JUNE 2019

BAKER MCKENZIE 2018 ANNUAL REVIEW ALM LEGAL INTELLIGENCE BAKER MCKENZIE ANNUAL REPORT Executive Summary

• Baker McKenzie’s strategy is to have an extensive global footprint with a large lawyer presence in major hubs, supported by technology-enabled service centers serving their core markets of the US, Europe, and Asia1 — $2.9bn in FY2018 firm revenue, ranked 3rd in the Am Law 100, with 4,720 attorneys in 47 countries — Strong practices in 2018 included Tax, M&A, Banking, Litigation, and Employment 1 — Lateral hiring has focused on strengthening the firm’s transactional capabilities in the US, London and Asia 1 — The firm invested in building its business services capability through targeted hiring in Legal Operations 2 and Legal Project Management 3 • Baker McKenzie posted a strong financial performance in 2018 with 9% revenue growth and 8% profit growth — Revenue growth was driven by large client mandates including acting for German building materials company Gebr Knauf KG in connection with its $7 billion acquisition of USG Corp 6 — Growth in profitability was supported by project management and service centers in lower cost locations. — Profits per equity partner grew 11% from $1.3 million to $1.44 million — The firm’s UK arm performed strongly in 2018 with revenue increasing by 15% to £216.3 million and lawyer headcount growing by 8% in London 9 — Revenue per lawyer climbed 9% to $614,000 • Last year, the firm opened a new service center in Tampa 4 and expanded its existing Belfast service center, 5 complementing the firm’s existing Philippines operations1 • Going forward, Baker McKenzie can be expected to continue expanding its global footprint through lateral hiring and acquisitions, and is actively targeting a US merger with Los Angeles and New York identified as potential targets 8

* ALM Selected Peers = DLA Piper, , , and . See methodology section for peer group criteria. See bibliography for links to underlying sources

2 Firm Report BAKER MCKENZIE ANNUAL REPORT Key Statistics: Baker McKenzie Baker McKenzie is ranked 3rd in the Am Law 100 with 4,720 lawyers in 47 countries. In 2018, the firm outpaced its five-year average in four financial metrics, reflected in the boxes below: Revenue, Revenue Per Lawyer, Profit and Profit Per Equity Partner Year-on-Year Average Annual Growth 2018 Growth 2014 -2018 2017 - 2018

Revenue ($M) $2,900 9% 3%

Profit ($M) $981 8% 2%

Profit Per Equity Partner ($K) $1,443 11% 3%

Revenue Per Lawyer ($K) 614 9% 1%

Total Lawyers 4,720 0% 3%

Metrics where the firm’s Equity Partners 680 -3% -1% year-on-year performance outpaced its five-year Non-Equity Partners 867 2% performance 5%

Leverage 5.9 4% 4%

3 Firm Report BAKER MCKENZIE ANNUAL REPORT Baker McKenzie Global Footprint

Baker McKenzie has a wide international footprint with 78 offices based across 7 global regions. The firm’s headcount has remained static within its home market of the US but has grown in Asia Pacific and the UK as the firm expands its global service offering, with China and London serving as growth markets. Lawyers By Location Baker McKenzie Baker McKenzie For Baker McKenzie, 2019 Lawyers by Global Region Year-over-Year 5-Year Average Baker McKenzie, 2018 2017 – 2018 2014 – 2018

Asia Pacific 1,509 5% 4%

Mainland Europe 1,166 -2% 2%

Americas 824 -6% 0%

USA 733 0% 3%

UK 385 8% 7%

4 Firm Report BAKER MCKENZIE ANNUAL REPORT Domestic Growth

Baker McKenzie has expanded its domestic footprint in New York and Los Angeles by 22% and 26%, respectively, over the past 5 years through lateral hiring. Further growth in these markets may come through a local merger.

