Feature

Has the Magic Circle lost its magic?

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After a quarter of a century of pulling rabbits out of the hat, the elite quintet is facing arguably its toughest test yet

Magic circle marketing teams owe legal journalists some debt of gratitude.

In the late 1990s, The Lawyer christened the then five leading British law firms with that epithet which still distinguishes them today. Although they may not like to admit it (some members have been known to shirk the term ‘Magic Circle’), Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters and Slaughter and May still instantly stand out to prospective graduates as well as competitor firms looking for a good lateral hire.

At the time when the term was first popularised, it made a lot of sense. Out of the demise of the ‘Club of Nine’, which represented a pact of sorts between the then nine leading British firms, the five Magic Circle firms had clearly distinguished themselves from the other four (Lovells, Norton Rose, Herbert Smith and Stephenson Harwood). But a lot has changed since then, as will be most apparent to younger readers who only recognise the non-MC Club of Nine members in their newly merged forms (Hogan Lovells, Norton Rose Fulbright and Herbert Smith Freehills).

So, has the Magic Circle lost its magic? Such a question implies that these five firms have something that makes them stand out. So our line of inquiry will consider what is ‘magic’ about them and not other firms.

There is one feature that still quantifiably sets these firms apart: their Chambers and Partners rankings for corporate and finance work in London. From big-ticket borrowers and lenders in banking and finance to corporate M&A, litigation, R&I and tax, these firms are omnipresent in the top two bands, occasionally joined by US rivals and the likes of Herbert Smith Freehills (HSF) and Hogan Lovells in certain areas of expertise. From these rankings, the Magic Circle still appear to hold the City legal market under their magic spell. But is this the whole story? Has significant change in fact already taken place?

Flicking through the different filters on The Legal Cheek Firms Most List tells a more complex story that makes the MC far less distinct for both graduates and more senior lawyers. The Magic Circle used to really stand out to graduates for several reasons. The five firms used to have the largest trainee intakes, best NQ salaries on offer by British firms and a strong reputation for excellent training.

Now, CMS is joint second with Clifford Chance in terms of trainee numbers (both offering around 95 places) and NQ salaries have recently been reshuffling. CC and Freshfields offer £125k, whilst Slaughters provides £115k. Linklaters and A&O is currently stick with a more conservative (but still pretty solid rate) of £107.5k, on par with former Club of Nine member Hogan Lovells. In the meantime, Herbert Smith Freehills have distinguished themselves with an NQ salary rise to £120k.

The 2022 Legal Cheek Firms Most List

As for future lawyers’ training, the Magic Circle are split with the City Consortium — made up of three Magic Circle firms Freshfields, Slaughter and May and Linklaters reunited alongside former Club of Nine members HSF, Hogan Lovells and Norton Rose Fulbright — decisively moving in favour of the SQE later this year, while Clifford Chance and A&O will transition to the new pathway in 2023 and 2024, respectively. Differing levels of maintenance grants also seem divided on arbitrary lines with HSF and Hogan Lovells frequently equalling the MC, though the City Consortium has been getting ahead by offering some sizeable sums. This may all change in accordance with the economic environment, but the Magic Circle currently do not distinguish themselves to graduates as the five standout British law firms on these factors.

Nor is profit per equity partner (PEP) a clear qualifying factor for membership of the elite group for more senior lawyers. Excluding US firms, Macfarlanes (£2.09 million) currently best Freshfields (£1.91 million), A&O (£1.95 million), Clifford Chance (£1.85 million) and Linklaters (£1.77 million) on PEP. And nobody knows exactly what Slaughters’ PEP is but estimates put the figure at somewhere between £2 million and £3.1 million. This, if accurate, puts the firm comfortably ahead of its Magic Circle peers.

Admittedly, these are often asterisks on what still portrays a compelling overall message as to the lofty status of the Magic Circle. But some might say the magic is shining less brightly than it used to when compared with other firms’ offerings. Certain MC junior lawyers seem relatively less jubilant than you might expect for firms with such strong reputations for having the best training on offer. “I’m not too sure what the fabled ‘MC’ training is”, one rookie told us. A common feature of the aforementioned ‘MC’ training is more support than US rivals on equally stimulating work. Although very distinct from the ‘throw rookie in at the deep end’ approach adopted by some US outfits, are the likes of HSF and Hogan Lovells so different to the MC in the training department anymore?

