Lawyers divided over emergence of breakaway magic circle trio
The Legal Week Top 50 highlighted the gap between the three largest magic circle firms and their London rivals. But Charlotte Edmond finds opinion split on whether the gap will widen
August 02, 2006 at 08:03 PM
3 minute read
The debate goes on as to whether Clifford Chance (CC), Linklaters and Freshfields Bruckhaus Deringer are breaking away from their rivals, with a recent survey showing industry opinion is evenly split.
According to the latest Legal Week/ EJ Legal Big Question survey, almost half (47%) of the UK's leading business lawyers believe the trio of firms are pulling clear of magic circle rivals Allen & Overy (A&O) and Slaughter and May, while 53% said they were not.
CC, Linklaters and Freshfields all saw significant growth in the last financial year, leaving A&O as the least profitable firm of the five, while Slaughters has seen relatively static turnover and partner profits growth over the last five years.
CC head of corporate Peter Charlton said: "The idea that the magic circle firms were all the same at the beginning is a misnomer. There is not so much a split as the fact that the differences are becoming more apparent."
However, A&O head of international capital markets Boyan Wells argued: "I do not think there is a divide. While this year A&O's revenues were less and our profits were slightly behind, in previous years we have been ahead. It balances out."
He added: "It is also a question of the number of non-equity partners – we have fewer non-equity partners than the majority of our rivals."
About 80% of A&O's partners are in the equity, slightly higher than Linklaters and above CC's figure of about two-thirds. Almost all of the partners at Freshfields and Slaughters have equity status.
However, the panel of more than 100 leading business lawyers said it accepts a magic circle does exist, with 73% stating they agreed the classification is correct and 60% agreeing with the five firms listed in it. Thirty percent argued the grouping should be enlarged, while 10% took the view that it should be smaller.
The vast majority (84%) did not think the grouping should be extended to include Herbert Smith.
Olswang banking and insolvency partner Eleni Skordaki commented: "The group of firms in the magic circle is pretty well-defined. It is difficult to come in or out. Its boundaries are very tight. Unless something big happens, it would be hard to find a logical explanation for Herbert Smith's inclusion."
Is there now a big three? Post your comments online at: legalweek.com/talkback
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