There has been much speculation about the impact of the coronavirus pandemic on the profession but the first set of results from a leading law firm has confirmed the gist of months of market chatter: they’re doing fine.
Allen & Overy (A&O)’s financial results for the 2019/20 year show that the City giant managed the remarkable feat of driving revenues up 4% to £1.69bn, despite nearly two months of its crucial year-end period catching the full brunt of the Covid-19 lockdown.
The results are the first yet for the 2019/20 season from a leading City player and confirm the remarkable resilience of the industry’s elite as plc clients kept their lawyers busy with disaster response work… and largely kept paying bills on time.
Issuing the results today (16 July), the 550-partner firm said that profit before tax edged down 2.5% to £690m, while profit per equity partner was down 1.7% to £1.63m. For context, the results are barely down on A&O’s 2018/19 performance, when it increased its top line by 5%.
It barely needs saying that the figures will be seen as a strong result for A&O’s c-suite, which also had to contend with the distraction of its long-running merger talks with O’Melveny & Myers, which were abandoned in September.
The firm said that growth was spread across its practice areas and regions, with its New Law division, advanced delivery and solutions, increasing revenues by 15%.
Deal highlights include acting for Refinitiv on its proposed $27bn acquisition by the London Stock Exchange, advising the banks on the EUR15bn finance for the acquisition of Tiffany & Co and work for ISDA on a major overhaul of its credit derivatives framework.
With A&O’s peers expected to issue 2019/20 results within days the industry will soon have its first true indication of how the profession has stood up to the global Covid-19 outbreak and resulting economic slump.
Previous indications are that leading firms are so far coming through with flying colours, though most managing partners are budgeting for a tougher 2020/21 as the impact of the pandemic is felt through the entire year and pipelines of new deal work clog up.
Nonetheless, many law firm leaders have reported better-than-expected trading through May and June, demonstrating again the ability of commercial law firms to ride out economic shocks that deliver devastating blows to many other sectors.
In common with many peers, A&O announced a raft of belt-tightening measures as the crisis hit, including injecting more capital into the business, slowing payouts to partners and cutting pay rates for incoming junior lawyers.
A&O’s leadership will be feeling bullish as the team of new managing partner Gareth Price (pictured) and recently-re-elected senior partner Wim Dejonghe gear up new terms with US strategy expected to be at the top of their agenda.
Discussing the results with Legal Business, Price set an understated tone, noting: ‘How can anyone be happy given what’s going on in the world? But, yes, we’ve had a good year.’
Price further noted that A&O’s trading had held up well over the summer, with a line of new-money M&A now hitting its books. Setting out his priorities, he noted the need to keep investing in talent and service lines and the need to move on new opportunities, such as the potential for a post-pandemic surge in investigations work.
The new managing partner also pledged a strong operational grip under his leadership, noting: ‘Improving a law firm is about the aggregation of marginal gains and then applying those marginal gains in local contexts. The team is sick of hearing me talk about continual improvement but that is a lot of my focus.’
Summing up the A&O mantra for the years ahead, Price concluded: ‘We’re not going to be big for the sake of being big, we’re about quality.’
Hard to argue with those sentiments or numbers.