In London, the houses of Parliament on the river Thames
In London, the houses of Parliament on the river Thames (Patrice Gilbert/Legal Times)

Continental Breakfast: your daily update on what’s happening in Europe.

Among all the excitement of transatlantic law firm mergers and the ongoing saga at King & Wood Mallesons, news that Allen & Overy’s revenue increased by an impressive 13 percent in the first six months of the fiscal year got somewhat lost in the mix.

A&O says that the growth—a record for the firm—was driven by “standout performances” in London and Asia. I suspect there’s a little more to it than that.

U.K. law firms are generally quite fickle when it comes to half year results. Unlike full year accounts, which U.K. firms are required to make publicly available as part of the rules governing limited liability partnerships, they are under no obligation to disclose interim figures. Predictably, most therefore only choose to do so if they are particularly good.

In the past, participation has been sporadic at best. This year, I expect that the majority of large U.K.-based firms will release first half results, and that A&O will be far from alone in posting large topline gains. Why? One word: Currency.

The British pound has fallen against almost every major global currency over the past 12 months. This has proved a headache for U.K. firms with significant international business—particularly where equity partners are receiving profits in sterling and billing in other currencies. But it has also had a welcome side effect of artificially inflating overseas revenue when it comes to consolidated financial reporting.

The fact that U.K. law firms are generally far more international than their U.S. rivals means that the impact is particularly significant. A&O, for example, only has 36 percent of its lawyers based in the United Kingdom. (The costs associated with the firm’s non-sterling business, such as attorney salaries and office rent, will also have increased, of course. A&O hasn’t released any data for first half profits.)

The other three international magic circle firms—Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters—will have likely seem similar boosts, as will the other geographically expansive U.K.-based practices such as Ashurst, Bird & Bird, Clyde & Co, Eversheds, Herbert Smith Freehills and Taylor Wessing. (All of these firms have less than 40 percent of their lawyers based in the U.K., apart from Freshfields, which has 42 percent of its lawyers in its home market. That still makes it proportionally more international than any other non-U.K.-based firm, apart from Baker & McKenzie, DLA Piper, Hogan Lovells and White & Case, however.)

While this may be good for U.K. firms when reporting in sterling, it will radically depress their performance in next year’s Global 100.

The weakening of the British pound against the dollar meant that the U.K. firms were among the worst performers in this year’s Global 100 survey. Freshfields Bruckhaus Deringer posted a 6.6 percent increase in revenue and a 7.5 percent increase in PPP, for example, but when its results were converted to dollars for our survey, it suffered contractions across all key metrics.

The results of the U.K. firms are likely to be even more heavily skewed in next year’s survey, thanks to a significant slide in sterling following the Brexit vote. The pound is currently trading at just $1.25. Applying that exchange rate to last year’s results would see British pair Berwin Leighton Paisner and Taylor Wessing drop out of the Global 100 entirely.

OPEC, Russia Deal Boosts Oil Price

Some welcome news for energy lawyers: The price of oil has risen by almost 10 percent after the world’s leading oil-producing countries agreed to slash production for the first time in eight years.

The Organization of the Petroleum Exporting Countries (OPEC), which includes Iraq, Iran and Saudi Arabia, agreed to lower production by more than 1 million barrels per day, while non-OPEC Russia also joined output cuts for the first time in 15 years.

The news also led to a sharp rises in bond yields, energy shares and the value of the U.S. dollar, with investors betting that the increased oil price and resulting inflationary pressure will lead to higher interest rates.

The sustained depression in global oil prices has had a significant impact on law firm energy practices, with clients scaling back on key exploration and production activities. (Energy sector lawyers have been kept busy by an increase in other work, such as disputes and restructuring, however.)

It has also contributed to a severe decline of the Russian legal market. Big Law firms invested heavily in Russia during the late 1990s and early 2000s, with the market producing a steady stream of big-ticket IPO and M&A deals. But most U.S. and U.K. firms have radically scaled back in the country in response to a crippling economic downturn caused by a combination of the oil slump and international sanctions. Some lawyers believe that U.S. president elect Donald Trump’s apparently cordial relations with Russian president Vladimir Putin could see a relaxing of sanctions against the country, which could eventually lead to Russia returning from the Big Law wilderness.

Three-Way U.K. Merger Finds A Home

The U.K.’s largest ever legal services merger moved a step closer after CMS Cameron McKenna, Nabarro and Olswang signed a deal for combined office space.

Nabarro and Olswang will move into CMS’ headquarters at Cannon Place, a modern office building in London’s financial district, with the combined firm’s lawyers to be integrated across five floors by sector and practice groups.

A CMS spokeswoman told me that the firm’s continued growth will “not be inhibited by space.” That extra capacity could prove important, with CMS understood to be interested in merging with a U.S. law firm.

