Magic circle v US law firms?

[piedpiper]

Hi everyone

What are your thoughts on the differences between the magic circle law firms and US law firms? Which firm is it better to train at? Are you really likely to work more hours at a US firm?

 

[Jaysen]

Hmm the magic circle law firms are very different from each other (same with the US firms). This'll be clearer to see when our insights page is up. But if I could generalise, I'd say US firms have:

• less formal training and more on-the-job training
• fewer trainees compared to the magic circle law firms
• the benefit of the US market. That comes with huge benefits – from established relationships with corporate clients to particular capabilities (high yield). It means US firms can offer clients certain options that magic circle firms can’t
• higher pay at NQ level and historically, more flexible partnership remuneration and partnership track (though that has begun to change)
• smaller London offices. Most of the time, these aren’t satellite offices, but decisions are still made in the US rather than in London
• more aggressive lateral hiring practices (often star partners from magic circle firms).
• less fancy non-monetary based perks, though some of that’s speculation (we’ve started offering yoga and language lessons!)
• fewer departments in the London practices, rather than the full service magic circle offerings.
• less agile working practices (at least in the London office)
• higher revenues and higher profitability. That’s a broader trend between UK v US firms. 12 British firms occupy the Global 100 compared to 81 US firms. That’s because of the size of the US market and also partly due to currency fluctuations this year – though that doesn’t change the picture too much

I don't agree with all of this, but it's an interesting read: http://www.motivelegal.com/magic-circle-doomed-heres/

 

[jess889]

+1. That article is interesting. Hours wise I think its going to be the same (and probably the silver circle too)

 

[Matt96]

+1. That article is interesting. Hours wise I think its going to be the same (and probably the silver circle too)

Yeah I think the hours thing is way overblown. If you work at a top corporate firm you are going to be working long hours period.

 

[Jaysen]

Found an interesting piece on US and UK firms by the Lawyer. It's behind a paywall, so I'll summarise:

Over the last decade, between the magic circle (excluding Slaughters):

International

• Freshfields has had the most conservative international strategy.
• Clifford Chance has reigned in its international reach and consolidated some offices.
• Linklaters has spun off its offices in east Europe and expanded in Australia and South Africa through alliances. The firm seriously invested in Asia after the financial crisis, pursuing China for inbound as well as outbound work. Its recent venture with a Shanghai firm this year finally gave it the reach it was looking for.
• Allen & Overy has transformed globally since 2012/13 (back in 2008, A&O had a inconsistent global outreach). It has opened 15 offices in 10 countries in 10 years.

US reach

• Clifford Chance is well known for its failed merger with US firm Roger & Wells in 2000, but it has recently done well to grow public M&A and funds in the US.
• However, the firm's reach in New York has been questioned with just 26 partners.
• Freshfields is pushing to make the US central to its ambitions in litigation and antitrust.
• Allen & Overy has made a few key hires in the US.

Headcount

• Clifford Chance and A&O have reduced the numbers of partners and lawyers the most. They have grown profits while reducing headcount.
• All magic circle firms have reduced partner and lawyer headcount over the last decade

Innovation

• Clifford Chance's acquisition of Carillion's centre impressed the market
• Allen & Overy has done the most for innovation (compared to 2008 when it was seen as the most conservative).

Size

• Linklaters is the biggest magic circle firm in London on revenue.

US elite v magic circle

• Between 2003 and 2007 magic circle (inc. Slaughters) had a far higher growth in PEP than the elite US firms
• The magic circle has chosen international reach over the last decade, at the cost of profits (where they now lag behind compared to US firms).
• The financial crisis was a big gift to US firms. The rise in investigations, litigation, restructuring and regulations work gave US law firms a huge source of income.
• The magic circle will continue to try break into New York over the next few years, which is their current limiting factor.
• UK firms are still surviving because of the popularity of English law, their reach in Europe and Asia and their investment in technology and delivery (think, legal services centres).
• The magic circle firms can no longer compete when hiring lateral partners, whereas US firms can afford huge pay packets.
• Technology and alternative delivery may help UK firms compete as they will be able to serve their global clients more cheaply.
• The question between US firms is how much they will continue to increase their salaries and bonuses to attract star partners.

 

[Nicole]

Think it might be helpful to add the comparison between practice area strengths between magic circle law firms here:

Great question, practice area strength is a good way to distinguish the magic circle firms, but it's not very easy to find that information.

