22 Feb 2023

Hogan Lovells posts 7% fall in revenue to $2.4bn following 'challenging' year

Results set to be bellwether for firms with large international footprints as PEP also falls from record 2021 high

Miguel Zaldivar Image courtesy of Hogan Lovells

Transatlantic law firm Hogan Lovells has seen both its revenue and profit per equity partner (PEP) fall in 2022 in the face of what CEO Miguel Zaldivar portrayed as a year of challenges, ranging from the war in Ukraine to “unprecedented inflation levels”.

Global turnover at the firm fell 6.7% to $2.43bn against an 8.2% drop in PEP to $2.28m, a subdued set of results that is likely to set the tone for firms with large international networks given the economic headwinds that built up throughout 2022.

Revenue per lawyer was also down, by 5% from $1.03m to $0.98m. The firm, however, pointed out that the results were nevertheless the firm's second-best on record. 

“While 2021 was a historically high year for the firm and our industry, looking at our revenue in 2022 in comparison with prior years demonstrates our continued growth and success,” said Zaldivar.

Like many of its rivals, Hogan Lovells capitalised on a strong deals market and an uptick in litigation work to post its best-ever results last year, growing revenue 12.9% to $2.6bn against an eye-catching 25.9% rise in PEP to $2.49m.

Zaldivar said: “Like many in the legal industry, our firm faced challenges in 2022 that had an impact on our global revenue. These challenges include the war in Ukraine, continuing impacts of Covid-19, unprecedented inflation levels and currency devaluation of the British Sterling and Euro, and a drop in legal services globally.

“Though the economic uncertainty led to a decline in transactional work, particularly in the first half of 2022, we saw this work pick up during the second half of the year. For example, we represented Duke Realty Corporation on its approximately US$23bn combination with Prologis, believed to be the largest REIT M&A transaction in history."

UK revenue at the firm fell by 13% from $534m in 2021 to $464m in 2022, the vast majority of which ($449m) was generated in the firm’s London office and the rest in its Birmingham base. The UK made up 19% of the firm’s total revenue compared to 21% the previous year. 

In terms of regions, the Americas contributed 48%, on a par with 2021’s figure of 49%, while EMEA's share grew 1% to 46% with the remaining 6% generated in Asia-Pacific, the same proportion as 2021. 

By practice area, corporate and financial work made up 40% of global revenue, 2% less than the previous year, while disputes was constant at 28% and global regulatory and intellectual property, media and technology increased from 30% to 32%. 

Along with Duke Realty's combination with Prologis, stand out work for the firm's corporate and finance team included advising listed UK real estate company Shaftesbury on its all-share merger with Capital & Counties Properties, creating a combined portfolio valued at $5bn.

On the disputes side the firm worked with clients including Google, the London Metal Exchange and Viatris. It also represented Citibank in a closely-watched case that saw the the US Court of Appeals for the Second Circuit unanimously hold that the recipients of $500m mistakenly wired by Citibank could not assert New York’s “discharge for value” defence to keep the money.

In January, the firm unveiled its largest partner promotions round yet, making up 38 lawyers across its network, 22 of whom were women. The round was a significant step up on 2022’s 27-strong cohort. 

Key partner laterals over the course of last year included Alexis Sáinz, who joined in Washington DC from Milbank to co-lead the firm's space and satellite practice. It also hired Birchal Ireland’s chief legal officer, Eimear O’Brien, in Dublin to strengthen its global regulatory practice.

Hogan Lovells’ results come as the firm continues merger talks with Shearman & Sterling; a tie-up that would create a firm with revenue in the region of $3.6bn, putting it in third place globally by turnover.

It is one of the earliest of the large US firms to post 2022 results, and while Gibson Dunn, Proskauer Rose and Goodwin Procter have all posted revenue increases, its large international network exposes it to forces that are likely to impact comparable firms, including the UK Magic Circle. 

Gibson Dunn's results are particulary impressive, with turnover up by 10.3% in 2022 to $2.74bn against a 10.9% rise in profits per equity partner (PEP) to $4.93m. Goodwin Procter, on the other hand, saw PEP slip by 6.4% despite a 12.1% in turnover, according to Law.com.

According to a Wolters Kluwer report published earlier this month, in-house legal departments are fending off rate increases at some of the largest US law firms, with 40% of law firm timekeepers across all firms seeing average fees stay the same or fall.

Meanwhile, the Thomson Reuters Law Firm Financial Index for Q422, which was published earlier this week, recorded its worst quarterly score on record, with the index now declining for six quarters in a row as client demand wanes and productivity levels drop.

However, the report suggested that a continued improvement in macroeconomic conditions could lead to a recovery in demand for transactional work. 

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