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From Times Online

January 23, 2009

Linklaters to axe partners in radical shake-up

Alex Spence

Linklaters, the world's second-largest law firm, is set to lose up to 50 partners in the biggest shake-up in the legal services market in decades.

It is a second blow to the "magic circle" just two weeks after Clifford Chance, the world's largest law firm, revealed it had asked partners to inject more than £40 million in new capital.

Linklaters told The Times it was reviewing its "size and shape" because of the crisis in the financial markets and wider economy.

"This is vital as part of the sound management of the firm," Simon Davies, the firm's managing partner, said. "What affects our clients affects us too."

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Mr Davies said the firm would announce the details of the overhaul on January 29. "We will be as transparent as possible and we are committed to limiting uncertainty," he added.

News of the shake-up leaked to the legal press before it had been announced to staff internally.

According to The Lawyer, a trade magazine, the partner cuts are likely to hit the firm's offices in Western Europe particularly hard, although as many as a dozen partners in London could also be asked to leave.

The overhaul could also see ten per cent of the firm's junior salaried lawyers — as many as 200 worldwide — lose their jobs, the magazine reported.

One of the City's most powerful law firms, Linklaters has grown rapidly in recent years to 540 partners and around 2,400 lawyers. Last year it earned fee income of £1.29 billion, only narrowly behind Clifford Chance, which had revenue of £1.33 billion.

Yet Linklaters’ performance had been the subject of rumours in recent weeks despite securing a prize role on the administration of Lehman Brothers.

News of the shake-up came at the end of a miserable week for the UK's top commercial law firms.

On Tuesday, Addleshaw Goddard, a national firm with revenue last year of £195 million, was the first to admit it was downsizing its partnership in response to the credit crunch. It will cut 19 out of 182 partners in coming months.

Ashurst, a leading private equity adviser, is also understood to be shedding partners, with up to ten at risk.

On Thursday, SJ Berwin, another prestigious City firm, announced it was in separate redundancy talks with 20 lawyers and 20 support staff. It also closed its highly-regarded film financing division, resulting in the departure of four partners.

Today, Baker & McKenzie, the world's eighth-largest firm with more than 3,300 lawyers, said it would cut 20 junior lawyers in London; it was also reviewing review support and secretarial staff, with further job losses possible.

Earlier this month Clifford Chance said it was in redundancy talks with 80 lawyers in its London office.

More than 2,000 salaried lawyers at firms across the UK have lost their jobs since the credit crunch began. However, the de-equitising and firing of partners has been more controversial.

While "managing out" partners is not uncommon at the larger firms even in good times, the aggressive approach taken by many in recent months has come as a shock. In the past, partners were regarded as secure even in a recession.

According to legal recruiters, up to 15 per cent of the 12,000 partners at the City's top firms could lose their jobs this year.

Partners who are forced to leave are entitled to the return of any capital invested in the firm, likely to be upwards of £500,000 for a senior partner. They will also receive compensation of up to a year's share of profits.

Equity partners at Linklaters earned an average of £1.44 million last year, with the highest-paid partner receiving £3.4 million, according to published accounts.

alex.spence@thetimes.co.uk

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