Freshfield’s Bruckhaus Deringer has paid a special bonus to its London-based private equity lawyers, and has become the latest international law firm to move away from its traditional payrolls in an attempt to halt dropouts to US rivals with deep pockets.
Freshfields, an international law firm considered part of the City of London’s elite “magic circle”, gave employees working on private equity deals an extra payout last year, according to three people familiar with the case. This was equivalent to around £ 50,000 for some middle-ranked lawyers, one of the individuals said.
The payouts came in addition to the standard bonus paid to attorneys across the firm, people said. One said it would be withdrawn if the lawyers left within 12 months.
U.S. private equity firms have triggered a boom in merger and acquisition activity over the past year, which in turn has waged a war of talent between the law firms that advise them.
Competition for staff has grown as U.S. law firms have expanded rapidly in London. Many of these firms have strong relationships with U.S. private equity houses, combined with a willingness to reward new recruits with compensation packages far beyond city standards.
Last year, Freshfields lost Vincent Bergin – a new partner who had worked on deals for private equity giant CVC – and Keir MacLennan. Both dropped out of Kirkland & Ellis, the world’s highest-earning law firm, joining former Freshfields star partners David Higgins and Adrian Maguire, who dropped out in 2017 and 2019.
Freshfields declined to comment on the new bonuses, which came on top of standard payouts at the end of the year of between 10-30 percent of salary.
Lawyers at City law firms have traditionally been paid on the same scale as colleagues, regardless of which department they work in.
But all the magic circle firms have now tried to adapt their bonus structures to introduce flexibility and remain competitive in the busiest areas where the most in-demand lawyers are able to earn far more than peers without the same amount of work.
A partner at an international firm in the city said it was “absolutely wild to have a consistent approach” because of the difference in revenue generated by different teams.
Agreements worth more than $ 5.8,000 worldwide were agreed in 2021, the fastest growth rate since the mid-1990s, with the work mainly handed over to corporate lawyers. Freshfields’ clients include private equity giants CVC and Cinven.
In November, Allen & Overy created a special bonus aimed at its leveraged financial partners – an area of dominance for the company – triggered when partners billed over 1,950 hours a year, according to a person familiar with the matter. The decision was first reported by The Lawyer magazine.
Denise Gibson, the firm’s co-head of global geared finance, said: “Having the ability to flex to compete with our US competitors while still being true to our culture and rewarding other broader contributions that add value is paramount. to ensure that we recruit and retain the best talent. ”
Clifford Chance also introduced a special bonus system to its UK private equity team. This gave lawyers a guaranteed minimum bonus, as well as their usual discretionary bonus if they hit a certain criterion in terms of working hours, as well as other measurements aimed at business development.
The firm’s broader bonus scheme means that associates working similarly long hours will also receive a higher level of bonus approaching that offered by top US law firms.
“The private equity market is incredibly busy and is set to get busier, so we are adjusting our business model for this team,” said Michael Bates, Clifford Chance’s UK managing partner. “Our bonus structure gives us the flexibility to recognize and reward those who work in the areas where there is the greatest demand in the market, without creating the same workload expectations for everyone in the company.”