Tale of two offices

AMID THE EUPHORIA OF NEW PARTNERS, LAW FIRMS WILL BE CONCERNED ABOUT KEEPING UNHAPPY STAFF WHO HAVE MISSED OUT ON EQUITY.

ANNE MIZZI LOOKS AT THE FACTORS WHICH DECIDE WHO GETS WHATHundreds of fresh-faced UK partners have in recent weeks been cracking open the vintage champagne to celebrate winning a slice of equity for the first time.

Many are also toasting their good fortune in becoming salaried or local partners, allowing them to be charged out at partner rates without having an equity share of the firm.

But the size of the party is likely to vary between practices.

Allen & Overy was the last of the magic circle firms to reveal its figures last week.

It has trimmed down to 37 the total number of partnerships doled out from last years 47.

Clifford Chance has cut promotions from 72 to 38, and Slaughter and May has only made up six, compared with ten last year.

In contrast, Linklaters & Alliance has increased its intake to 38 from last years 28, and Freshfields Bruckhaus Deringer has more than doubled its annual partnership enlargement to 43 from 21.

Ashurst Morris Crisp and Herbert Smith have also made up record numbers this year, with Ashursts promoting 16 against last years 12, and Herbert Smiths rising from 15 to 19.

As any novice solicitor with an eye on the top table will know, the chances of joining the partnership at any level will be inextricably linked to each individual firms strategy.

While the global four, Allen & Overy, Clifford Chance, Linklaters & Alliance and Freshfields Bruckhaus Deringer, all have their eyes on expansion in key areas, their strategies for growth are different.

Slaughter and May is the odd one out, keeping its profits high with a notoriously tight UK-focused equity partnership.

A firms fortunes over the past year will also be a factor.

Linklaters & Alliance and Freshfields Bruckhaus Deringer have both pulled off significant mergers this financial year, Linklaters with German Alliance firm Oppenhoff & Redler and Freshfields with German heavyweight Bruckhaus Westrick Heller Lber.

And a significant number of their new partners is in those new offices.

Clifford Chance, on the other hand, completed its three-way merger with US firm Rogers & Wells and German firm Pender Volhard Weber & Axster more than a year ago.

It made a record number of partners up as a result of the merger and this years more modest figures signal a desire to tighten the equity pool and keep profits up following the first post-merger full financial year.

In contrast to its magic circle rivals, Allen & Overy has opted for cherry-picking teams and individual lateral partner hires so it has not been forced to cut deals with merger partners to accommodate a large number of would-be partners.

The partnership round also gives an insight into a firms growth strategy with regard to particular practice areas.

For example, Allen & Overy has made up 11 global banking partners and six in international capital markets, while more than half of Clifford Chances 38 new partners are in corporate and capital markets.But the figures can also be misleading.

Clifford Chance introduced a salaried partner tier for the first time last year, and many of the new Allen & Overy partners are also local partners in overseas offices without an equity stake.

This enables the firms to give promotions without diluting their overall profitability.

Slaughter and May only makes up a small number of equity partners each year.The balance between maintaining a high level of profitability and rewarding those outside the equity circle will be a determining factor in the numbers made up each year.

Up- and-coming lawyers, who have missed out on partnership because they are in a practice area which is not a central focus of the firm or because they just do not get put forward, may well be considering a move to a more compatible firm.

Practices are increasingly conscious of giving them the break into partnership as part of their career development.Allen & Overy partnership partner Richard Turnor says attraction and retention is an important consideration: There is a desire not to dilute profitability and the necessity to bring in new young blood, which is crucial to the firm.And, of course, there is no automatic right of partnership, so there will be many disappointed assistant solicitors who are not on the list.

John Reynolds, London managing partner of US firm McDermott Will & Emery, says that despite making up three partners in January, the end of the US financial year, his firm has been hit by the loss of four lawyers, who moved in-house with clients in the past three months.

Mr Reynolds says there is always a boom in applications from UK law firms at this time of year, mainly from lawyers with three years post-qualification experience, who are seeing talented colleagues being passed over and are anxious to ensure that this doesnt happen to them in the future.

He says many firms are also guilty of not giving their lawyers a proper career structure: A lot of talented and ambitious people are making their firms lots of money and dont want to spend years time-serving as a bag carrier before they get the chance to run a deal.

The market is very mobile.

People are leaving or being fired.

Its always glossed over, but its not a job for life.

It isnt a corporation with a clear career path, and can still be a mysterious process at many firms.Theodore Goddards managing partner, Peter Cooke, says: We have fairly clear criteria and let them know if they are on track as early as possible, and there is a review process.The firm has made up seven partners and taken a lateral hire.

It has two tiers of partnership and it has made up its first part-time partner, Jane Hollinshead, into the initial tier.

Like the situation at other firms, potential partnership candidates at Theodore Goddard are sponsored and put forward by their practice group, and two of the partners have been made up into the project finance initiative department, which needed partners to lead the deals, says Mr Cooke.He continues: The truth is that in the very good market for legal services in the last few years, people are making up more rather than fewer partners.

Building up is a long-term practice and what we have to look for is long-term ability to build a good practice and contribute to the overall practice of the firm.But being sidelined for promotion to partnership for whatever reason is difficult, and firms that can afford to reward are likely to do so in todays fluid market where retention is a priority for all firms with a busy workload.Manchester firm Pannone & Partners, which is predicting a 24% increase in fee income and 60% in profits this year, has just grown to 40 equity partners by taking on seven from its ranks.

Other firms have increased the number of partners while increasing profitability, but at the expense of older partners who have been urged to retire as part of the firms strategy.

Pannones made a point of not doing this.

For solicitors who want to stay in private practice, partnership remains a holy grail, and a firm is unlikely to want to share its cake unless it thinks an individual can add to it.

Ronnie Fox, senior partner at City-based Fox Williams, says: Its more difficult to make partnership in law firms than it has been in the past.

The concern is usually to make up partners who will add to the size of the cake and not result in the cake being cut into smaller portions.If this years year-end reports match expectations, the cake will be somewhat bigger and firms can afford to make up more partners.

But baking law firm cakes is a delicate balancing act and caution will be the watchword for partners thinking of slimming if the US slowdown brings leaner times this side of the pond.Anne Mizzi is a freelance journalist