What the magic circle will look like - part two
A reader pointed out that I was a bit vague on this week's leader about how the magic circle will look in the future. So, attempting to rise to that challenge, I said I would come back with more specifics. So here are my less-vague projections on where the partnerships of the big four will be in 2011. A&O will come in around the 425-partner mark. With Linklaters it largely depends in if they make the obvious cuts to their international network. If they don't, you are looking at the 460 region. If they do, it'll be more like 400. I know some rivals think they WhiteShoeCrosswill split from those offices, but I don't have a feel for which way the wind is blowing. Freshfields won't be much different to now – around 440. Clifford Chance will come in under 550, maybe as low as 525.
February 26, 2009 at 07:03 PM
3 minute read
A reader pointed out that I was a bit vague on this week's leader about how the magic circle will look in the future. So, attempting to rise to that challenge, I said I would come back with more specifics. So here are my less-vague projections on where the partnerships of the big four will be in 2011.
A&O will come in around the 425-partner mark. With Linklaters it largely depends in if they make the obvious cuts to their international network. If they don't, you are looking at the 460 region. If they do, it'll be more like 400. I know some rivals think they will split from those offices, but I don't have a feel for which way the wind is blowing. Freshfields won't be much different to now – around 440. Clifford Chance will come in under 550, maybe as low as 525.
Linklaters, A&O and CC will all get their partnerships under 200 in London. Market conditions for the next five years will support maybe 180 partners in London on the kind of margins these firms are looking to achieve. Freshfields, with only 160 partners in London, has an obvious advantage here. In purely financial terms, the finance/debt capital markets partner-ranks of CC, A&O and Linklaters would probably have to shrink to around 60 each in London, which would collectively require the trio to shed around 70 partners in the UK. However, they are unlikely to be that short-term about the practice area and client base. I'd guess each will contract by 10-15 partners by that time. A&O has the biggest issue here in terms of London finance partnership, both in terms of size and how the teams are organised. Leverage at the big four could go under 4:1, with the exception of CC, which would struggle to get under 5:1. Slaughters will get close to 3:1.
These are purely my estimates, based on contacts, market knowledge, trends and current facts, but my colours are nailed to the mast. What this does not mean is that the magic circle is going down the white shoe path, if that can still be said to exist. That's a different model and one they're not interested in (rightly, I would say). What you will get is a convergence between the internationally-minded US law firms and the big four; US and UK law firms routinely make digs at each other others' models, but the truth is that they've been liberally borrowing ideas from each others' camp for years.
And while I'm updating my own comment, I should give a nod to my colleague Richard Lloyd for the phrase "Skaddenisation of the magic circle", which I lifted for the original piece. He's a class act.
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