Profits of US law firms in London fall below £1bn amid slowdown in M&A deals

The profits of the top 15 US law firms in London have fallen below £1bn, experiencing a 3% decrease from £1.01bn in 2021/22 to £985m in 2022/23, according to new research from Hazlewoods, specialized in legal profession accountancy and advisory. In contrast, the top 15 UK law firms saw a slight increase in profits by 1%, rising from £5.22bn to £5.27bn during the same period.

US law firms in London, known for specializing in Private Equity, M&A, and capital markets, faced challenges due to a significant downturn in M&A activity globally. This downturn, reflected in a 23% decrease in global M&A deals in 2023, from $2.7tn to $2tn, has affected the profitability of these firms. However, there are signs of recovery in sectors such as PE-backed deals in early 2024.

Ian Johnson, Partner at Hazlewoods, commented, "US law firms in London have seen their profits impacted by the slowdown in M&A. Their concentration on the most profitable work leaves them vulnerable during downturns, but also positions them for significant profitability during economic upswings."

Looking forward, Johnson expressed optimism, noting a recovery in the M&A market in early 2024, which could lead to a bounceback in profits for US firms in London. Despite challenges, US firms continue to attract top young talent with higher salaries for newly qualified solicitors compared to UK firms.

The average profit per equity partner at the top 15 US law firms in London remains higher than their UK counterparts, standing at £1.3mn compared to £1.05mn for UK firms in 2022/23.