980s than most law firms manage in a century. Forged by the 20-year-old marriage between Coward Chance and Clifford Turner - the merger that did more than any other to revolutionise the City legal market - this finance-driven firm relishes its status as a first-mover innovator.
The union was also to propel the firm into the emerging band of five top London firms that became known as the magic circle in the 1990s. CC was to re-enforce its progressive credentials in 1997 with the publication of its "Vision for the Future", a grand strategic statement of intent produced after more than a year of consultation among the partnership. In true CC style, the firm eschewed the understatement typical of City law firms to publish the highly-influential document, which was built around a manifesto to make CC's the "world's premier law firm".
The means to achieve this was largely about ditching the moderate international growth that had defined law firm strategy at the time in favour of aggressive expansion that actively targeted foreign mergers. Then-senior partner Keith Clark set up a working party to make the strategy reality, a venture dubbed Project Sky, and within two years half the City was openly borrowing from CC's playbook.
CC's boldness of course saw the firm lead the way in 1999 with its profession-defining tripartite tie-up with New York's Rogers & Wells and Puender Volhard in Germany. The firm's daring was in evidence again with its 2000 decision to quit the City to move to Canary Wharf (pictured below right). Things didn't go quite to plan after that, mainly because Rogers & Wells proved hard to integrate, both in terms of its litigation-heavy practice and culturally, with partners reared on eat-what-you-kill pay slow to warm to lockstep partnership.
Partnership discontent at the time contributed to the election of joint European managing partner Peter Cornell as the firm's managing partner in a closely-fought contest against London head Peter Charlton in 2001. The result was seen as vote against the centralised management that defined CC's late 1990s expansion and ushering a more consensual style from Cornell.
Still, consensus did not quickly bring with it stability. A troubled 2002 launch into California's legal market also aggravated tensions, as did a widely-leaked memo drawn up by US associates that lifted the lid on poor morale and generated unsubstantiated but damaging headlines regarding the potential padding of bills. By 2004, the firm was wrestling with a fractious partnership, profits languishing behind rivals and a US practice in turmoil.
The situation appeared to reach its low point in May 2004 when the London arm of US law firm Weil Gotshal & Manges came within a whisker of recruiting private equity partners Matthew Layton and James Baird, two of CC's top M&A lawyers. It came as a massive shock to the system for CC. However, the firm managed to turn the pair around at the last minute and, in retrospect, 2004 proved to be the turning point as leaders like Cornell and successor David Childs were able to push through a programme of cost-cutting and go some way towards rebuilding unity.
As such, 2006 and 2007 saw dramatic increases in profitability and solid revenue growth, with CC in 2007 seeing average profits per equity partner rising 25% to hit £1.015m. At the same time, revenue rose 16% to £1.194bn. A more confident mood has seen CC again expanding internationally, including even in the US, where the firm's reputation has improved markedly. However, in late 2007 the firm made six lawyers in its New York structured finance team redundant in response to the credit crunch, and in October 2008, as many UK firms laid off property lawyers in the midst of the financial markets meltdown, CC made the shock move of laying off 20 US litigation associates, citing market 'sluggishness'.
2009 saw more cutbacks as the downturn continued to bite, with the firm launching a redundancy programme in early January which saw 70-80 lawyers' jobs placed under review. This was followed a month later by the announcement of an extensive review into the size and shape of the firm's partnership. And the cuts kept coming, with the March announcement that between 105 and 115 support staff roles were to be made redundant. In total, 350 jobs are believed to have been cut.
Financial results for 2008-09 confirmed the brutal impact of the markets on CC's business with partner profits falling 37% to £733,000, while revenues fell 5% to £1.262m.
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Regarded as more enterprising and entrepreneurial than its big City peers - a reputation CC still likes to cultivate, but one that the more snobbish of its rivals still snipe about. From assistants' point of the view, the firm currently gets good reviews for quality of work, but less so for work/life issues and flexibility.
Despite the scale of the job cuts the firm announced in 2009, CC has generally received good reviews for its handling of the process, with the firm being lauded for transparency and fairness in handling the redundancies. Nevertheless, Legal Week Intelligence's 2009 Employee Satisfaction Report found that the firm's assistants in many cases felt undervalued.
At the 2008 British Legal Awards the firm was handed the CSR project of the year award.
"Absolutely great for banking," enthuses one CC stalwart. "Great quality work, amazing clients and superb reputation. I love working in the banking department and have no regrets choosing the firm post-qualification."
As mentioned above, the firm has one of the top finance practices, both in London and globally. The practice has coverage across the board, but is probably best regarded in bank lending, acquisition finance, securitisation and Islamic finance (leaving its old rival A&O ahead in capital markets, derivatives and projects). Insolvency/restructuring also has excellent credentials. Corporate, meanwhile, has made steady progress in recent years, with the firm best regarded in private equity, where it has no credible rival in Europe, and cross-border European M&A.
Despite the traditional claims that top City firms neglect property, CC has built a substantial and highly profitable real estate practice. As a full-service corporate firm, CC also boasts solid coverage across most commercial disciplines. More unusually for its market profile, the firm also has a respected public law team that has handled some genuinely ground-breaking work in recent years.
There is a feeling that CC generally could have put in more work into bolstering its general corporate/public M&A practice, which lags behind its private equity team in reputation. CC has recently moved to raise its game here with a venture to put more emphasise on covering industry sectors.
As you'd imagine, very broad. CC currently has a network of 27 offices across 20 countries comprising nearly 4,000 lawyers. CC is generally regarded as the most internationally expansive of the UK's top firms and is still the only top London law firm to have secured a US merger. The continental European practice is regarded as a highly-effective cross-border operator in both banking and M&A. Spain is particularly strong, where the firm is viewed as the top international.
