Kirkland & Ellis/lawyers: strong suits

Jokes about the uncanny ability of lawyers to thrive amid adversity came true last year. Kirkland & Ellis, the world’s highest-grossing law firm, is on track to generate annual revenues of $5bn for the 12 months to the end of January. That is a 20 per cent increase. The trend is good for partners at law firms and lowlier workers too. Firms such as Morrison & Foerster are dishing out one-off “appreciation bonuses”.

Law firms, like investment banks, feed off volatile times such as these. A glance at recent mandates won by Clifford Chance illustrates the point. The firm, part of the UK’s elite “Magic Circle”, worked on the £31bn telecoms merger of Telefónica’s O2 with Liberty Global’s Virgin Media. That speaks to the booming M&A market.

But there was also Covid-specific work, both private and public sector, as shown by Clifford Chance’s advisory role on Pfizer’s Covid-19 vaccine and, separately, on KfW’s emergency financing package.

The pandemic has left companies retaining lawyers at both ends: working on restructurings of businesses that are struggling and helping with takeovers by those that are not. Private equity, a big part of Kirkland & Ellis’s client base, has been going gangbusters. Government money and low interest rates have kept more companies in the game. A cynic would say that creates fees now for restructurings and fees later from insolvencies when government support ends. Rising bank provisions allude to this.

New and updated laws across the globe, such as the UK’s corporate insolvency and governance act, require legal brains to interpret. China’s newfound war on competition — in a country knee-deep in duopolies — will ensure plentiful antitrust work.

Litigation, once the lion’s share of work at Kirkland until the corporate deal machine took over, has also been a big driver of profits. Coronavirus has caused huge disruption, bringing claims in its wake. An FCA insurance case in the UK stands to affect 370,000 policyholders.

There is always an aftermath. Many law firms are wisely preparing for this. They are taking provisions before distributing profits to partners and keeping credit lines on tap. But the breadth of work being carried out and rewriting of business norms give the world’s legal industry an enviable cushion.

The Lex team is interested in hearing more from readers. Please tell us what you think of the outlook for the legal industry in the comments section below