Linklaters finance practice under scrutiny with partner exits expected amid profitability push

Linklaters

Linklaters is set to see a number of partner exits from its finance practice, amid a profitability drive at the firm.

One ex-partner said that a process to reduce the amount of equity in the finance group began before Christmas, and is expected to lead to exits by the end of the current financial year.

It is understood that, following a review of the practice last year, Linklaters is aiming to reduce the amount of equity in the group by 150 points, which under the firm’s current lockstep system is the equivalent of six full equity partners.

Former partners say the move is aimed at boosting profitability within the group. “There has been quite a lot of points appreciation at Linklaters over the last five years – the thesis is you can cut the number of partners and maintain most of the business, which makes banking more profitable.”

Of the partners in the London finance group, half are at the top of the lockstep, according to one ex-partner. According to the firm’s website, it has 39 banking partners in London of a global total of 94.

However, the firm denied that it is reducing its headcount in its finance practice, noting that it made up four new banking partners in its 2017 promotions round, including one in London.

A Linklaters spokesperson said: “There are no plans to actively reduce headcount over the next 12 months in our banking or finance practices.”

In November, London finance partner Yen Sum resigned from the firm to join Sidley Austin. She was followed out the door by finance managing associate Jennifer Brennan, who joined Sidley Austin as a partner.

A former partner described Sum’s exit as a “spanner in the works”, as she had been tasked with overseeing the practice’s move away from traditional bank representation to acting for alternative credit providers.

Former restructuring head Tony Bugg took over leadership of the finance practice in January 2016, after previous head Gideon Moore was elected as managing partner.

Last year, the firm’s partnership voted to reform its lockstep system, increasing the length of the equity ladder and introducing gates at which partners will have their performance assessed. Partners and former partners say the goal of that exercise is to slow the build-up of equity in the partnership and to increase profits at the top of the ladder, in a push to make the firm more competitive with its US rivals.

Magic circle rival Freshfields Bruckhas Deringer is also currently in the process of a shakeup of its finance practice, with several partners expected to leave the firm as it refocuses on more profitable work for issuers and sponsors, rather than lenders.