The firm also maintains a solid presence in Asia and the other key emerging markets. CC's sizeable US practice, which has suffered serious turbulence in previous years, is now viewed to be improving fast. By the end of 2007 CC had 350 lawyers across its offices in New York and Washington DC after a recruitment drive that had seen the firm recruit 22 partners in 2006 and 2007. Despite contracting during the tough years of 2002 and 2004, the US practice is again growing, up 19% in 2007 to $321m in 2007.
However, the firm's US practice saw a wave of departures from late 2008 through to the spring of 2009, particularly in its litigation practice, raising fresh questions about its success in the States.
"No firm (US or UK) can match CC's strength across the board or its global turnover," says one admirer, "and its profit margin is beginning to really improve again, which is key to attracting and keeping the best lawyers. A further pay rise is also advisable."
The firm in January 2009 boosted its practice in the much-touted Indian market after securing a tie-up with respected local practice AZB and Partners. The firm's CEE network in 2009 saw a shake-up that saw the firm split from its 29-lawyer Budapest practice. However, CC also recently launched in Kiev and finalised a merger with its Romania alliance firm.
Built very much around its banking clients. The firm acts for pretty much every major bank of any repute. Its other key constituency is private equity, where the firm has probably the top practice in Europe. Major clients include Permira, CVC, Blackstone and PPM Ventures. CC's most important clients outside investment banking and the buy-out arena are currently Barclays, British Energy, Citigroup, Dubai World, Siemens and Shell. There has been some surprise, however, that CC has not cultivated more FTSE 100 clients. A corporate reshuffle at the end of 2007 could herald an attempt to widen its corporate appeal.
Given the size of the firm, it depends on the office and practice area. In London, the banking team is chock-full of big names, among them James Johnson and Mark Stewart in leveraged finance and Mark Campbell and Malcolm Sweeting on general lending. Key lawyers in structured finance include securitisation specialist Kevin Ingram and Claude Brown. Insolvency has proven performers like Mark Hyde and Nicholas Frome.
Private equity boasts 'Mr Buy-out' Matthew Layton (pictured), as well as other serious names like James Baird and David Pearson. In straight M&A, you're looking at Guy Norman and Daniel Kossoff. Jason Glover has helped build up CC's funds team to the point where most would regard it the equal of the once-unchallenged SJ Berwin. Key names in the firm's much touted real estate team are Iain Morpeth and Jonathan Solomon, with Mark Rees-Jones and Damian Perry leading names in property finance.
The firm's public law team includes distinctive lawyers like Michael Smyth and Jeremy Carver. However, there was some concern in 2009 as Adam Signy, regarded by some as the firm's top public M&A lawyer in London, quit to join the City arm of New York's Simpson Thacher & Bartlett.
Probably not at their best right now given market conditions and CC's current drive to strip down its partnership. The firm promoted 17 partners in 2009, sharply down on 2008, and has just put the finishing touches on a partnership restructuring expected to trim its partner ranks by 15%. Legal Week research in 2009 found that its associates were downbeat about the chances of making partner, though that finding was echoed at other large City law firms.
In common with most City firms, CC in 2009 announced that it was freezing pay for UK associates and introducing a lower pay band for incoming newly-qualified lawyers starting in 2009. CC currently pays around the same benchmark as most leading City firms, though it does slightly lag its magic circle rivals. Click here for a comparison of CC's pay with its big four rivals:
The firm also operates a bonus scheme that is seen as averagely generous for a firm of CC's standing.
The firm currently takes on around 130 trainees annually in London, with the main contact being graduate recruitment partner Lynn Johansen. Click here for more information.
In April 2008 the firm bagged an award from The Times as the employer of choice for 15,000 students targeting careers in the law, ahead of magic circle rivals A&O and Linklaters.
In truth the firm does not have a reputation as the most helpful for work/life balance or flexibility, even by the standards of major City law firms. However, in an attempt to convince staff it is serious in its efforts to improve the career prospects of female fee earners, CC has signed up to a Government-backed kitemark scheme. But if the reaction of two former CC lawyers is anything to go by, the firm will rub up against a good deal of cynicism.
"It's hard to see how the measures outlined in the Legal Week article will increase the number of women in the partnership," says one ex-CC lawyer, given that it is now "easier to quit after maternity leave". The contributor adds: "Career-minded lawyers don't care two hoots about a kitemark or calling in consultants, but it gives the partners something to point to and say 'look how hard we're trying'."
A 2009 report from Legal Week Intelligence, which surveyed more than 100 CC assistants, found some dissatisfaction regarding work/life balance, though CC is hardly out of line in this respect with its City peers.
The firm's reputation for diversity was called into question in 2007 when it emerged that CC had settled a sexual orientation discrimination claim with a former partner, who was gay. However, the firm moved quickly to meet with campaign group Stonewall and in late 2007 launched a lesbian, gay, bisexual and transgender network to improve its reputation.
Pro bono/corporate social responsibility
As one poster confirms below, CC is definitely regarded as one of the more committed pro bono firms among City's top league of M&A firms, a propensity underlined by its unusual commitment to public law. The firm calculates that the value of pro bono work handled by its staff in 2006-07 was nearly £10m, while 54% of its staff recorded time during a pro bono file. The firm's pro bono activities currently include:
The firm's corporate social responsibility credentials were bolstered by its work alongside key banking client Citi on the development of a legal template that assists Microfinance institutions (MFIs) gain access to large-scale commercial funding.
The firm was the winner of the CSR Project of the Year at the 2008 British Legal Awards. Click here to read an article about CC's CSR and pro bono work.
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