Lawyers by State For Baker McKenzie Expansion in California and New York 140 • The firm strengthened its position in Southern California last year after 130 opening a new Los Angeles office in response to increasing opportunities and client demand, including growing interest from Asian clients 11 120 California • The firm has also expanded further in New York following several 110 recent partner hires in both its M&A 12 and life science practices 13

100 • The firm has stated that it is open to a merger in these markets8 New York 90

80 2015 2016 2017 2018 2019

5 Firm Report BAKER MCKENZIE ANNUAL REPORT International Growth

Baker McKenzie has expanded its global footprint with a focus in London and China. 6

Lawyers by Global Region Baker McKenzie, 2018 Expansion In London +8% • 385 Baker McKenzie’s UK growth has been supported by increased inbound 358 Chinese investment in the UK and Europe over the past few years7 • The firm’s U.K. arm grew its revenue by 15% to £216.3 million in 2018, according to the firm’s LLP accounts 9 • The firm grew its lawyer numbers by 8% in London last year. This growth forms +8% part of an ongoing strategy to bolster its global transactional practices 10 154 167 organically and through key lateral hires • The firm recently appointed a new head to its China Group in the City7 +30% 61 Growth in China 47 • Last year, the firm grew its Beijing and Hong Kong headcount by 30% and 8% respectively Beijing Hong Kong London

6 Firm Report BAKER MCKENZIE ANNUAL REPORT Baker McKenzie Lateral Hiring

Baker McKenzie made 57 partner hires between 2017 and 2019, with 88 partners departing the firm across the same period. Lateral hiring has focused on boosting the firm’s transactional offering in London and New York.

Lateral Partner Hires and Departures For Baker McKenzie Annual Report and ALM Selected Peers, 2017 - 2019

Depatures Hires

129 57 61 43 31

-61 -58 -88 -113 -152

Baker McKenzie DLA Piper Hogan Lovells Norton Rose Fulbright Squire Patton Boggs

Note: Lateral hiring data is from the period January 2017 through February 2019

7 Firm Report BAKER MCKENZIE ANNUAL REPORT 2018 Practice Area Growth Baker McKenzie experienced an increase in high-value transactional work last year,6 leading to increased hires in banking and M&A.

Practice Area Attorney Growth By Region Baker McKenzie’s Fastest Growing Practice Areas, 2018

10%+ YoY Growth 5-10% YoY Growth • Baker McKenzie reported that strong financial performance last • Taxation and Accounting • Consumer and Retail USA • Banking and Finance year can be attributed to securing lead roles on high-value cross- • Government and Regulatory 6 • Labor and Employment border transactions

• M&A • Litigation • Tax is also a growing practice area for the firm. The firm has seen • Intellectual Property Europe • Consumer and Retail • Banking & Finance an uptick in client demand for tax work, most notably in the US, • Antitrust stemming from a growing number of companies using a transactional strategy as part of their tax-planning efforts 6 • Banking & Finance • Litigation Rest of World • Consumer and Retail • Taxation and Accounting

8 Firm Report BAKER MCKENZIE ANNUAL REPORT Performance in Key Financial Metrics

Baker Mckenzie had a strong financial performance in 2018 with revenue up by 9% and profits increasing by 8% . Profits Per Equity Partner (PEP) were up by 11%. Likely Drivers of Revenue Growth 1 • Increase in high-value cross-border transactions, which account for 65% of all Baker McKenzie deals • 1.8% increase fee earners globally (6,188), resulting in a 1.2% increase in Baker Baker ALM Selected Peers total billable hours for FY2018 (8.5 million) Year over Year Average Annual Average Annual Growth in Financial Key Metrics • High-profile lateral hires commanding premium fees Growth Growth Growth For Baker McKenzie 2017 – 2018 2014 – 2018 2014 – 2018 $4,500 $1,600 Profit Per Equity Partner ($k) $1,443 $4,000 $1,290 $1,400 11% 3% 7% $3,500 $1,200 $2,900 $3,000 $2,620 $2,670 $2,540 $2,430 $1,000 $2,500 Revenue 9% 3% 3% $800 ($B) Profit ($B) 34% $2,000 36% Margin Margin $600 $1,500 $910 $904 $911 $981 $1,000 $801 $400 8% 2% 3% $500 $200 $0 $0 2014 2015 2016 2017 2018

