China Elite: Top 30 Chinese firms’ financial results revealed

The highest-grossing law firms in China produce some of the lowest revenues per lawyer in the country, exclusive research by The Lawyer has found.

Dentons, King & Wood Mallesons (KWM) and Zhong Lung have emerged as the top three firms in China by total revenue, but the trio are dominated in the revenue per lawyer (RPL) rankings by litigation boutique Tiantong & Partners, Slaughter and May best friend JunHe, and Shanghai banking and finance specialist Llinks.

The Lawyer’s China Elite 2016 report, released today (26 September), identifies the top performing Chinese firms by various key metrics such as revenue, RPL, revenue growth and RPL growth last year.

The third annual edition of the report also contains three years of financial and technological data and indepth analysis on Chinese law firms’ strategies from some of the country’s most eminent lawyers.

The research shows that Dentons, KWM and Zhong Lun continue to be the highest-grossing firms in China, with 2015 annual turnover reaching RMB2.9bn (£305m), RMB2.1bn (£221m) and RMB2bn (£210m) respectively.

The trio has significantly widened the gap between them and the rest of the top 30 Chinese firms in the last year.

Large national firms AllBright, Grandall and Yingke all achieved similar revenues of RMB1.3bn (£136.5m) in 2015, ranking fourth, fifth and sixth by revenue.

Meanwhile Slaughter and May best friend JunHe claimed seventh place, having achieved a 17 per cent year-on-year increase to RMB1.17bn (RMB122.9m). The firm is then followed by DeHeng, Fangda Partners and Mayer Brown’s Chinese ally Jingtian & Gongcheng, which complete the top 10 group.

Top 30 by revenue: Who’s up, down, in, out?

There are several new entries and exits in this year’s top 30 firms by revenue list. Shandong based Jointide and Beijing-based JunZeJun dropped out of the group, while Shanghai-based Llinks and Shenzhen-based Guanghe made their first appearance.

Llinks posted a turnover of RMB236m after achieving a 50.3 per cent hike in 2015 and claimed 27th place in the process. Guanghe, riding on the country’s booming newly established over-the-counter equity exchange which provides a speedy and favourable way of fundraising for start-ups, came 28th. It recorded a 69 per cent increase in revenue for last year.

The firms in the top 10 group remain largely unchanged. However, AllBright, with a 48.2 per cent increase in revenue, moved up three places to fourth. Beijing-headquartered Jingtian & Gongcheng saw a 41.6 per cent revenue growth last year, winning the firm its debut in the top 10, replacing last year’s tenth highest-grossing firm JT&N.

Further down the table, private equity and technology focused Han Kun climbed most rapidly by six places to seventeenth. National giant W&H also moved up six places to nineteenth. Beijing-based Tian Yuan was up five places to eleventh, overtaking larger rivals including Kangda, JT&N and Zhonglun W&D.

Top 30 by RPL: A very different list

Unlike in more developed markets, where firms with the highest revenue usually feature high in the RPL rankings, in China firms generate significantly less RPL the larger they are.

The most striking example is Beijing-based litigation boutique Tiantong & Partners. The seven-partner firm is renowned for high-end commercial litigation, particularly for cases and appeals in the higher courts. It also had the highest RPL among all elite firms for the second consecutive year in 2015.

Although Tiantong didn’t provide revenue, its 2015 turnover is estimated to be RMB80m. Estimated revenue par lawyer was RMB4.4m (£462,000).

Last year was described by the firm’s managing partner Jiang Yong as the “best year the firm has ever had”. The soaring number of litigation cases in China and a number of partner hire helped boost its fee income, up by an estimated 33 per cent.

JunHe, which underwent major partnership remuneration reform in 2015, has come out as the firm with the second highest RPL at RMB3.4m (£357,000) in 2015.

While 21 of the top 30 firms by revenue make appearance in the top 30 by RPL list, nine much smaller firms, including Tiantong, have also claimed a spot.

Llinks, a 71-lawyer firm focusing on high-end banking and finance transactions, fared highly. In 2015 it brought in RMB3.3m (£347,000) per lawyer, making it the country’s third best firm in terms of RPL.

Hui Zhong, a boutique firm set up in 2014 to solely focus on disputes, came in fourth with a RPL of RMB2.3m.

The next 12 firms’ RPL ranged between RMB1m and RM1.9m. KWM, the most international-facing Chinese firm, ranked twelfth.

The firm’s global revenue stood at $1.02bn last year, and it is understood approximately 35 per cent was generated by the China offices, or around RMB2.08bn (up 30 per cent year-on-year). China was the fastest growing part of the firm’s Swiss Verein in 2015.

KWM’s 1,217 lawyers across its 10 domestic offices generated an average of RMB1.7m each last year, representing an 18 per cent increase on RMB1.4m in 2014.

Legacy Dacheng, which has adopted the Dentons name following its combination with the global firm last year, saw modest improvement in terms of RPL, moving up three places to 25th. The firm saw a 9.2 per cent rise in RPL from RMB723,000 to RMB790,000 in 2015.

National firms lag behind

This year’s China Elite research found that firms with more than 10 offices in China had lower RPL than their less expansive peers.

Among firms with 10 or more offices, KWM performed best by RPL. The 30 per cent increase in RPL achieved in 2015 also partially correlated to the firm’s decision to close three regional offices in Xi’an, Tianjing and Chongqing.

Grandall and AllBright, with 16 and 14 offices respectively, fared better among large firms with a broad national network.

Due to the disparity in rates and margins between key economic centres (such as Beijing and Shanghai) and regional cities, the so-called red circle firms have been more cautious about expansion in China in recent years.

Zhong Lun, Jun He, Fangda, Jingtian & Gongcheng and Haiwen all said national expansion is lower down their priority lists than ever before.

The post China Elite: Top 30 Chinese firms’ financial results revealed appeared first on The Lawyer | Legal News and Jobs | Advancing the business of law.