By Matt Byrne 2 July 2019
Akin and Goodwin’s batches of hires last week have put both firms back on the City map, but barely move the dial in terms of London bench strength. Data from The Lawyer’s annual US Top 50 report confirms that a gap is opening up between the top five largest firms and the rest of the US London offices in terms of headcount and revenue. In 2019 that gap was worth $750m. And that data suggests that the long-term winners in the over-heated US firms in London recruitment market will be those that already have the scale to provide a welcoming home to new talent.
The most obvious recent winners in terms of growth have been those firms right at the top of the rankings: Latham & Watkins, White & Case and – most of all – Kirkland & Ellis. All three have used their pre-existing scale as a springboard to an increased rate of growth.
Using the current rate of growth projected forward five years, the gap between the firms ranked in the top five and the next group of five could be worth almost $1bn by 2024.
In contrast, the gaps between the remaining five groups of five will have barely moved by 2024.
Several firms further down the rankings are also looking to capitalise on the ramped-up recruitment clout additional scale provides. But the concern for many smaller rivals is that the ‘scale attracts’ trend piles on yet more pressure in the competition for talent. Over the next five years, this trend has the potential effectively to close off access to many of the market’s leading lawyers to firms that lack the financial firepower and bench depth of those at the head of the table.
So back to what this means for Akin Gump and Goodwin. After a series of hires, and one very large local takeover of Bingham’s London operation, Akin’s City office is now the firm’s third-largest in its international network by some distance.
Akin’s City office is also marked by the firm as the location with possibly the greatest opportunities to further capitalise on its growth strategy of building out core strengths in its entire network.
“London is a fulcrum for where the firm is going,” confirmed firm chair Kim Koopersmith. “Over the past five years the London office of Akin Gump has become a destination for high-end talent.”
In March, The Lawyer revealed that O’Melveny & Myers (OMM) funds partners Aleksander Bakic and Daniel Quinn were joining Akin as the firm’s first dedicated UK-qualified private equity funds partners in the City.
Most recently, this month two more OMM lawyers (funds specialist John Daghlian and counsel Mary Lavelle, who joins as a partner on Monday 1 July) came on board, taking the team to eight partners. Daghlian, the former chair of OMM’s investment funds practice, is understood to have brought all of his clients with him to Akin. Just yesterday, Akin added White & Case corporate partner Gavin Weir. https://www.thelawyer.com/white-case-corporate-partner-leaves-for-akin-gump/And last year,
Bracewell’s former London managing partner Julian Nichol made his move to the firm last year to bulk out its transactional energy team – a top strategic priority for Akin.
However, Akin’s progress in the UK was not jump-started through organic growth. Prior to the Bingham McCutchen hires in 2014, when the office turned over $35.8m, Akin Gump had 35 lawyers in London. Further back, in 2009, it had 29, which means that in the five years prior to the Bingham deal it grew headcount by a not unreasonable 20.5 per cent.
Akin now has 119 lawyers in London. That’s a rise of 310 per cent since the start of 2009 and 240 per cent since 2014 thanks to the effective takeover of Bingham’s London office. In the past 12 months headcount has risen by 21.4 per cent, from 98 to 119.
For any firm, size is an indicator that it has depth and experience as well as a commitment to building capabilities in a range of complementary services in multiple locations. This is the factor that then becomes its own sales pitch to potential new hires. Of course, healthy financials also help.
Last year Akin Gump’s City figures jumped by 28 per cent, its best set of London results since its deal with Bingham.
The London office’s turnover increased from $96.2m (£73.8m) to $123.5m (£94.7m) over 2018. Indeed, since 2014 turnover has rocketed by 244 per cent although the firm’s global revenue, having broken through the $1bn barrier in 2017, only nudged up slightly last year from $1.04bn to $1.07bn and net profit was down from $464.4m to $445.3m. Average profit per equity partner was effectively flat at $2.4m.
Despite its rapid growth and standout 2018, Koopersmith insists there is still “plenty of headroom” for growth at Akin’s City office. “We haven’t plateaued,” she adds. Akin cannot afford to plateau: while it has showed strong growth in the last two years, it is still some way off the pace in terms of total size in the City. While London certainly represents momentum at Akin , which has jumped from 20th place in the 2018 The Lawyer US Firms in London table – and 17th now – it will need to add another 50 per cent onto its revenues to get close to the ninth-biggest US firm in the City, Shearman & Sterling, which last year turned over $188m in London.
In the current global market there are a number of boxes the top firms need to tick; as highlighted by last year’s Global 200 report, cracking through the $1bn barrier is one of them. A similar kind of threshold is emerging in the City with the $100m mark for US firms. In the current ranking 22 US firms now generate in excess of that level.
While revenue is just one part of a measure of success, it can be a passport to further growth in that it takes a firm further up the pecking order, particularly in the lateral recruitment market. In London, the $100m mark these days puts a firm on the map. Much below that level and firms really need a compelling proposition for them to be heard above the ever-growing, ever more crowded US law firm in London market.
Scale in any given practice is also increasingly a must, as evidenced by several recent moves not least Akin. And it has to be growth that gels with a firm’s platform so that the new arrivals can plug into the broader resources on offer as opposed to working in a silo while adding a million or two to turnover.
Goodwin’s recent raids on Taylor Wessing, bringing in six partners in as many months, has a similar feel of renewal. Goodwin’s revenues in London now stand at $66.8m, having ballooned 58 per cent from $42.3m the previous year. It will need two further full years of 50 per cent-plus growth to take it to $130m, Akin Gump’s current level –a feat that no firm aside from Kirkland has managed.
Indeed, what is most striking about the US Top 50 historical data is the extent to which it highlights those segments of the market where there is remarkably little growth. It is in this part of the market, rather than at the very top, that the pressure really is on.