Tuesday, 07 August 2018

‘The giant is awakening’: Baker McKenzie adds $230m to revenue as partner profits surge 13%

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‘The giant is awakening’: Baker McKenzie adds $230m to revenue as partner profits surge 13%

Baker McKenzie has posted one of its best financial performances in recent history as revenue hit $2.9bn and partner profits reached $1.44m in the year to 30 June 2018.

An upbeat chair Paul Rawlinson claimed his firm was winning more higher value work as revenue rose 10% in constant currency and 8% in dollar terms from last year’s $2.67bn. The result confirmed Bakers as the third highest billing firm in the world, behind Kirkland & Ellis and Latham & Watkins.

Rawlison said the firm was climbing up the value chain in the mandates it acted on, pointing to the 13% growth in profits outpacing the increase in revenue.

‘The giant is awakening,’ he added, referring to Legal Business’ feature on Bakers last year. ‘We are going up the market, there is no question about that.’

He saw the results as an endorsement of its strategy of focusing on the key money centres – London, New York and China – as well as integrating the global giant and pitching to clients around industry sectors.

EMEA had a particularly strong year and accounted for 39% of turnover. Americas were a close second at 35% despite a flat Latin American market due to the ups and downs in the local economies. Asia Pacific brought in the remaining 26% of revenue.

Rawlinson singled out the capital markets practice, which saw a significant increase in IPO activity, the international trade group, which was particularly busy advising on sanctions, as well as the employment and antitrust practices. However, he added: ‘You really have to be firing on all cylinders to make sure there is this steady growth across the firm.’

Bakers has been on an unusually high number of large mandates in recent months, such as Chinese internet giant Tencent’s €2.1bn acquisition of videogame publisher Ubisoft from Vivendi and Turkish freight shipping operator UN Ro-Ro’s €950m sale to DFDS. It also advised German company Knauf on its $6bn proposed takeover of USG Corporation as well as DK Telekommunikation and a Macquarie-managed consortium on the $6.7bn takeover of Danish telecoms business TDC.

The year also saw Bakers make a highly significant step towards its stategic goal of integrating along three profits centres in Europe, America and Asia by 2020 as it agreed a deal to unite the bulk of its EMEA business into a single pool. Although Germany and France stayed out of the grouping, Rawlinson said the ‘overwhelming majority’ of the partnership wanted a more integrated firm and promised there would be updates on that front within the next 12 months.

As well as opening its ninth US office in Los Angeles in March, the firm made considerable additions to its partnership over the year with 53 laterals and 64 promotions.

‘The investment in the key financial centres is starting to pick up with a lot of interesting candidates who are increasingly interested in our platform,’ Rawlinson said.

The double-digit revenue growth is particularly good news for a firm that has consistently failed to gain real momentum after the banking crisis.

The five-year performance now looks rosier, with the firm hiking revenue 20% since 2012-13. Profits per equity partner (PEP) still lags the Global 100 average of $1.76m, but this year’s double-digit rise is a good step ahead towards the unofficial target of $2m.

Rawlison admitted that compared to the other giants in the world’s top three the firm has a profitability challenge but concluded: ‘I am optimistic that we can keep this pace. We are beginning to show we can make strides in profitability.’

marco.cillario@legalease.co.uk