Linklaters hikes PEP by 7.8% as revenue jumps nearly 10%

Linklaters has become the first magic circle firm to announce its 2016-17 results, posting a 7.8% hike in profits per equity partner (PEP) alongside a revenue rise of almost 10%.

The magic circle firm’s PEP has risen to £1.568m, up from £1.455m last year, an increase that came as the firm grew its equity partnership by 1% from an average of 435.7 last year to 440.6 this year.

Total revenues for the 12-month period rose 9.8%, up from £1.31bn to £1.44bn. The firm said the results represent a 1.7% increase at constant currency.

Last year, Linklaters reported a 3.5% increase in turnover and a 2.5% increase in PEP.

Pre-tax profit this year was £664.4m, equating to an 8.6% increase on last year’s figure of £611.9m, but flat at constant currency.

Managing partner Gideon Moore said: “I am quite pleased with the overall performance. There were a number of well publicised geopolitical events, like Brexit and Trump, and other things around the globe that had an impact on business, so to come out up on a constant currency basis is a good result. If someone had offered me that at the start of the year, I would have taken it.”

Major deals for the firm in the last year include advising on Anheuser-Busch InBev’s acquisition of rival brewer SAB Miller and acting for Unilever on its defence of Kraft’s multibillion-dollar takeover bid.

“We have a fantastic global M&A franchise so making sure the market recognises us a top-tier M&A firm remains a key priority,” said Moore.

Moore picked out the US and Southeast Asia as regions that did particularly well. “Our team out in the States had a very good year – that was very pleasing. Southeast Asia also rallied and had a good year,” he said.

In terms of the upcoming financial year, Moore said that implementation of the firm’s new strategy would be a key priority.

Moore and senior partner Charlie Jacobs launched the new strategy at the firm’s partner conference in Monaco in April. Key changes include the way partner performance is looked at, including a move away from billing targets and annual partner reviews.

Moore said: “Everyone warned me that putting together a strategy refresh was the easy bit, but the implementation and execution is the tricky area. A large part of what we are doing is rallying around the refresh and implementation, so we can give the clients the service they want.”

Moore and Jacobs are keen to inculcate into partners a sense of responsibility to themselves and to others, and move away from a culture measured by hitting individual targets. Moore said that he wants team leaders to “communicate rather than looking at a spreadsheet”, when monitoring performance.

Jacobs said that partners should be able to “look each other in the eye” and answer the question: ‘Who are your clients and what are you working on?’

“You don’t really need numbers – you either have clients or you don’t,” he said.

Moore added: “At one level you could form the view that this is a little cuddly, in that we are taking away these individual metrics, but actually what it does is it requires partners to explain to our fellow partners what we are contributing to our partnership.”

The changes mark a break from the firm’s previous metrics-driven regimes. Former managing partner Tony Angel is credited by many for his efforts to instill greater financial discipline, but his successor and protege Simon Davies faced difficulties in his latter years at the firm, with some partners unhappy with management decisions and how they were communicated.

Jacobs draws on a rugby analogy. “Like what [rugby coach] Eddie Jones did with England; you can have the same team under [previous head coach] Stuart Lancaster not doing terribly well, but if you get inside their minds and motivate people, you can make quite a behavioural change,” he says.