Law giants hit by M&A drought
■ Linklaters’ revenues down by 8.8 per cent
■ Allen & Overy’s revenues contract by 4 per cent
■ Clifford Chance is set to reveal a 5 per cent sales drop
THE UK’s largest law firms have suffered a blow from a two-year M&A drought that has forced them to look beyond Britain’s shores for business.
Magic circle law firms Linklaters, Allen & Overy and Clifford Chance (have seen revenue streams hurt by the fall off in takeover activity after cross border deals declined by up to 76 per cent between 2007 and 2009.
Revenue at Linklaters fell by 8.8 per cent to £1.18bn for the year ending 30 April, according to figures out today, while rival A&O posted a four per cent drop in revenue to £1.05bn.
City A.M. has learnt that Clifford Chance is expected to report a fall in revenue of roughly five per cent later this week when it reports yearly financial results.
Clifford Chance will present this as a highly respectable result, especially since its profitability will be seen to have increased after a tight clampdown on costs last year.
Linklaters managing partner Simon Davies told City A.M. that the fall in corporate and M&A work, which accounts for 40 per cent of the firm’s business, had impacted turnover.
“These are a resilient set of results in what has been a challenging environment. The results were in line with expectations. Revenues are down mainly because of the M&A market,” said Davies.
Like his peers at Allen & Overy, Davies is looking to the emerging markets for a return in activity.
Up to 57 per cent of Linklaters’ business came from outside the UK last year, while Allen & Overy said last week that 60 per cent of its revenue is derived from offices beyond its City base.
“There are likely to be more deals between the emerging markets, in particular Brazil, India, China and Russia. As a general matter, we expect buoyant activity in [those] markets,” said Davies.
But he remains sceptical about the next 12 months and echoes sentiments from his peers that 2010 will continue to be an uphill struggle.
“I certainly think this is going to be a challenging year for the legal sector,” said Davies.
Allen & Overy managing partner Wim Dejonghe also said that 2010 is unlikely to be an easy year for law firms.
Meanwhile, profits at Linklaters fell by 1.2 per cent to £507m.
Clifford Chance, which would not comment on results, is expected to post a 20 per cent rise in profits per equity partner, while Allen & Overy saw this number rise by 10 per cent for the year.
Freshfield Bruckhaus Deringer is also expected to report this week.