Historically, Allen & Overy and Clifford Chance were stronger in finance, whilst Linklaters and Freshfields were more focused on corporate/M&A. The boundaries in the magic circle have blurred a bit more now, but generally speaking, that distinction still rings true today. Freshfields has the strongest litigation team in the magic circle and is investing heavily to build its US litigation practice at the moment. As a matter of fact, a lot of UK law firms are pushing US disputes and investigations work at the moment as it's very lucrative over there.

I think Freshfields has more frequently topped Linklaters in the UK, European and global M&A rankings for deal value in recent years, but the results are often close. Linklaters is stronger and has a bigger finance team than Freshfields. Linklaters invested a lot into their finance team quite early and I don't think are too far from Allen & Overy and Clifford Chance in that line of work.

Freshfields has struggled to build a finance team to the same standard of its M&A practice. It recently refocused around a narrower range of financial products and has been pushing to do more borrower-side work (which generates a lot of fees). That'll help its private equity practice, which is very reputable - although facing a lot of competition from US firms with strong finance practices. Clifford Chance is also very strong in private equity, although it has lost a few star players in recent years.

And then Slaughters is very focused on corporate work. It tends to top the table when it comes to UK M&A work for deal value and has very strong relationships in the CIty, representing a good chunk of the FTSE 100.

 

[Nicole]

And on magic circle law firms trying to enter the US market.

Some thoughts:

It was/is arguably easier to crack the London market than crack the US (NY) market. When US law firms first came to London, it was because their clients were expanding internationally. They used these existing relationships – with US corporations and Wall Street banks – to anchor their practice in London. These firms concentrated on a small number of practice areas, catering to their US clients, which justified the huge costs and challenges of entering a competitive financial market.

Meanwhile, the magic circle law firms are trying to build a presence in the world's most competitive market for legal services. US law firms will be first pick for inbound deals or for overseas clients requiring US expertise and US law (e.g. leveraged finance). The magic circle have struggled to dent these longstanding relationships or differentiate their practices from US law firms when it comes to high ticket deals. Some have done better in niche areas, such as Clyde & Co's insurance practice, but in corporate and finance the New York elite reigns.

US law firms also have the benefit of the world’s most litigious market. For many law firms, litigation contributes as much as 50% to total revenue. Kirkland & Ellis, for example, has not only stormed the London market in private equity, but it also happens to be the world's biggest litigation firm. The global financial crisis also led to a boom in regulatory and investigations work, which meant huge increases in revenue for many US law firms. UK law firms don't have this opportunity. Litigation-derived revenue is far smaller. Although, some law firms, like Freshfields, have tried to enter the US market by focusing on regulatory and investigations work.

The remuneration system for UK law firms is another big challenge. Most operate on a lockstep model, where partners are paid according to their seniority at the law firm. This limits their ability to adjust their pay and therefore attract high performing partners in US. And, even if they tweak their lockstep system, which they have been trying to do, they risk unsettling their existing partners. The top UK law firms also generate far less profits per equity partner (PEP) compared to the New York elite. PEP is a metric that matters when you are looking to attract star partners.

 

[Lawgirlxo]

This new article/report from The Lawyer might be helpful too


https://www.thelawyer.com/the-lawye...news&adg=B26EF818-CCFD-48D0-8CD1-845DBC1B9B9A

 

[Jaysen]

This new article/report from The Lawyer might be helpful too


https://www.thelawyer.com/the-lawye...news&adg=B26EF818-CCFD-48D0-8CD1-845DBC1B9B9A

That was a very interesting read, thank you for sharing.

(I was thinking of buying the full report and then saw it was £2,995!)

 

[Lawgirlxo]

That was a very interesting read, thank you for sharing.

(I was thinking of buying the full report and then saw it was £2,995!)

Ahaha at least you tried to buy it, I didn’t even bother to click on it because I suspected it’d be super expensive

 

[Jaysen]

Something I came across which is another good way to differentiate US firms and MC firms (particularly in favour of MC):

• US firms have struggled to crack high end public M&A work in London (advising FTSE 100 public companies on their acquisitions/sales/exits).
• All the biggest M&A deals in 2016 involved the magic circle, or top UK firms like HSF.
• US firms only really get involved if there is a large US side to the transaction where they can leverage their US relationships.
• Firms like Latham and White & Case are actively working on this -- trying to hire key corporate partners from magic circle firms.
• Historically, UK corporate partners were reluctant to move to US firms, although that began to change in 2016.

