Freshfields to cut German partner numbers by up to 20% in profitability push

Frankfurt, Germany

Freshfields Bruckhaus Deringer is planning to cut partner numbers in Germany by up to 20% by 2020.

The firm currently has 103 partners in its German business but is aiming to reduce this number to between 80 and 90 by 2020. According to numbers previously reported by Legal Week, the firm has already reduced German partner count by 20% since December 2015.

The move is part of a longer-term push to drive up profitability in Germany, with a goal of bringing profit per point in the country up to £40,000, according to former partners.

One former Freshfields partner in Germany said: “It’s quite natural that if you want to increase profitability you need to do something to the numbers.”

A partner at a rival magic circle firm in Germany said: “Their headline reason is increasing profitability and they’re also looking at which areas are of strategic importance. It would be possible to boost their profitability to those levels if they undertake cuts like these.”

The planned exits are the latest in a number of initiatives by Freshfields to raise profitability in Germany, and come as a number of firms look more closely at the country.

Freshfields previously launched a crackdown on partner performance in Germany in late 2015 with the aim of removing 500 points – the equivalent of 10 top-of-the-lockstep partners – from its equity.

In December 2015, before the closure of its Cologne office, Freshfields had 130 partners, meaning partner numbers are already 20% lower than 18 months ago, with a fall to 80 partners representing another 20% partner reduction on top of this.

The firm has also been making increasing use of its second tier lockstep ladder in Germany, moving partners to the lower ladder, which is capped at 30 points. The firm’s standard lockstep runs from 17.5 to 50 points, while its second tier lockstep runs from 10 to 30 points.

In a statement on the latest changes, Helmut Bergmann, DACEE (Germany, Austria, central and eastern Europe) regional managing partner at Freshfields, said: “Our German business is performing well and we have every confidence that this will continue.

“As with any firm, changes naturally occur in our partnership through retirements and promotions; we have an outstanding pool of talented lawyers that will cement our partnership group over the coming years and collectively add value for our clients in Germany and globally.”

Legal Week reported last week that Allen & Overy has ruled out changes to its German lockstep that could have seen remuneration for most of the firm’s local partners capped at a reduced level.

The firm had kicked off consultations last September about potentially changing its lockstep in the country, mooting the introduction of an informal 40-point top of lockstep, preventing most Germany partners from progressing to the 50-point global cap.

Meanwhile, earlier this year it emerged that Clifford Chance Germany partners were among those facing cuts to the lockstep plateau in a number of the firm’s offices around the world.