Again, unlike their American rivals, the Magic Circle have been pretty hands on in emphasising how they can improve their lawyers’ working lives. From bringing dogs to work to office saunas, swimming pools, massages, all-expenses-paid weekend trips abroad and tickets to the Royal Academy, Cheltenham gold cup and a box at the O2 are all strong sweetners offered by the MC. But in all these areas insiders don’t describe this as something that is necessarily unique to the Magic Circle.

This gets to the crux of the matter — prestige is the most powerful perk.

The term ‘Magic Circle’ is clearly an anachronism, guilty of trying to live in a different age where the City was dominated by elite British firms. In the two decades or so since the term was popularised, attention has shifted from competition between elite British firms to the growing rivalry between US and British firms in London.

This appears to be the new psychology at play. Although a few still boast that their firm is the best in the Magic Circle, most trainees and junior lawyers who spoke to us had a different dilemma on their minds: “There is no longer a distinction from being at a US shop. They’re increasing salaries to compensate [for the working hours], but what they don’t understand is that if people wanted to work at a US firm, they would have applied there (and many are now moving). They’re losing their niche in the market the faster they move to a US model”. Tellingly, junior lawyers are more focused on busting UK/US myths with less mention of the Magic Circle as a distinct comparator.

Is this an identity crisis? What seems to matter the most to MC insiders is that the Magic Circle firms stay as true to their prestige. Beyond their impressively broad Chambers rankings, which in themselves are not entirely a unitary characteristic of the group, it is getting harder to pin down on paper what these firms uniquely offer compared to some of their rivals. Whilst the Magic Circle is still the first port of call for ambitious students and lawyers, it remains to be seen whether the five can continue to keep these groups spellbound.

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46 Comments

Hater

Hang on?! This is actually a very good piece

(189)(1)

Boomshakalaka

Agree. Well written and spot on.

(31)(0)

Truth Serum

It’s because it was written by a city insider and not one of the normal LC writers lol

(98)(0)

noice

Great post

(9)(0)

Anon

The MC is an outdated concept. Yes they’re all fantastic firms, with fantastic prospects and work. But how different are they really from the likes of Latham when it comes to quality of work? Or HL when it comes to quality of training? Or Bakers when it comes to multi-jurisdictional work? Over time this distinction between the MC and their counterparts will get blurrier and blurrier.

(91)(1)

Big di*k US energy

Yes it has

(12)(3)

Ex-MC US lawyer

The Magic Circle has already lost its magic.

Any ‘big deal’ in London 20 years ago would have MC lawyers all over it. Now, it’s very common to see premium deals run by US firms. For example, Kirkland is seen as the stellar firm to go to for restructuring and PE deals. Latham is a solid all-rounder, excelling in finance and corporate. Simpson Thacher are incredible at PE and sponsor-side finance.

Similarly, a top graduate would only really consider the MC for training 20 years ago. Now, is there a better place to do a TC in the City than Latham? A global brand, large intake and resources and US pay (albeit a poor exchange rate).

The MC will not die but they are in a losing battle against US firms with deeper pockets and who are looking to expand in London. This is precisely what the MC did to local firms around the world when they were going global in the 90s and 00s. The problem for the MC is they can’t crack the US market (which is huge and much more profitable). A&O and Freshfields are trying but it’s not looking promising. And while they waste resources trying to take on the likes of Cravath and Skadden in the US (lol), they’ll have to take financial pain in London which the US firms can exploit.

As much as I would love to criticise MC partners, it’s not all their fault (although I do think their whole British prestige thing made them very complacent). Since the GFC, the US economy has outperformed Europe’s. A strong dollar against the euro and especially sterling in the last few years has made it so easy for US firms.

Look at banking. Remember when RBS was briefly the largest bank in the world. When you had elite British banks like Barings and Cazenove. Gone. Ground down by American capitalism so the top dogs are now JPM, GS and MS. This is a macro trend and too much for the MC to deal with.

