Cutting it fine

Are Linklaters’ property woes down to its scissor-happy redundancy policy?

Battersea Power Station

Battersea Power Station

Linklaters’ real estate department is a fascinating case study. The firm once had the top property practice in the City, perhaps even the world. One source familiar with the firm tells the tale of how a former real estate head would look out of his office window and explain how every building on the visible horizon could be traced back to a client of the firm.

But over the past decade or so, the firm’s focus on ever higher profitability combined with a sluggish market has resulted in a drastic shrinkage. As best as The Lawyer can make out, there are now only one or two equity partners left in the property team.

“Linklaters has very few people left – all the guys we’ve used are gone,” says a director at one of the UK’s largest property agencies. “It’s a deliberate move away from real estate and it means that people like me can no longer recommend them to potential clients.”

Another industry source said the partners they used were still at the firm, and they had noticed no difference in the level of service. And Linklaters can still be seen on big mandates. In July, partner Mark Burgess-Smith advised Ernst & Young as administrators and receivers on the £400m sale of Battersea Power Station to a Malaysian joint venture.

Nonetheless, sources close to the firm insist that all is not well. Linklaters has been culling real estate partners for years as part of restructurings designed to align its lawyers under a core focus, but after the latest round of cuts in December 2011, two key real estate partners – department head Anne Byrne and Joe Conder – decided to leave. Some say this has created problems for the firm.

An ex-partner says: “The firm did the cuts on a faceless, by-the-numbers basis. Management wanted Byrne and Conder to stay but didn’t check with them how they felt about the cuts.”

Some sources argue that Linklaters doesn’t have enough real estate partners to support the firm’s corporate department. News that the firm had put out searches to recruit a construction counsel and real estate partner only served to strengthen the impression that cuts had gone too far.

The problem comes down to uneven partner pay. If partners are paid according to a lockstep but some practices contribute more to the firm than others, it’s going to create friction.

“You have to separate status from remuneration,” says a source. “If you look at the banks it’s the traders not the directors earning the most. Firms should deal with each practice area independently. That’s a far more sustainable model than dragging down a practice until it’s an irrelevance.”