19 February 2021

Hogan Lovells weathers Covid-19 storm with 2.8 per cent revenue rise to $2.31bn

HOGAN LOVELLS law firm sign and entrance

Hogan Lovells' office in Washington DC

Cost savings help fuel 30.8% PEP increase also partly caused by change in partner compensation arrangements

Hogan Lovells grew revenue by 2.8% last year to $2.31bn against a 4% rise in revenue per lawyer (RPL), achieving what chief executive Miguel Zaldivar described as ‘steady financial growth’.

While profit-per-equity partner (PEP) rose by 30.8% to $1.97m, a significant proportion of that rise was accounted for by a reporting change, although the firm said more than half was down to efficiencies and cost savings.

The rate of revenue growth was down on last year’s increase of 6%, but the figures nevertheless underline the extent to which business law firms have weathered the impact of Covid-19 – and not just in the lucrative US market, given Hogan Lovells’ credentials as a transatlantic law firm that generates the majority of its revenue (51%) outside the Americas.

"Key drivers of our performance include our focus on highly regulated sectors, and a strong emphasis on complex multi-jurisdictional transactions and disputes work,” said Zaldivar, who took up his post last April. “The sectors that continued to demonstrate a robust performance include financial institutions, life sciences, technology, media, and telecoms, and automotive. At the same time we saw a strong performance in transactions, regulatory work, and disputes."

The firm’s corporate and finance practice group represented around 41% of total billings, its global regulatory and intellectual property, media and technology (IPMT) group accounted for just under a third (31%) with litigation, arbitration and employment making up the remainder (28%). 

The regional revenue breakdown saw the Americas generating around 49% of total billings, the EMEA region accounting for 45%, and Asia-Pacific just 6%.

The 30.8% PEP rise was partly triggered by a reporting change, the firm having provided a financial guarantee to protect the income of some partners with lower units or shares. Although Hogan Lovells regards them as equity partners, they are not classed as such by the AmLaw 100 ranking’s methodology. 

However, the firm also pointed to efficiency and cost savings. While lockdowns imposed due to the pandemic have generated a raft of cost savings for law firms, Hogan Lovells can also point to a major streamlining last year of the cumbersome governance structure that was set up when Washington DC’s Hogan & Hartson merged with the UK’s Lovells in 2010.

Last year, the firm signed a deal with new law outfit Elevate to launch a document review centre in Phoenix to handle US-sourced legal work while technology investments included the launch of an AI-based tool in collaboration with FTI Consulting to help businesses comply with new European Banking Authority (EBA) outsourcing requirements. 

Zaldivar said the firm would continue with its strategy of investing “in strategic markets and lawyer talent” while pursuing financial discipline and improving client service. Earlier this month it hired five partners in London, including the co-head of White & Case’s UK corporate practice, to boost its M&A and litigation teams and in January it hired a team of M&A and private equity lawyers from Baker McKenize in Paris. Notable hires last year included the return of three private equity partners less than a year after switching to Paul Hastings.

The firm also ramped up its ESG credentials in 2020, which included publishing global diversity and inclusion (D&I) targets, introducing D&I billable hour credits for US and EMEA lawyers and becoming a founder member of the Legal Sustainability Alliance on Climate Change in the UK .

In October, Baker McKenzie recorded flat revenue against a 12% fall in PEP for its fiscal year ending 30 June in what chairman Milton Cheng described as a “resilient” performance. Of the four UK Magic Circle firms that report revenue figures, Clifford Chance achieved the most robust growth, recording a 6% revenue increase for its financial year ending on 30 April.

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