Hogan Lovells CEO Stephen Immelt will end his six-year tenure as the firm’s leader on a high note. The global firm said that revenue in 2019 rose 6% from the prior year to $2.25 billion while profits per equity partner jumped 9% to $1.5 million.
The transatlantic firm formed by the merger of Hogan & Hartson and Lovells a decade ago saw revenue per lawyer, often considered the most telling metric of a firm’s financial health, rise nearly 6% from 2018 to $850,000 last year.
Immelt will step down as chief executive officer and retire from the firm at the end of June, handing the reins to Hong Kong-based project finance partner Miguel Zaldivar, the firm announced in December. Deputy CEO David Hudd, based in London, will be replaced by Londoner Michael Davison, who has led the firm’s litigation department.
Growth was spread across the firm’s offices and practices, he said. Its corporate and litigation groups each made up 29% of revenues with the regulatory practice accounting for 19%, finance 13%, and its IP, media, and tech practices 10%. That roughly tracks with the number of lawyers the firm has in each practice.
“It is a validation of the Hogan Lovells proposition of being able to provide global execution for clients in key jurisdictions and having a sector approach with deep expertise, matched with a very deep regulatory practice,” Immelt said.
Hogan Lovells is typically among the 10 largest U.S. firms by revenue, according to AmLaw rankings. It has more than 2,800 lawyers in more than 45 countries. Its 2019 revenue was fairly evenly split between the U.S. (50%) and the U.K. and Europe (47%). The firm said 7% of revenue came from Asia and the Middle East. Major clients it represented last year included Equifax Inc., Volkswagen AG, Bristol-Myers Squibb, Google and Daimler AG.
Under Immelt’s leadership, the firm has transitioned, like many others, to an industry sector marketing structure, mimicking strategies adopted by consulting and accounting firms. Hogan Lovells focuses on eight sectors and tasks its relationship partners with understanding key trends in those industries.
That transition has been well-received by clients, the outgoing CEO said, pointing to the firm’s rise in client surveys. The firm was ranked No. 5 in the Acritas global law brand survey last year, up from No. 9 in 2013.
“When clients like something, [partners] tend to accelerate their adaptation,” Immelt said.
Hogan Lovells has also responded to pressures to provide more efficient legal services in recent years. Immelt said those pressures would “only become more intense in the future” as clients are becoming more comfortable applying fee caps, he said.
The firm in January opened a document review office in Phoenix in a partnership with legal services provider Elevate Services. The firm has partnered with Elevate before, launching a “flexible lawyering” program in 2018. It also won industry praise for its partnership with Cognia Law and FTI Consulting to launch a product helping banks transition away from the LIBOR benchmark interest rate.
Immelt said those partnerships help the firm handle the less complex aspects of high-value matters. He said the firm has avoided building capacity to handle those services in-house, a strategy some other firms have pursued.
“They want to be both podiatrists and brain surgeons, and I think that’s challenging,” he said. “That is not a model we have chosen to pursue.”
Some in the legal industry have theorized that increased cost pressures could require broader investment in people and technology that law firms could more easily handle by raising capital. That has not been allowed under U.S. bar regulations. But law firms in the UK, including those like Hogan Lovells with significant UK presences, can raise outside capital and there has been increased discussion of such a change in the U.S. Reed Smith became the first international firm in November to launch a so-called alternative business structure in the U.K.
Immelt said law firms typically don’t require that level of capital investment even with the increased role of technology. He said there would be a long way to go before U.S. states agreed on a structure to allow that type of investment.
“The idea of bringing in outside ownership is one I would watch with great interest from the sidelines, but I wouldn’t want to participate in that particular game,” Immelt said.
As for how he would spend his time, Immelt said he was considering writing and gardening and looking forward to less airplane travel. His brother, Jeff Immelt, stepped down as CEO and chairman of General Electric in 2017.
“It feels like a good time to be handing it over to the next generation,” Stephen Immelt said.