Linklaters sees PEP growth halt as firm cites impact of investment
Firm posts 6% revenue rise as PEP falls for first time in almost 10 years
July 12, 2018 at 09:05 AM
4 minute read
Linklaters has seen profit per equity partner (PEP) fall for the first time in almost a decade, alongside a 6% revenue rise for 2017-18.
The magic circle firm saw revenue rise 5.9% from £1.44bn to £1.52bn during the year, a performance the firm said represented a 4.8% increase on a constant currency basis.
The rise in turnover came alongside a 1.7% increase in pre-tax profits from £664.4m to £676.2m; however, PEP dipped by 2% to £1.538m.
The decrease in PEP marks the first time the figure has fallen since 2009-10, since when it has steadily risen from £1.214m, culminating in a 7.8% hike to £1.568m last year.
Managing partner Gideon Moore cited the impact of investment in areas such as IT, including Nakhoda, the firm's technology and AI platform, as well as the rollout of new tech infrastructure across the firm's offices around the world.
During the year, the firm also received long-awaited approval from the Chinese Government for its joint operations in the Shanghai Free Trade Zone with best friend firm Zhao Sheng, a process that required significant investment.
Moore told Legal Week: "PEP has dipped since last year, but not by much, and from the partnership reports we are very pleased with our performance. We have made investments this year – for example around IT capabilities – that are going to have plenty of short-term impact. We don't have quarterly reporting and external shareholders that we have to please on a short-term basis, and the partners look to invest long term."
On the firm's overall performance, Moore said the London and Germany corporate team had enjoyed strong years, while on a geographic basis, continental Europe and London had performed well and the firm had seen "strong growth" in Asia and the US.
"Overall, all of our offices and practices have together delivered results which are within a narrower range than they have ever been previously," he said. "Our strategy was to break down barriers within the firm and deliver 'Team Linklaters' to our clients, which we are seeing. The areas I look at are: 'are we getting the right deals from the right clients?'; and 'are all regions delivering?'. The answer is yes to both."
Deal highlights for the firm last year include acting for Takeda on its £43bn bid for FTSE 100 company Shire Pharmaceuticals, advising National Grid on its £1.2bn sale on its gas distribution business and being instructed by Sainsburys on its proposed merger with Asda.
The firm also acted for Cerberus Capital Management on its €1.2bn acquisition of airport services company Worldwide Flight Services and took a role on the £1.5bn acquisition of London waste company Cory Riverside Energy by a consortium of infrastructure funds.
Moore added: "The year last year started slower and got quicker. We had a better second half than first half – the opposite of England against Croatia last night. The momentum from the second half last year has carried through into this year, but with Brexit and geopolitical machinations it is not for me to say that is something that will continue for the next 10 months."
The firm is the fourth of the magic circle to report its 2017-18 results. Clifford Chance (CC) and Freshfields Bruckhaus Deringer both announced double-digit PEP hikes, posting 16% and 12% rises respectively, while Allen & Overy (A&O) saw PEP rise 4%.
CC saw revenues increase by 5% to £1.62bn, while Freshfields also boosted its top line by 5% to reach £1.403bn, with A&O growing revenues by 4% to reach £1.57bn.
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