1 June 2009
Egorov Puginsky Afanasiev & Partners leads Top Legal International’s PEP ranking

CATCHING UP WITH PROFITS

In an exclusive first, TopLegal International publishes profitability figures for 20 legal houses as Oslo-based firms lead the Continent for transparency

Tucked among the financial data supplied by law firms this year were annual profits and profit margins. On the basis of these figures, TopLegal International was able to calculate the profits per equity partner (PEP) of 20 legal houses.

Although far from an exhaustive sample (the majority of law firms declined to supply figures), the results published exclusively here provide several interesting indicators.

One immediate consideration is the PEP spread (see table 1) reflecting very different legal business models. Russia's Egorov Puginsky Afanasiev & Partners (with the highest PEP) and Sweden’s Lindhal (with the lowest) are separated by 19 positions in the TLI 100 rankings and have relatively similar profit margins. However, the two firms' leverage — tightly-managed equity with a the ratio of all lawyers to equity ratio of 1:32 makes it one of the partners — differs much more highest leveraged firms in the markedly. Egorov Puginsky's TLI 100 compared with Lindhal's leverage of 1:2.5.

That 12 of the 20 firms listed in the profit ranking are based in the Nordic region says much about the culture of transparency of these legal markets. A comparison between them further shows that the six Norwegian law firms — differentiated between themselves by just over 7% (see table 2) — maintain consistently higher profit margins compared with peers from Sweden and Finland.

Wider regional comparisons show that firms from Germany and Norway have the highest profit margins. On average, this margin is around 50%. Two German and two Norwegian law firms have a profitability above this average: SZA Schilling Zutt & Anschutz (56.8%); Schordt (55.3%); Buse Heberer Fromm (55.1%) and Thommessen Krefting Greve Lund (55%). Firms from the emerging markets in Eastern Europe along with several players from Finland and Portugal, where practices contain a greater proportion of commodity or volume work, average exactly half as much.

Aside from Egorov Puginsky, the other top 25 TLI 100 firms present in this year's profits rankings are Wolf Theiss and De Brauw Blackstone Westbroek. The Austrians registered among the highest PEP, almost twice as high as De Brauw. Quite a performance for a practice with a predominantly Central and Eastern Europe business. The Dutch leader, meanwhile, has come off several years of restructuring to the partnership. In addition to abandoning domestic presence in Rotterdam and The Hague, in the latest year De Brauw further reduced the all-equity membership from 76 to 72.

 TopLegal International article