(140)(9)

Bobbie

This hit the nail on the head. The Americans are more aggressive in their expansion and business acumen. Its not just the UK, every country where the top American firms have expanded, they have dominated. I cant say the same about the UK firms. I also can’t really put my finger on the real reason why the US firms just do it better.

(41)(0)

Anon

100% and the other problem is many MC firms are reliant on winning business through pre-existing relationships with dinosaur FTSE companies that are themselves being pushed out of the market by market disruptors from overseas. There is no entrepreneurial spirit at these firms, the emphasis is all on grinding out churning docs for 10+ years and maybe being made up to partner if you’re lucky. US firm partners by contrast are generally entrepreneurial, more commercially aware and concise in their advice and stealing market share at a rate of knots as a result.

(44)(8)

Flo

Is there a better place than Latham to do a TC? Yes yes there is.

We have two new laterals who have moved from Latham to my firm, whilst Latham seems a decent place to be a associate (frankly mostly due to the clients) the training is dire and both of them lack basic skills I already had picked up at the end of my first seat. We can’t even put either of them on a deal alone as their technical knowledge is crap. They both boasted that at Latham they led all their deals solo, however goodness knows how. My impression is that the firm puts you in the deep end to sink and they never realised how bad they were till they moved here.

(47)(9)

Anon

Latham trainees are fine. I’ve worked with a number of people who trained at Latham and had no issues at all. You sound slightly bitter. A catch all statement that all Latham trainees are useless is just such nonsense.

(25)(20)

Flodog

No one said they are useless I am simply against OPs statement that there was no better place to train than Latham. It’s not true and blanket statements like this are the sort of thing that impressionable students on this site take away and run with.

(13)(4)

Bitter Ness

Flo got rejected by Latham.

(7)(9)

Average Pay War Enjoyer

Congratulations on some adequate journalism!

(54)(2)

The Great Marvo

They’re called the Magic Circle as they make lots of money appear from nowhere!

🪄 🎉 🌟💷

(10)(1)

Anonymous

I feel like the allure of the MC when compared to other top UK firms is mostly marketing for students, the article is right in saying that what they offer is no longer a massively different proposition to other top UK firms.

I personally turned down a TC offer from a MC firm to accept one from a SC firm, because I could tell that the apparent boundaries between the firms didn’t really mean much in reality. I couldn’t see a real difference in quality of work or training and I just felt like I gelled with the SC firm more on my vac scheme with them. I knew the MC firm would pay a little more, but I could also see they would work me a bit harder, and from what I could gather from legal reports canvassing clients perceptions of law firms, the “prestige” of the MC doesn’t seem to be a real differentiating factor any more.

(48)(6)

Mr Schidiz Panz

Do you make love to the tune of ABBA’s “Money money money?”

(1)(6)

Former A&O Corporate

The problem for the magic circle – the bigger four other than Slaughters (which is a unique case) in particular – is that they don’t have a clear idea of what they want to be.

Take A&O – ridiculously profitable and market leading banking and projects practice. But the rest of the firm? They’re good at infra and energy/resources, and have made some progress on PE with recent panel appointments. But their general corporate offering is bolt average (look at mid-level associate retention there too, which has been abysmal) and they are okayyy on the litigation front too.

What’s their end game? Be able to service clients moderately well in every major jurisdiction on the planet, all while working associates US hours and paying them mid-market rates? If so, it would be nice for them to give their staff some clarify on that, so they can brush up their CVs.

I left the MC because the supposed perks (including a deep bench that means you always get to take your annual leave) just weren’t there. I just don’t really get the strategy re salary, retention, hours, etc, and why anyone would consider it to be a destination firm if you’re in Corporate or PE (over, say, Latham or STB).

(39)(4)

Why

MC just isn’t as appealing anymore. You typically sign over your soul to work there (evenings, weekends, etc) yet get paid a lot less than US firms where you are working similar/the same hours.

You work more hours than SC/large international firms which pay about the same or in some cases more. Of course in the SC and large internationals you work long hours too, but typically they will have a bit more respect for your time than MC firms.

