Ask people outside of Slaughter and May to describe the firm and typical responses might be “old school” and “conservative”.
In some ways, insiders have been able to draw strength from such perceptions for many years. But for all the benefits that come with maintaining a consistent strategy and culture for several decades there are increasing drawbacks to being perceived as a firm that cannot adapt to wider industry and cultural changes.
The firm’s diversity statistics, for example, appear out of touch with the 21st century. In its 132 years of existence, Slaughter and May has never had a Black partner. In its London headquarters only 1 in 5 of its partners are female and just 5.4% from ethnic minority backgrounds. And unlike most other elite U.K.-based firms, the firm has yet to elect a female leader.
Against a backdrop of immense industry shifts in the last 18 months, perhaps the time for change has now come. Increased conversations surrounding gender, following the #MeToo movement, and race, following the death of George Floyd, mean even the most seemingly conservative of firms have had to seriously address these issues internally.
Amid such societal shifts, Law.com International spoke to a wide variety of people inside and outside the firm to get their views on if and how Slaughters needs to change.
There are signs that Slaughters is finally joining its peers in responding to the wider debate about diversity.
The firm appointed a number of junior and female partners to its partnership board last year and in May it revealed D&I targets for the first time. It is aiming for women to make up at least 40% of its equity partner promotions over a five year period by the end of 2027, and for at least 15% of new partner promotions to be from ethnic minority backgrounds by April 2025.
The firm is coming under pressure to adapt to modern times in other areas too. Despite several partners privately expressing reservations about hybrid working, the firm unveiled remote work offerings in line with its peers, saying it will allow the majority of its lawyers based in London and Brussels to work remotely up to 40% of the time, although trainees and new joiners will be able to do so only up to 20% of the time.
And possibly the biggest internal change came later in June when the firm decided to scrap two of its executive management roles to replace them with a newly-created managing partner role as well as a chief operating officer, who will not have to be a qualified lawyer.
Maybe the recent announcements show the firm is willing to adapt after all. Tony Williams, an industry consultant at Jomati, says the external view of Slaughters being resistant to change isn’t quite fair.
“People have been writing off Slaughters as a firm that wouldn’t adapt to the times and that would become irrelevant for as long as I can remember,” he says. “But that’s always been wrong.”
“It’s a deeply professional, astonishingly successful and conservative firm. It sticks with its model until it needs to change.”
But conversations with people close to the firm suggest that some of the changes have not been proactive decisions by the firm.
The main factor prompting changes at the firm is pressure from clients, according to several people. One London based legal recruiter says that the firm’s FTSE clients have been very keen for their panel firms to see changes, especially in relation to D&I. The recruiter added that FTSE clients “really influence what Slaughters do as a firm”.
One former lawyer at the firm says the firm’s statistics “don’t lie”. There are not many women in leadership positions. High profile partner Nilufer von Bismarck, who led the firm’s financial institutions group and capital markets practice, retired in April, leaving a gap in the ranks of senior women at the firm. However, Slaughters moved quickly to replace fellow retiree and Brussels office head John Boyce with Anna Lyle-Smythe, and real estate head Jane Edwarde is another exception.
People close to the firm argue the new partnership diversity targets will go a long way to addressing this, with one saying: “I think bringing [women] through to the partnership is important and setting explicit targets for it, like they did recently, is sending a message to clients and internal staff too.”
All Equity Anomaly
Slaughters supporters also point to the fact that the firm’s all-equity partnership may make its diversity numbers appear low, when in fact the firm actually compares well with rivals.
Another former lawyer at the firm says that because the firm’s partnership is all-equity, those who receive the nod are on a better footing than many of their peers at other firms, which may by numbers alone appear stronger in diversity stats.
They add: “Sure, it’s not perfect. But at some firms, they’re promoting women or ethnic minority lawyers, but how many make equity? Very few if any, that’s the answer. At Slaughters, if you’re promoted you’re automatically an equity partner. I think people outside the firm often have a perception that the firm is stuck up and conservative, but the reality internally is very different.”
Women currently comprise 19.4% of the firm’s equity partners in the U.K., placing Slaughters ahead of domestic firms such as Eversheds Sutherland, DWF and Osborne Clarke. Elite U.K. firms such as Linklaters, Freshfields Bruckhaus Deringer and Allen & Overy do not even provide such data.
Meanwhile, the firm currently has 5.4% of its equity partners identifying as Black, Asian or Minority Ethnic (BAME), according to the latest data provided. In comparison, the firm ranks better than the likes of Travers Smith, Pinsent Masons, and Eversheds. And, again, Slaughters stood out among its Magic Circle rivals as none of the others provided such data.
As well as the all-equity issue, some argue that Slaughters is in a more difficult position to address diversity as quickly as other firms because it is a pure lockstep firm.
One former lawyer says its compensation system is the main obstacle to improving diversity internally. They say: “Because it’s a pure lockstep, the firm cannot afford to take risks with partner promotions. They have to make sure that the partner promoted will make a lot of money in the long term.
