For much of its nearly 300-year history, Freshfields hardly needed to look beyond London.
The law firm’s list of envied clients ranged from the Bank of England to oil producer BP, while universities including Oxford and Cambridge provided a conveyor belt of graduates to become the next generation of lawyers advising the most. large British companies.
In 2000, Freshfields merged with two German companies to consolidate a powerful presence in continental Europe. But for the business law firms that are now fighting to be the global elite of the profession, hitting like a heavyweight in the UK and Europe only gets you very far: the US is where you have to deal your punches.
This is something Georgia Dawson knows more than anyone. Last month, the 44-year-old Australian was voted the first woman to lead Freshfields, a rare achievement in a profession whose top ranks are still largely occupied by men. After breaking that glass ceiling, Ms. Dawson’s challenges are just beginning.
According to partners, former partners and lawyers at rival firms the Financial Times spoke to, his five-year tenure will determine whether Freshfields is able to make a deeper breakthrough in the lucrative US market and solidify a reputation for power. global.
“Georgia’s election reflects a much-needed generational change within the company that must find a way to reward rising star partners,” said Christopher Clark, director of legal recruiter Definitum Search. The question for Freshfields is “whether it pushes further global expansion or restructures the current business to focus on the most profitable areas of the jurisdictions it comprises.”
The offices of Freshfields Bruckhaus Deringer in the City of London © Financial Times
The stakes are high. Among London’s elite business law firms – collectively known as the Magic Circle – Freshfields has had the most success in the United States, where top lawyers can order compensation contracts of $ 10million. dollars per year.
But it comes at a price. The stubborn expansion has strained a partnership built on a rigid compensation structure designed to reward time served rather than performance – a contrast to some notable American companies. At the same time, deep-pocketed American rivals such as Kirkland & Ellis and Latham & Watkins have turned to London, poaching a series of star partners as they threaten Magic Circle businesses in their own turf.
Leading the pack
Ms Dawson, who joined Freshfields in 2004 and has been leading its business in Asia since 2017, does not regret that the company’s horizons are global.
“We are really looking forward to using the next five years to move the business forward and be very competitive in all key markets,” she told the Financial Times. “We want to stay very relevant and ahead of the pack – and that includes with our American competitors.”
While the company’s global reputation is shaping up to be a defining issue for Freshfields’ new leader, it won’t be the only one when she returns to London in January as a senior partner after her election by the 395 partnership. people in the company.
Its rise marks an important moment for a company where women represent only 19% of the partners. Last year, the firm set up a committee with the power to withhold payment for bad behavior after one of its senior lawyers was fined for sexual harassment misconduct and another quit after a internal investigation.
Ms. Dawson assembled a leadership team from all of the practice’s practice groups, all under the age of 50. The partners say her drive to make Freshfields an “inclusive and progressive place,” a goal she presented to the FT, could spark loyalty.
Long known in Europe for its antitrust, M&A and litigation activities, Freshfields’ breakthroughs in the United States, which it began to make in earnest in the mid-2000s, saw it overtake other abandoned Magic Circle companies. scrap for a stranglehold on the world’s most lucrative legal market.
The firm has more than 200 attorneys in the United States, a market that has been turbocharged over the past decade by a booming private equity industry that generates an enormous volume of work. There is a newly established office in Silicon Valley, which houses clients such as Facebook, Google, and Airbnb. The partners have been prized by U.S. companies, including the hiring of Google advisor Ethan Klingsberg last year for a notorious $ 10 million salary deal, alongside a team of M&A lawyers from Cleary Gottlieb.
The addition in early 2019 of Aimen Mir, who previously oversaw the Committee on Foreign Investments in the United States, the government group that can block deals for national security reasons, brought experience in one area more and more important in global negotiations.
Excluding blocking
Persistence in the United States has helped Freshfields position itself globally – it ranks second among law firms in this year’s global M&A ranking, according to Mergermarket. However, trying to maintain that position risks pushing the company’s so-called compensation structure to the breaking point, say partners, former partners and rivals.
Built on the idea of tying compensation to the length of service of a partner rather than the costs they generate, the lockstep system has for decades been synonymous among law firms with a culture that values tradition. and collegiality.
“The deal was that there was a no blockage, and as you get older you get paid more,” said an ex-partner. “There have never been any arguments about money because you got what you got, but there isn’t an organization in the United States that got twice as much as you. This is what sows the seeds of discontent.
Lockstep helped forge the culture of Freshfields, but the firm has already adjusted it a few times in recent years, especially when it wanted to persuade rivals of American companies to join.
Freshfields’ equity partners took in an average of £ 1.8million last year. But after a redesign three years ago, the current iteration of the lockstep model means that a small group of top lawyers in the firm can earn around five times as much as other partners.