With that, why work for the MC? Prestige? US firms have plenty of that now, and in some practice areas (e.g. technology) there is more prestige in some of the specialist and boutique firms.

(30)(0)

TBF

From my own experience (MC associate), if you were coming out of law school and didn’t know what you wanted to do (corporate, DR, finance, tax, TMT, employment etc etc) then MC is a great place to start. They offer a broader range of top tier practices, and probably offer more in the way of TC secondment opportunities, than most US firms in London.

(59)(1)

Anon

Good point. People always like to forget that about 90% of the actually decent US firms in London are mostly transactional. Even the arguably broader service US firms such as White and Case or Latham whilst have seat options in contentious and advisory seats – the actual qualification spots they have in those areas are barren.

(25)(4)

Magic Hatter

Yes.

(3)(0)

MC Associate

I basically agree with this article. I think whether or not you think the MC is best for you now depends on what you want to practice and the culture of your specific practice area (rather than just being some blanket thing). One area where the MC do still have a fairly substantial advantage over US firms in terms of quality of work is in advisory practice groups (competition, financial regulation, environment, tax, aspects of pensions and TMTIP etc.), so if you are simply not interested in transactional work then it makes sense to train/work at the MC. And on the flipside, SC firms (setting aside NQ rates in the last couple of months) won’t pay you the same as the MC (their salary bunching is generally worse for senior associates). You also don’t get worked as hard in those practice groups, so the target hours demands of the MC and US firms are actually different. However, if I did corporate M&A or something there is no way I would be getting flogged to death at the MC when I could get flogged to death at a US firm for 50% more. It just doesn’t make sense.

In terms of overall profitability and pay, the MC just aren’t as ruthless as US firms. They are just unwilling to shut down or downsize less profitable practice areas and offices to get to the level of US firms. There’s a reason the most US firms have comparatively small presences (if they have a presence at all) outside of the US, London and a few other major financial centres (like Hong Kong, Singapore etc.). That’s because those jurisdictions are just much less profitable so they generally keep the minimum people necessary to support international transactions. Equally, they just don’t have people in some less profitable practice areas beyond the minimum necessary to support their big ticket transactional work. As long as the MC are not willing to be as ruthless, they are not going to summon up the cash to be competitive on pay and profitability in the UK. That’s fine for firms that are ok covering a very wide geographic range and practice area range at the expense of high pay and profitability in their core areas, but it is a choice that has to be made one way or the other.

(26)(0)

Don’t put ketchup on your roast dinner, you utter child

After “Paywar 2: The Sequel”, the MC already looked to be on shaky legs. Especially with the dramatic twist during the climax where HSF raised salaries to 115k.

Looking forward to the third instalment of the Paywar series “Paywar 3: Revenge of the SC”

(10)(15)

Anon

MC firms made it too easy for US firms. Over the years, MC firms created an environment ripe for poaching because of their ignorance and failure to respond to market changes. MC firms have adopted a stingy approach in compensating junior lawyers. Their lawyers are unhappy because they feel overworked and not compensated enough.

Partners always shy away or dismiss conversations about junior lawyers’ pay not being competitive enough. But, they love to boast about their prestige/training/quality of work. These credentials are now in serious jeopardy because City/SC/US firms can compete in these areas + also offering compensation equal to or ahead of MC firms.

(33)(0)

US 3 PQE - USD 190k

I receive calls from recruiters on a weekly basis asking if I’m interested in a move to the MC. But the reality is we work across from the MC on the same deals, with the same demands, for almost double the pay (inclusive of bonus). With US firms hiring aggressively in London (ours plans to double head count in the next 2 years), MC status may fast become a legacy title.

(30)(0)

US 3 PQE - GBP 190k

I receive calls from recruiters on a weekly basis asking if I’m interested in a move to the MC. But the reality is we work across from the MC on the same deals, with the same demands, for almost double the pay (inclusive of bonus). With US firms hiring aggressively in London (ours plans to double head count in the next 2 years), MC status may fast become a legacy title.

(14)(0)

Bob

It’s not double the pay now, not at least compared to CC and FBD.

A top performing 5PQE at CC or FBD will be pulling in approx GBP 310k inclusive of bonus.

