Baker McKenzie offices in Washington, D.C. (Photo: Diego M. Radzinschi/ALM)

Baker McKenzie posted solid increases in revenues and profitability in its 2018 fiscal year, with gains driven by an uptick in cross-border dealmaking.

For the fiscal year ending at the end of June 2018, the firm increased revenue by 8.6 percent to $2.9 billion. Profits per equity partner, meanwhile, grew 11 percent, from $1.3 million to $1.44 million.

Net income jumped 7.7 percent to more than $981 million, while revenue per lawyer climbed 8.5 percent to $614,000.

"We had more cross-border transactions than ever before and, critically, transactions where we were serving as lead counsel," said Baker McKenzie North America CEO Colin Murray.

The firm acted as lead legal counsel to major German building materials company Gebr Knauf KG in connection with its $7 billion acquisition of Chicago-based USG Corp, and also to Servier, a France-based independent international pharmaceutical company, on its agreement to acquire Shire's oncology business for $2.4 billion.

Murray also highlighted significant demand for the firm's tax services, pointing to the effects of tax reform measures in the U.S. and other jurisdictions, and a growing number of companies using a transactional strategy as part of their tax-planning efforts.

Litigation, too, has been robust. "We saw more trials in a strong economy," Murray said.

Murray and his colleague North America chair Duane Webber did acknowledge ebbs and flows in government enforcement efforts, both in the U.S. and elsewhere. The recent U.S. government shutdown offers one example, but diminished resources for bringing cases – both by regulators and prosecutors – is a wider issue.

"That is something we're hearing in all of our markets," Murray said. 

While the firm's overall headcount stayed stable in 2018, with 4,720 lawyers last year, the size of the equity partnership dipped slightly, from 701 to 680 partners. Webber attributed the 3 percent drop to recent retirements. And while he expects the retirement trend to continue, he also anticipates the number of equity partners remaining stable or growing slightly.

"Both in our promotions and in our lateral hires, we're pursuing strong equity partners who will continue to help us drive quality service to our clients," he said. 

At the end of the 2018 fiscal year, the firm converted to a black box system for equity partner compensation.

Baker McKenzie brought on more than 50 lateral partners in 2018. Among the most significant additions were five California hires from Hogan Lovells, three of whom became the founding partners at the firm's new Los Angeles office, which opened last spring. The firm had been targeting Los Angeles for some time.

"LA is a hotbed for disputes, perhaps more than any other place in the U.S.," Murray said. "The team hit the ground running, and they tried a significant case a couple of months ago."

Thus far in 2019, the firm has been growing in New York, adding former Milbank M&A lawyer Mark Mandel along with the former co-chairman of Morgan, Lewis & Bockius's life sciences practice, Randall Sunberg, and partner Denis Segota, who will operate out of the life sciences corridor in Princeton, New Jersey.

Baker McKenzie is also looking to expand its footprint in London and China, according to Webber. And in September, global chairman Paul Rawlinson told Legal Week that it was actively looking for a merger partner in the U.S. Rawlinson remains on leave after temporarily stepping down due to exhaustion in October.

Webber, however, would not commit as forcefully to the prospect.

"We're always with our eyes open on opportunities to provide further and broader service to our clients, through any type of acquisition or merger activity that may be identified," he said. "We don't talk about it, but we certainly consider ourselves to be part of that ongoing dialogue."

Globally, the firm shuttered an office in Baku, Azerbaijan, in 2018. The firm is largely satisfied with its global footprint, according to Webber.

"There's probably only one other major market we'd like to be in, but we're constrained now, like everyone else: that's India," he said. The Indian Government and the Bar Council of India currently block foreign law firms from setting up shop in the world's second-largest country.

The firm also announced it would be opening a legal services centre in Tampa to complement existing back-office operations in Northern Ireland and the Philippines, which will open in 2020. That's alongside personnel investments in client services, highlighted by the June hire of global director of legal operations David Cambria, and January's addition of director of legal project management Casey Flaherty and director of pricing strategy Jae Um.

"We're doubling down on the integrated approach to delivery of our services," Webber said. 

And the firm is bullish about its prospects for 2019 and beyond, even in a global climate where Brexit and escalating trade tensions are immediate examples of rising unpredictability.

"It's more of an uncertain time than it had been before, but that really goes to the core of what our value proposition is," Murray said.

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