Under this system, partners with a stake in the business are paid in shares, or “points,” largely based on time spent at its top tier. In 2017, the number of potential points a partner could be paid – currently worth around £ 55,000 – was increased from 40 to 60, while the smaller number was reduced from 17.5 to 12 , 5, according to people with direct knowledge of the subject.
Compensation “is a fundamental aspect of strategy and you need to be concerned about it to ensure that it continues to support your strategic objectives,” explains Ms. Dawson. “That’s why it’s on the agenda [now]. “
American rivals with deep pockets
If its American ambitions are pulling the seams of the Freshfields salary structure, so too is the need to keep its best London artists out of the clutches of its American competitors.
Ms Dawson was offered a reminder of the threat on the eve of her election, when Skadden Arps hired Bruce Embley, the co-director of M&A activities at Freshfields who had worked on important deals for clients, including brewer Anheuser-Busch InBev.
Deep-pocketed American rivals such as Latham & Watkins have turned to London, poaching a series of star partners as they threaten the Magic Circle in its territory © Reuters
His departure was not the first. In February, M&A specialist Sam Newhouse moved to Latham & Watkins. Former star private equity partners David Higgins and Adrian Maguire are now at Kirkland & Ellis.
All this only injects urgency into the debate on the company’s salary structure. A pledge to better reward young star partners and outperformers has been a crucial part of the campaign Ms. Dawson fought for the top job.
“We are conducting a holistic review of our current lockdown system and we will remain a lockdown firm,” Ms. Dawson said. “But if we believe that marginal adjustments will help retain our star partners, it’s important to make them. . . We operate in a highly competitive environment. ”
Some think that repeatedly tinkering with the lockstep won’t be enough.
“When you compare the top of fairness to the Magic Circle, it’s barely halfway up the pay scale in major US companies, so you can’t solve the challenge by playing around with the pay structure,” said Charlie Geffen, the elder. senior partner of the British law firm Ashurst and chairman of the American firm Gibson Dunn’s London. “You have to do something more fundamental.”
Freshfields claims a pedigree European private equity practice, but is still overtaken by the likes of Kirkland & Ellis, which has dominated the private equity boom to become the world’s largest company.
“During the election we were faced with the question of what the company is trying to be,” said a senior associate at Freshfields. “Are we trying to be part of the world’s elite? We already are, but you can lose this position quite quickly. Or are we going to stick with our knitting and that’s enough?
For much of its nearly 300-year history, Freshfields hardly needed to look beyond London.
The law firm’s list of envied clients ranged from the Bank of England to oil producer BP, while universities including Oxford and Cambridge provided a conveyor belt of graduates to become the next generation of lawyers advising the most. large British companies.
In 2000, Freshfields merged with two German companies to consolidate a powerful presence in continental Europe. But for the business law firms that are now fighting to be the global elite of the profession, hitting like a heavyweight in the UK and Europe only gets you very far: the US is where you have to deal your punches.
This is something Georgia Dawson knows more than anyone. Last month, the 44-year-old Australian was voted the first woman to lead Freshfields, a rare achievement in a profession whose top ranks are still largely occupied by men. After breaking that glass ceiling, Ms. Dawson’s challenges are just beginning.
According to partners, former partners and lawyers at rival firms the Financial Times spoke to, his five-year tenure will determine whether Freshfields is able to make a deeper breakthrough in the lucrative US market and solidify a reputation for power. global.
“Georgia’s election reflects a much-needed generational change within the company that must find a way to reward rising star partners,” said Christopher Clark, director of legal recruiter Definitum Search. The question for Freshfields is “whether it pushes further global expansion or restructures the current business to focus on the most profitable areas of the jurisdictions it comprises.”
The offices of Freshfields Bruckhaus Deringer in the City of London © Financial Times
The stakes are high. Among London’s elite business law firms – collectively known as the Magic Circle – Freshfields has had the most success in the United States, where top lawyers can order compensation contracts of $ 10million. dollars per year.
But it comes at a price. The stubborn expansion has strained a partnership built on a rigid compensation structure designed to reward time served rather than performance – a contrast to some notable American companies. At the same time, deep-pocketed American rivals such as Kirkland & Ellis and Latham & Watkins have turned to London, poaching a series of star partners as they threaten Magic Circle businesses in their own turf.
Leading the pack
Ms Dawson, who joined Freshfields in 2004 and has been leading its business in Asia since 2017, does not regret that the company’s horizons are global.
“We are really looking forward to using the next five years to move the business forward and be very competitive in all key markets,” she told the Financial Times. “We want to stay very relevant and ahead of the pack – and that includes with our American competitors.”
While the company’s global reputation is shaping up to be a defining issue for Freshfields’ new leader, it won’t be the only one when she returns to London in January as a senior partner after her election by the 395 partnership. people in the company.