(2)(15)

Trainee

Which firm are you at?

(0)(0)

A fair observer

There is a good chance that we work at the same US shop. I spent 6.5 years at a MC before joining this current firm as a (senior) associate. It’s true that associates at a US firm get to do more billable work but are often unsupervised, resulting in poor professional development and below average technical skills. In my humble opinion, many US associates are living in a bubble where they erroneously believe that they are superior to MC/UK associates because of their remuneration package, and overlook their deficiencies due to the success of the firm’s business.

Our firm, like most, builds their practice through headhunting partners from other UK/US firms. The partners often rely heavily on firm clients (US funds that pay £££) and aren’t incentivised to invest in junior talents like MC firms. Similarly, senior associates are also focused more on themselves than training junior staff, due to the awful billable targets and non-existent recognition for training others.

It’s a shame that MC is unable or unwilling to match US pay but that’s a natural consequence of the business model in which they operate – strong emphases on back office support and investment in juniors, which all come with high costs.

I expect some US firms will collapse in the next 3-5 years. The remuneration structure/billing practice is truthfully unsustainable and fund clients are becoming increasingly savvy. They also realise the work can equally be done by top UK firms, often with better service and support. Only time will tell.

Other than the significantly lower salary I disagree that US firms are the same as UK firms in terms of training and development.

(25)(5)

Gen Z Champ

Millennials and Gen Z really don’t care for “prestige” as much as our predecessors.

Especially since the pandemic, things that would have traditionally kept people tied and connected to their respective firms such as “cULtURe” and a “close team” has pretty much disappeared now since most people work from home half of the week. Now we all basically do the same thing, regardless of the firm we work at. Churn out documents from home and lurch in the background on mute during Teams calls.

Gone are the days where people care about what firm you work at. The main focus now is either (1) making as much money as possible or (2) a good work-life balance. Most people aiming purely for the former target US firms, and with the latter, people tend to drift towards mid-market firms or in-house (even some of these firms pay decent whack). Those looking for the sweet spot tend to be attracted to the SC firms.

Magic circle firms (except FF) are just drifting in no man’s land at the minute especially as the likes of CMS and Addleshaw only pay a few thousand pounds less a year. HAHA

(44)(0)

Wowee

Hello fresher

At some point you’ll talk to a recruiter, whereupon your blue-sky ideals will disappear and you’ll realise “prestige” does exist. Having a name brand on the CV certainly counts, regardless of the (frankly more interesting) debate about MC firms.

(4)(25)

Boomer

What’s different about FF?

(0)(0)

City boy

Really interesting piece – look forward to more from the Insider!

(6)(0)

Anonymous

As a mid level associate at Goodwin, I can gloat at the perks received (in rebuttal to the suggestion MC have better perks):
– gym pass
– £60 a month wellness allowance
– £
– $10,000 all expenses paid holiday (on top of bonus) for achieving target hours (that’s a trip to Maldives!)
– 28 days leave a year and encouraged to take every day
– parental leave (I know 7 associates including men taking up to 5 months paid)
– around $100k in “COVID bonuses” last year for senior associates in addition to bonuses of £115k a year minimum (rising if you exceed hours, and guaranteed if you hit)
– dental and healthcare paid for
– free breakfasts / lunches once a week and ice cream on a hot day
– European associates only retreat for team bonding
– multiple trips to the US (including all diverse attorneys meeting once a year all expenses paid staying at 5 star hotel in NYC/Boston to attend diversity empowerment sessions)
– practice group all expenses paid trips including 5 star hotels and $100 a day food allowances once a year, plus training run by Harvard once every 3 years (all expenses paid)
– yoga once a week in the office
Etc etc

So I would argue at Goodwin (US firms), the non-salary perks are pretty good

Salary is Cravath scale. Work life balance as good as the last two UK firms (including magic and silver circle) I’ve worked at.

(28)(7)

Goodwinite

And yet as someone who also works at Goodwin, it is a horrible place to work. Lack of real training, poor quality of work, beyond average clients. The only thing there is the money, which compensates for everything else the firms lacks.

