Freshfields Bruckhaus Deringer’s latest limited liability partnership accounts highlight the reliance law firms have on holding back capital to their partners in light of financial disruption.
Like many of its peers, Freshfields improved its net cash position to £98.4 million during the 2020-21 financial year ending April 30 2021.
In the accounts, the firm also states that it has “considerable discretion over the timing of any cash distributions to partners.”
Several firms opted to delay partner profit distributions at the onset of the pandemic as they assessed the financial impact.
In the statement accompanying its accounts, published on Companies House on Thursday, Freshfields said: “While Covid-19 has not had a significant impact on the firm to date, it remains possible that the pandemic could impact demand for our services in the short term. Liquidity pressure on our clients could also have an adverse impact on the business.
“However, the firm has considerable financial resources together with a diverse range of clients and across different geographic locations and sectors. The firm also has considerable discretion over the timing of any cash distributions to partners.”
The accounts also reveal that revenue across its U.S., Asia and Middle East and North Africa business fell during the financial year ending April 2021, with the firm’s European business steadying its global performance.
U.S. revenues dipped slightly from £175.7 million to £174 million. In 2020, the firm’s U.S. business outpaced all other regions in 2020, with 11% revenue growth.
The firm’s Asia revenue was down 6%, from £143.3 million to £135.2 million, while its Middle East and North Africa revenues dipped by 9%, from £31.3 million to £28.5 million.
Its European arm grew from £1.19 billion to £1.29 billion, however.
Despite the stagnation, total pay for the management committee, which includes the senior partner, managing partners and heads of its global practice groups, increased by nearly 19% to £16.5 million.
According to the LLP accounts, operating profits at the firm were down from £500.3 million to £449.2 million, while staff costs went up 5.8% from £728.8 million to £771.4 million.
Notable mandates for Freshfields in the 2021 financial year include advising U.K. car retailer Cazoo on its $7 billion SPAC deal in March, fielding a U.K. and U.S. team on the matter.
The muted international growth is in line with other international firms’ 2021 LLP accounts. The total revenue for DLA Piper’s international arm was pulled down by a notable dip in the firm’s Asia and Australia business, which suffered a 6.2% and 5.7% drop in revenue respectively.
Freshfields recently invested more into its Europe business by establishing a special unit in Germany to deal with mass ‘dieselgate’-style claims, which will see four new office openings.
It has also continued its U.S. push, adding several notable hires. These include Hogan Lovells’ New York corporate head, an Arnold & Porter partner duo and Cravath, Swaine & Moore dealmaker Damien Zoubek.