Contact Chris Johnson at cjohnson@alm.com. Follow him on Twitter at twitter.com/chris_t_johnson

Continental Breakfast: your daily update on what’s happening in Europe.

Among all the excitement of transatlantic law firm mergers and the ongoing saga at King & Wood Mallesons , news that Allen & Overy ’s revenue increased by an impressive 13 percent in the first six months of the fiscal year got somewhat lost in the mix.

A&O says that the growth—a record for the firm—was driven by “standout performances” in London and Asia. I suspect there’s a little more to it than that.

U.K. law firms are generally quite fickle when it comes to half year results. Unlike full year accounts, which U.K. firms are required to make publicly available as part of the rules governing limited liability partnerships, they are under no obligation to disclose interim figures. Predictably, most therefore only choose to do so if they are particularly good.

In the past, participation has been sporadic at best. This year, I expect that the majority of large U.K.-based firms will release first half results, and that A&O will be far from alone in posting large topline gains. Why? One word: Currency.

The British pound has fallen against almost every major global currency over the past 12 months. This has proved a headache for U.K. firms with significant international business—particularly where equity partners are receiving profits in sterling and billing in other currencies. But it has also had a welcome side effect of artificially inflating overseas revenue when it comes to consolidated financial reporting.

The fact that U.K. law firms are generally far more international than their U.S. rivals means that the impact is particularly significant. A&O, for example, only has 36 percent of its lawyers based in the United Kingdom. (The costs associated with the firm’s non-sterling business, such as attorney salaries and office rent, will also have increased, of course. A&O hasn’t released any data for first half profits.)

The other three international magic circle firms— Clifford Chance , Freshfields Bruckhaus Deringer and Linklaters —will have likely seem similar boosts, as will the other geographically expansive U.K.-based practices such as Ashurst , Bird & Bird , Clyde & Co , Eversheds , Herbert Smith Freehills and Taylor Wessing. (All of these firms have less than 40 percent of their lawyers based in the U.K., apart from Freshfields, which has 42 percent of its lawyers in its home market. That still makes it proportionally more international than any other non-U.K.-based firm, apart from Baker & McKenzie , DLA Piper , Hogan Lovells and White & Case , however.)

While this may be good for U.K. firms when reporting in sterling, it will radically depress their performance in next year’s Global 100 .

The weakening of the British pound against the dollar meant that the U.K. firms were among the worst performers in this year’s Global 100 survey. Freshfields Bruckhaus Deringer posted a 6.6 percent increase in revenue and a 7.5 percent increase in PPP, for example, but when its results were converted to dollars for our survey, it suffered contractions across all key metrics.

The results of the U.K. firms are likely to be even more heavily skewed in next year’s survey, thanks to a significant slide in sterling following the Brexit vote. The pound is currently trading at just $1.25. Applying that exchange rate to last year’s results would see British pair Berwin Leighton Paisner and Taylor Wessing drop out of the Global 100 entirely.

OPEC, Russia Deal Boosts Oil Price

Some welcome news for energy lawyers: The price of oil has risen by almost 10 percent after the world’s leading oil-producing countries agreed to slash production for the first time in eight years.

The Organization of the Petroleum Exporting Countries (OPEC), which includes Iraq, Iran and Saudi Arabia, agreed to lower production by more than 1 million barrels per day, while non-OPEC Russia also joined output cuts for the first time in 15 years.

The news also led to a sharp rises in bond yields, energy shares and the value of the U.S. dollar, with investors betting that the increased oil price and resulting inflationary pressure will lead to higher interest rates.

The sustained depression in global oil prices has had a significant impact on law firm energy practices, with clients scaling back on key exploration and production activities. (Energy sector lawyers have been kept busy by an increase in other work, such as disputes and restructuring, however.)

It has also contributed to a severe decline of the Russian legal market. Big Law firms invested heavily in Russia during the late 1990s and early 2000s, with the market producing a steady stream of big-ticket IPO and M&A deals. But most U.S. and U.K. firms have radically scaled back in the country in response to a crippling economic downturn caused by a combination of the oil slump and international sanctions. Some lawyers believe that U.S. president elect Donald Trump’s apparently cordial relations with Russian president Vladimir Putin could see a relaxing of sanctions against the country, which could eventually lead to Russia returning from the Big Law wilderness.

Three-Way U.K. Merger Finds A Home

The U.K.’s largest ever legal services merger moved a step closer after CMS Cameron McKenna , Nabarro and Olswang signed a deal for combined office space.

Nabarro and Olswang will move into CMS’ headquarters at Cannon Place, a modern office building in London’s financial district, with the combined firm’s lawyers to be integrated across five floors by sector and practice groups.

A CMS spokeswoman told me that the firm’s continued growth will “not be inhibited by space.” That extra capacity could prove important, with CMS understood to be interested in merging with a U.S. law firm.

Contact Chris Johnson at cjohnson@alm.com. Follow him on Twitter at twitter.com/chris_t_johnson