9 Firm Report BAKER MCKENZIE ANNUAL REPORT 2018 Revenue and PPL Growth

Baker Mckenzie was the standout performer among its peer group in profitability and revenue growth in 2018

Growth in Revenue and Profit Per Lawyer For Baker McKenzie and ALM Selected Peers Grew Profitability / Grew Revenue 20% Key $1 Billion in Baker McKenzie 15% Hogan Lovells Annual Revenue Squire Patton Boggs 10% DLA Piper Norton Rose Fulbright 5% 2018)

– 0% -5% (2017 YoY PPL Growth Growth PPL YoY -10% -15% -20% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

YoY Revenue Growth (2017 – 2018)

10 Firm Report BAKER MCKENZIE ANNUAL REPORT 2017-2018 Performance Versus Peers

Baker Mckenzie generates the highest amount of both revenue and profit of its peer group. The firm also generates higher Profits Per Equity Partner (PPEP) compared to its many of its peers. This is as a result of high Profits Per Lawyer (PPL) and relatively low Cost Per Lawyer (CPL)

Norton Rose Squire Patton Baker McKenzie DLA Piper Hogan Lovells Fulbright Boggs 2018 Financials • Revenue ($M) 2,900 2,836 2,119 1,969 1,035 • Operating Profit ($M) 981 751 722 618 173 Best performance in these 2018 Operating Metrics metric among peer group • Revenue Per Lawyer ($K) 614 766 804 583 691 • Cost Per Lawyer ($K) 407 563 530 400 575 • Profit Per Lawyer ($K) 208 203 274 183 116 • Profit Per Equity Partner ($K) 1,443 1,874 1,381 907 1,027 • Total Lawyers 4,720 3,702 2,636 3,376 1,497

11 Firm Report BAKER MCKENZIE ANNUAL REPORT Growth in Cost Per Lawyer

Despite an uptick in cost in 2018, Baker McKenzie still outperforms many of its peers in cost per lawyer control. The firm’s cost management strategy includes a focus on building shared services centers across the globe 1

Cost Per Lawyer Five Year Growth in Cost Per Lawyer For Baker McKenzie and ALM Selected Peers For Baker McKenzie and ALM Selected Peers, 2014 - 2018

$600 10% Squire Sanders

DLA Piper $500 Hogan Lovells 6%

$400 Baker McKenzie

Norton Rose Fulbright $300 2014 2015 2016 2017 2018 Baker McKenzie ALM Selected Peers

12 Firm Report BAKER MCKENZIE ANNUAL REPORT Baker McKenzie’s Cost Control Strategy

Baker McKenzie opened a new service center in Tampa in 2018, complementing existing service centers in Northern Ireland and the Philippines, with plans to expand this capability to Latin America

Shared Service Centers Baker McKenzie’s Global Shared Service Centers

• The firm utilizes the centers to enhance quality, effectiveness and efficiency 1

Belfast, Northern Ireland • The Tampa center is set to be fully operational by 2020 with 300 employees handling work in legal services, finance, IT, knowledge management, business development and marketing 4

• The opening complements existing operations in Belfast (opened in 2014) and the Philippines (2000) and allows the firm to have service centers within each of its core Tampa Florida markets of the US, Europe and Asia

• Last year the firm expanded its Belfast service center with an additional 150 staff 5 Manila, Philippines • Plans to establish a new service center in Latin America 4

13 Firm Report BAKER MCKENZIE ANNUAL REPORT Financial Analysis: One Year Profit Tree

Baker McKenzie's 2018 PEP growth outpaced its peer group average. The firm also achieved higher PPL growth than its peers despite CPL being significantly higher. The firm increased leverage ratios to maintain its overall PEP, albeit at a slower rate in comparison to its peer group