 

[datguyak]

sorry to flag up an old post- I was wondering as I dont have experience in either - are the magic circle working hours significantly more than say a silver circle firm or another big international firm? (excluding the big American firms)

 

[Jaysen]

sorry to flag up an old post- I was wondering as I dont have experience in either - are the magic circle working hours significantly more than say a silver circle firm or another big international firm? (excluding the big American firms)

Interesting question. It's hard to give a clear answer as hours really differ between departments. In real estate, you might finish work at 5:30pm, while you might be working until 9pm each day in corporate. It's also driven by the market - you could be working until the early hours of the morning before a closing.

That said, I'm not convinced the general hours differ much between the magic circle and silver circle, or other top UK firms. The standard hours may decrease as you move further out, although it's pretty hard to draw the line.

 

[datguyak]

Interesting question. It's hard to give a clear answer as hours really differ between departments. In real estate, you might finish work at 5:30pm, while you might be working until 9pm each day in corporate. It's also driven by the market - you could be working until the early hours of the morning before a closing.

That said, I'm not convinced the general hours differ much between the magic circle and silver circle, or other top UK firms. The standard hours may decrease as you move further out, although it's pretty hard to draw the line.

Ah okay, that's interesting. I only ask because I keep reading horror stories on the internet about Magic circle life and I was kind of thinking similar to you- at top firms hours must be reasonably similar (to an extent). Just quite hard to to pinpoint exactly what is true.

Thanks anyway

 

[nj3352]

Found an interesting piece on US and UK firms by the Lawyer. It's behind a paywall, so I'll summarise:

Over the last decade, between the magic circle (excluding Slaughters):

International

• Freshfields has had the most conservative international strategy.
• Clifford Chance has reigned in its international reach and consolidated some offices.
• Linklaters has spun off its offices in east Europe and expanded in Australia and South Africa through alliances. The firm seriously invested in Asia after the financial crisis, pursuing China for inbound as well as outbound work. Its recent venture with a Shanghai firm this year finally gave it the reach it was looking for.
• Allen & Overy has transformed globally since 2012/13 (back in 2008, A&O had a inconsistent global outreach). It has opened 15 offices in 10 countries in 10 years.

US reach

• Clifford Chance is well known for its failed merger with US firm Roger & Wells in 2000, but it has recently done well to grow public M&A and funds in the US.
• However, the firm's reach in New York has been questioned with just 26 partners.
• Freshfields is pushing to make the US central to its ambitions in litigation and antitrust.
• Allen & Overy has made a few key hires in the US.

Headcount

• Clifford Chance and A&O have reduced the numbers of partners and lawyers the most. They have grown profits while reducing headcount.
• All magic circle firms have reduced partner and lawyer headcount over the last decade

Innovation

• Clifford Chance's acquisition of Carillion's centre impressed the market
• Allen & Overy has done the most for innovation (compared to 2008 when it was seen as the most conservative).

Size

• Linklaters is the biggest magic circle firm in London on revenue.

US elite v magic circle

• Between 2003 and 2007 magic circle (inc. Slaughters) had a far higher growth in PEP than the elite US firms
• The magic circle has chosen international reach over the last decade, at the cost of profits (where they now lag behind compared to US firms).
• The financial crisis was a big gift to US firms. The rise in investigations, litigation, restructuring and regulations work gave US law firms a huge source of income.
• The magic circle will continue to try break into New York over the next few years, which is their current limiting factor.
• UK firms are still surviving because of the popularity of English law, their reach in Europe and Asia and their investment in technology and delivery (think, legal services centres).
• The magic circle firms can no longer compete when hiring lateral partners, whereas US firms can afford huge pay packets.
• Technology and alternative delivery may help UK firms compete as they will be able to serve their global clients more cheaply.
• The question between US firms is how much they will continue to increase their salaries and bonuses to attract star partners.

why does freshfields take up this international approach? is it a strategic move?

 

[Tim918]

Another angle that may be worth thinking about is efficiency (in addition to reach, size headcount etc.). By "efficiency" I mean how much revenue the firm generates relative to the number of employees. Firms with a higher revenue per employee ('RPE') typically have more budget to spend on their staff (e.g. salaries + perks). But on the flip side, a firm that is more efficient is probably going to mean longer hours for its employees.

Here is an assessment of the efficiency at Magic Circle firms, which shows an average RPE of $460K. Meanwhile the average RPE of the top 10 US firms is roughly double that based on my calculations. So, to answer your question about whether you are likely to work more hours at a US firm, the data suggests that the answer is yes.