(27)(5)

Anonymous

Sorry fellow Goodwinite – not sure I agree with you with no real training, poor quality of work or average clients – the firm is market leading on deals this year in the M&A rankings, has some of the leading clients in the spaces it operates – Tech/life sciences/VC/start up space, real estate, etc. But I do feel bad that you feel it is a horrible place to work. If you have any feedback or suggestions, you should definitely feed upwards – there are numerous anonymous ways to do so, in order to make it a better place to work for all – sorry you feel this way.

(3)(5)

MC Trainee

Are those benefits legit?

(0)(0)

Anonymous

Yes

(1)(0)

U wot

Why do you consider trips away with work to be a perk? I’d much rather be left alone and get to enjoy that time doing what I want. Trips away with colleagues sounds horrific.

(17)(1)

Anonymous

@U wot: the fact that the firm is willing to invest in (optional) events where associates are flown in and treated for: (a) diversity empowerment sessions for diverse attorneys; (b) practice group team sessions to promote togetherness; and (c) Harvard led associate leadership training, is certainly seen as a perk for most associates that fit the Goodwin culture. Appreciate not everyone feels the same way, and for those on the fringe, these are optional to attend.
The point is – it’s not just MC that provide perks, I would argue US firms provide equal or greater perks (I listed a dozen or so above) in addition to Cravath scale salaries and bonuses, meaning during last financial year where covid bonuses were paid, senior associates could be remunerated £500k+ gross

(3)(3)

James

Apart from PE or Acquisition Finance I can’t see why you’d pick US over MC. Goodwin pays well but can’t be said a top firm in the London market.

(6)(8)

Anonymous

It is THE leading firm in the markets it chooses to operate – Tech/life sciences/VC/start up, big ticket/european real estate including fund formation (eg, rival being Simpson Thatcher), volume private equity, etc.

(1)(6)

Kirkland NQ

Magic is making a Lambo appear on your driveway just moments after qualifying.

(10)(10)

Belter brace

Others have alluded to it above in the comments, but the problem with these pieces is they are always comparing apples with pears.

Putting a US firm up against a Magic Circle firm in a brief piece like this doesn’t really make sense unless it is clear what you are comparing.

A US firm like, say, Lathams, might compare attractively with, say, Linklaters (or any of the others named) on private equity deals and some financings. But Linklaters have a host of other broader practice areas, offering everything else to a deal on a specialist level.

It’s like comparing an independent financial adviser with a major banks private investment management teams.

So this is really only relevant – to prospective trainees and existing lawyers at these firms – to the extent you are in those central corporate and finance practices. If you are a trainee interested in litigation, or niche practice areas (including heavily corporate ones like TMT) then transferability to he Cravath-scale paying US firms just isn’t there. And your work-life balance will be a ton better.

If you are in those core practices, then you’re probably getting paid big money even in the MC firms (as bonuses are targeted to those groups), as well as having much wider training support, detailed templates, a truly deep bench etc etc. More opportunities for client secondment too.

It’s just not as simple as saying “ooh, look they now do big ticket M&A too they must be as good”. The decision is far more complex.

And if you’re a budding lawyer unsure of the practice area best-suited to your skills, always better to take flexibility and breadth over pay.

(12)(2)

SC Associate

Agree with the discussion above. I trained at a MC firm, then moved to a US firm and now at an SC firm making partner.

In addition to the points above, a further consideration is ease of making partner at MC/international/U.K. firms is much easier than US. The reality is that making partner at a US is extremely difficult. Putting to one side Kirkland’s unique model of promoting 5 PQEs to glorified Senior Associate-Partners for two years, most US firms expect a minimum USD2m practice. That is hard to generate unless one has PE relationships. Public M&A tends to go the old-fashioned big names, either at MC firms or MC partners that have moved US for big dollars. For the rest of us, if you want to be a partner, the MC or SC (HSF, Ashurst, Lovells, NRF etc) is a slightly easier run especially as some of them have fixed share/salaried partner rungs. The fee generation expectations are much lower; this is important especially if you’re practising in a non-transactional department. Not that this matters for LC’s junior lawyer audience but it’s part of the nuances of why go to certain places over others…

(14)(4)

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