“It’s very easy for firms like Kirkland or Latham to promote very diverse people and fulfill the targets because it will take those people several years to make equity, so it’s not as much of a risk for those firms. They can promote whoever they want, and in big numbers too. Slaughters can’t do that.”
That said, even former lawyers agree diversity remains a challenge for the firm. One says that partners at the firm do tend to have a very similar background, having received high-end education and most coming from similar social environments. They add that for associates from more socio-economically diverse backgrounds, it might be more difficult to adapt to the firm’s traditional culture and blend in with the partners, increasing the difficulty to be promoted.
Meanwhile, another London based recruiter says the firm is a “meritocracy with a slice of hierarchy”, and while it has “served them well” it is the “hardest thing to change culturally internally”.
They add: “Out of all the firms, I think Slaughters is the one that makes safe bets. They don’t take gambles.”
One part of the firm’s strategy that has remained famously unchanged is its international approach.
Several people outside the firm believe that Slaughters’ international strategy could, and arguably should, be higher up on its agenda.
The firm has long opted to remain as essentially a single-site operation, with small offices in Belgium, Beijing and Hong Kong complementing its London headquarters. It has instead relied on a tight-knit group of ‘best friend’ law firms across key European jurisdictions: Hengeler Mueller in Germany, Bredin Prat in France, De Brauw Blackstone Westbroek in the Benelux region, Uria Menendez in Spain and BonelliErede in Italy. It also has strong relationships with some New York firms, particularly Cravath, Swaine & Moore.
Two former lawyers say the firm had at various points considered options to re-enter the U.S. market – having shut down its New York operations some 17 years ago – but that to do so would have required breaking the lockstep, which the partnership has consistently refused to do.
One person with knowledge of the firm believes the firm’s lack of international presence might become problematic in the long term, as more and more U.K. clients seek to use legal advisers with U.S.-specific expertise when conducting deals across the pond.
Another person with knowledge of the firm adds they’re also seeing a trend in U.K. clients slowly reaching out to more international or U.S. firms for legal advice for cross-border transactions, and they expect the share of U.K. clients among Magic Circle firms to shrink for the profit of firms with a more international base.
The person added that although Slaughters’ brand and its client work both in and out of the U.K. is still “astonishing”, it does “keep its international strategy and presence under review”.
Between 2001 and 2020 the firm fell seven places in the Mergermarket legal rankings for global M&A. Best friend firms Hengeler Mueller and BonelliErede dropped out of the top 30 altogether, in 2009 and 2003 respectively, and have yet to return.
U.K. rivals Linklaters and Clifford Chance also fell in the M&A league tables by 13 and 14 ranks respectively, while U.S. firms such as White & Case, Latham & Watkins and Simpson Thacher & Bartlett have outgrown everyone in the M&A tables in that same period.
Meanwhile, the departure of partner Murray Cox to the London office of U.S. firm Weil Gotshal & Manges in February was viewed by many as significant because it was so rare for Slaughters partners to be lured away and because it raised questions about the firm’s private equity capabilities. Cox was viewed as one of the firm’s bright private equity stars and key to the firm’s ambitions in breaking into that space.
Still Number 1
However, while its global position may have slipped over the years, Slaughter and May remains at the top of the U.K. M&A league table for the first half of 2021 with a total of 30 deals worth a combined value of over $54 billion.
On its website, the firm claims it acts “for more FTSE 350 companies than any other law firm.” As of March, the firm still maintained its crown in the large-cap U.K. stock market adviser rankings, advising a total of 33 FTSE 100 clients in Q1. The firm was well ahead of rivals Linklaters, Freshfields Bruckhaus Deringer and Allen & Overy in the rankings.
And only this week the firm has secured what is believed to be its largest ever private equity mandate on a public deal, acting for investment management group Fortress on its £6.3 billion takeover of Morrisons.
One person familiar with the firm’s thinking also emphasises that the perception that Slaughters does not do private equity work is “absolutely not true”. They add that a lot of private equity firms simply have existing relationships with U.S. firms, while Slaughters does not have the same history in the sector.
But while most clients may have stuck with the firm, some believe it is top junior lawyers who could start to turn away, as many want to work at international institutions.
One consultant says: “They aren’t as dominant on cross-border work as other firms, they have best friend firms but they don’t have the international capabilities of international firms. But I think in this day and age, being an international firm attracts young talent, so this could be something to look at next for them.”
Perhaps this is where the firm’s efforts to promote a younger generation of partners to its board could play a part.
“I think the firm is going through a generational change”, the consultant adds. “There seems to be a sense of recognition that younger lawyers expect things that older partners might find difficult, but it’s absolutely right that they should implement change at the firm.”
“They think about things very carefully, they’re not a knee-jerk firm. They have a very successful model and they will continue to adapt to ensure that they remain successful in the future. It might not be a radical change but it will happen gradually.”
Then again, gradual change might be too slow for some. One legal recruiter says this is likely to be the case due in part to reluctance among the firm’s most experienced partners, or “old guard”, to accept alterations. And they are, they add, unsurprisingly “the most influential people internally”.