It’s that time of year again, when reports about U.S. firms’ prior-year performance begin to emerge before the annual printing of the Am Law 100 and 200 lists. Absent from those lists are firms that do not meet the full criteria for Am Law inclusion, but would qualify based on their standalone U.S. financial performance. This diverse group of firms (see Figure 1) includes former Am Law 200 firms which no longer meet the Am Law criteria (like Dentons), global firms based outside the U.K. (like Clyde & Co and Eversheds Sutherland), and four firms within the U.K.’s prestigious Magic Circle group. All of these firms have large U.S. footprints and U.S. practices which could rival Am Law firms in revenue and profitability. Typically though, we hear very little about the U.S. practices of these firms. The reason for this is simple – most of these firms don’t provide much clarity into the performance of their U.S. practices. In this regard, Clifford Chance is unique.
As with most firms of its size, Clifford Chance publishes its global financial results each year. Unlike most firms, however, it also releases a breakdown of the firm’s financial performance in each global region. In addition to these public disclosures, Clifford Chance went one step further this year. The firm provided ALM Intelligence with data on the growth and profitability of its Americas practice since 2010. An analysis of that data provides useful insight into the firm’s performance in the U.S. It also raises questions about the long-held belief that U.K. firms have struggled to develop a sustainable footprint in the U.S. Clifford Chance’s U.S. footprint certainly looks sustainable – perhaps even thriving.
Based on the results of Clifford Chance’s Americas practice – which currently includes 200 lawyers in New York City, 58 lawyers in Washington, D.C. and a small 9-lawyer office in São Paulo – the firm had revenue of $262 million in the fiscal year ending on April 30, 2017. Put into the context of Clifford Chance’s global firm, the Americas practice earned 13 percent of the firm’s total revenues last year. Had Clifford Chance’s Americas practice been included in the Am Law rankings, it would have been ranked 119th by revenue and 55th by revenue per lawyer. With less than two months to go in its current fiscal year, Clifford Chance is projecting that the firm’s Americas practice will post 7 percent growth in both revenue and revenue per lawyer this year, while maintaining a steady headcount.
The first takeaway from this data is that Clifford Chance’s Americas practice is fairly large by the standards of foreign practices of global firms. The success of U.S. firms in London has gotten significant attention in recent years. While a recent analysis suggests the upbeat narrative on U.S. firms’ performance in London may be overblown, some U.S. firms have done exceedingly well in the U.K. White & Case, the largest U.S. firm in London, earned $290 million from its U.K. practice last year. Latham & Watkins earned $280 million. By the standards of these firms, Clifford Chance’s Americas practice has been relatively successful. It is larger than nearly all of the U.S. firms in London, with the exception of White & Case (see Figure 3). Additionally, its revenue per lawyer compares well with Latham’s U.K. practice. The main difference between Clifford Chance’s performance in the U.S. and the performance of leading U.S. firms in London is growth. White & Case has grown its London headcount by 42 percent since 2011. Latham has grown by 46 percent. Meanwhile, Clifford Chance’s Americas practice has grown by a more modest 8 percent.
A second area of analysis which provides some insight into Clifford Chance’s Americas practice is a look at how their performance benchmarks against U.S. firms. This raises an interesting question – who exactly is Clifford Chance competing against in the United States? There is a temptation to compare them against other leading global firms like Latham and Kirkland & Ellis. Both of these firms, similar to Clifford Chance, are large, global, based outside of New York, and have built a strong presence there. Beyond those shared characteristics, however, the comparison doesn’t fit very well. Clifford Chance’s U.S. revenue per lawyer is 20 percent lower than Latham’s and 45 percent lower than Kirkland’s. This difference in revenue per lawyer points to a more fundamental difference between these firm’s U.S. businesses. Clifford Chance’s U.S. strategy is not predicated on winning a large number of high-end domestic public M&A deals. The firm has decided, at least for now, that the U.S. market has too many competitors in that space to justify the existing volume of work. Instead, Clifford Chance has chosen to build strength in several specific areas where it sees a stronger business case.
In January, the 2017 year-end league tables for project finance work in Latin America were published. Clifford Chance was ranked first in volume and value, according to IJGlobal. This was not an isolated event. The firm has topped the Latin American charts in two of the past three years. Although the tables reflect work that resulted in new projects in Latin America, the majority of the finance work was done by Clifford Chance lawyers in New York and Washington, D.C. Additionally, they were largely advising U.S.-based investment banks like Goldman Sachs and JPMorgan Chase, and development banks like IDB Invest, the private sector arm of the Inter-American Development Bank (IDB) Group.
Other practices that fit into Clifford Chance’s strategic focus in the U.S. include the firm’s well-ranked asset finance and real estate investment trust (REIT) practices, and the firm’s growing insurance and cross-border M&A practice. The latter practice, developed a hybrid insurance product that has allowed the firm to develop a strong brand with global reinsurance companies. On the disputes side, the firm has also invested heavily in its U.S. white collar and regulatory practices.
While there is no perfect peer group for any law firm, Clifford Chance’s practice area focus and financial performance make it look fairly similar to other leading New York City firms. This makes sense – the firm’s Americas practice is predominantly New York based. Compared against that group, the firm’s Americas practice has done relatively well (see Figure 4). It has outpaced the group in revenue growth and kept pace in revenue per lawyer growth. Additionally, the profit per equity partner of Clifford Chance’s Americas practice, which the firm privately shared with ALM Intelligence, compares relatively well with this group.
The ultimate question for Clifford Chance’s U.S. presence is if it can break free from the existing narrative of U.K. firms struggling in the U.S. American firms have been deemed successful in London for two reasons. First, they have penetrated the highest value areas of the U.K.’s legal market. Second, they have grown at a tremendous pace over the past half-decade. Clifford Chance’s U.S. strategy has side-stepped the first issue by not targeting the domestic M&A space. This choice, in many respects, could be seen as good management. The M&A market in New York is highly competitive, and it’s not clear if Clifford Chance could successfully compete with the larger more profitably corporate practices of Latham and Kirkland. The issue of growth, however, cannot be sidestepped. Over the past several years, Clifford Chance has invested heavily in its U.S. practice – adding 16 laterals in the past 24 months. Those investments have allowed the firm to develop a number of practices that strongly compete against large U.S. firms domestically. In this respect, Clifford Chance’s Americas practice cannot be dismissed as merely a British outpost. Whether it can build on those successes – as its American counterparts in the U.K. have – is yet to be seen.
Nicholas Bruch is a Senior Analyst at ALM Legal Intelligence. His experience includes advising law firms and law departments in developing and developed markets on issues related to strategy, business development, market intelligence, and operations. He can be reached by Email, Twitter, or LinkedIn.