Its rise marks an important moment for a company where women represent only 19% of the partners. Last year, the firm set up a committee with the power to withhold payment for bad behavior after one of its senior lawyers was fined for sexual harassment misconduct and another quit after a internal investigation.
Ms. Dawson assembled a leadership team from all of the practice’s practice groups, all under the age of 50. The partners say her drive to make Freshfields an “inclusive and progressive place,” a goal she presented to the FT, could spark loyalty.
Long known in Europe for its antitrust, M&A and litigation activities, Freshfields’ breakthroughs in the United States, which it began to make in earnest in the mid-2000s, saw it overtake other abandoned Magic Circle companies. scrap for a stranglehold on the world’s most lucrative legal market.
The firm has more than 200 attorneys in the United States, a market that has been turbocharged over the past decade by a booming private equity industry that generates an enormous volume of work. There is a newly established office in Silicon Valley, which houses clients such as Facebook, Google, and Airbnb. The partners have been prized by U.S. companies, including the hiring of Google advisor Ethan Klingsberg last year for a notorious $ 10 million salary deal, alongside a team of M&A lawyers from Cleary Gottlieb.
The addition in early 2019 of Aimen Mir, who previously oversaw the Committee on Foreign Investments in the United States, the government group that can block deals for national security reasons, brought experience in one area more and more important in global negotiations.
Excluding blocking
Persistence in the United States has helped Freshfields position itself globally – it ranks second among law firms in this year’s global M&A ranking, according to Mergermarket. However, trying to maintain that position risks pushing the company’s so-called compensation structure to the breaking point, say partners, former partners and rivals.
Built on the idea of tying compensation to the length of service of a partner rather than the costs they generate, the lockstep system has for decades been synonymous among law firms with a culture that values tradition. and collegiality.
“The deal was that there was a no blockage, and as you get older you get paid more,” said an ex-partner. “There have never been any arguments about money because you got what you got, but there isn’t an organization in the United States that got twice as much as you. This is what sows the seeds of discontent.
Lockstep helped forge the culture of Freshfields, but the firm has already adjusted it a few times in recent years, especially when it wanted to persuade rivals of American companies to join.
Freshfields’ equity partners took in an average of £ 1.8million last year. But after a redesign three years ago, the current iteration of the lockstep model means that a small group of top lawyers in the firm can earn around five times as much as other partners.
Under this system, partners with a stake in the business are paid in shares, or “points,” largely based on time spent at its top tier. In 2017, the number of potential points a partner could be paid – currently worth around £ 55,000 – was increased from 40 to 60, while the smaller number was reduced from 17.5 to 12 , 5, according to people with direct knowledge of the subject.
Compensation “is a fundamental aspect of strategy and you need to be concerned about it to ensure that it continues to support your strategic objectives,” explains Ms. Dawson. “That’s why it’s on the agenda [now]. “
American rivals with deep pockets
If its American ambitions are pulling the seams of the Freshfields salary structure, so too is the need to keep its best London artists out of the clutches of its American competitors.
Ms Dawson was offered a reminder of the threat on the eve of her election, when Skadden Arps hired Bruce Embley, the co-director of M&A activities at Freshfields who had worked on important deals for clients, including brewer Anheuser-Busch InBev.
Deep-pocketed American rivals such as Latham & Watkins have turned to London, poaching a series of star partners as they threaten the Magic Circle in its territory © Reuters
His departure was not the first. In February, M&A specialist Sam Newhouse moved to Latham & Watkins. Former star private equity partners David Higgins and Adrian Maguire are now at Kirkland & Ellis.
All this only injects urgency into the debate on the company’s salary structure. A pledge to better reward young star partners and outperformers has been a crucial part of the campaign Ms. Dawson fought for the top job.
“We are conducting a holistic review of our current lockdown system and we will remain a lockdown firm,” Ms. Dawson said. “But if we believe that marginal adjustments will help retain our star partners, it’s important to make them. . . We operate in a highly competitive environment. ”
Some think that repeatedly tinkering with the lockstep won’t be enough.
“When you compare the top of fairness to the Magic Circle, it’s barely halfway up the pay scale in major US companies, so you can’t solve the challenge by playing around with the pay structure,” said Charlie Geffen, the elder. senior partner of the British law firm Ashurst and chairman of the American firm Gibson Dunn’s London. “You have to do something more fundamental.”
Freshfields claims a pedigree European private equity practice, but is still overtaken by the likes of Kirkland & Ellis, which has dominated the private equity boom to become the world’s largest company.
“During the election we were faced with the question of what the company is trying to be,” said a senior associate at Freshfields. “Are we trying to be part of the world’s elite? We already are, but you can lose this position quite quickly. Or are we going to stick with our knitting and that’s enough?