Profit Tree Analysis: Growth Over One Year Year-on-year change in key metrics for Baker McKenzie and ALM Selected Peers Average, 2017 - 2018

Key

Baker McKenzie 9% Y-o-Y Growth ’17 – ‘18 Revenue Per Lawyer 8% 4% ALM Selected Peers Growth rate over PPL Y-o-Y Growth ’17 – ‘18 period 2% 9% Cost Per Lawyer 4% Profit Per Equity 11% Partner 7% 3% Associate to 4% 6% Equity Partner Ratio Leverage 6% 5% Non-Equity to 5% Equity Partner Ratio

14 Firm Report BAKER MCKENZIE ANNUAL REPORT Gender & Minority Diversity

Baker Mckenzie performed better than many of its peers in terms of gender diversity. However, when broken down by the percentage of minority lawyers, the firm performs less favorably against its peers.

Percentage of Female and Minority Lawyers For Baker McKenzie and Selected Peers

44% Baker McKenzie DLA Piper Hogan Lovells Norton Rose Fulbright Squire Patton Boggs 41% 40% 38% 38%

26% 24% 23% 21% 19% 19% 20% 17% 18% 17%

% Female Attorneys % Female Partners % Minority Attorneys

15 Firm Report BAKER MCKENZIE ANNUAL REPORT Definitions

Definitions and Methodology

• Gross Revenue is fees for legal services. It does not include disbursements or income from non-legal ancillary businesses. In all cases, the revenue and profit figures listed are for the firm's most recently completed fiscal year. Most Am Law firms are on a calendar fiscal year. • Net income is compensation paid to equity partners. • Equity Partners are those who file a Schedule K-1 tax form and receive no more than half their compensation on a fixed-income basis. • Non-equity Partners are those who receive more than half their compensation on a fixed basis. • Revenue per lawyer (RPL) is calculated by dividing the gross revenue by the number of lawyers and rounded to the nearest $1,000. • Cost per lawyer (RPL) is calculated by dividing the total costs by the number of lawyers and rounded to the nearest $1,000. • Profit per lawyer (PPL) is calculated by dividing the total net income by the number of lawyers and rounded to the nearest $1,000. • Profits per equity partner (PEP) is calculated by dividing net operating income by number of equity partners and rounded to the nearest $1,000. • Leverage is the ratio of all lawyers (minus equity partners) to equity partners • Associate leverage is the ratio of all associates to equity partners • Non-equity leverage is the ratio of all non-equity partners to equity partners • ALM Selected Peers: Most law firms have a wide range of competitors which compete with the firm in specific geographies and/or practice areas. ALM’s Selected Peer Group is designed to identify the firm-wide peers. ALM selects peers by weighing various factors including the firm’s size, organizational structure, geographic footprint, and practice area specialty. Firms can utilize the data provided in ALM Intelligence’s Legal Compass to benchmark themselves against specific firms or peer groups.

16 Firm Report BAKER MCKENZIE ANNUAL REPORT Bibliography

1 Baker McKenzie Announces Record Global Revenues of $2.9 Billion (06 August 2018) https://www.bakermckenzie.com/en/newsroom/2018/08/fy18-financials 2 Baker McKenzie appoints David Cambria as Global Director of Legal Operations (29 June 2018) https://www.bakermckenzie.com/en/newsroom/2018/06/david-cambria-global-director-legal-operations 3 Baker McKenzie Expands Services Function with Prominent Hires (22 June 2018) https://www.bakermckenzie.com/en/newsroom/2019/01/expands-services-function 4 Baker McKenzie Picks Tampa for US Operations Base (27 October 2018) https://www.law.com/americanlawyer/2018/10/17/baker-mckenzie-picks-tampa-for-us-operations-base/ 5 Baker McKenzie to Expand Belfast Hub With 150 New Hires (25 July 2018) https://www.law.com/international/2018/07/05/baker-mckenzie-to-expand-belfast-hub-with-150-new-roles-396-4672/ 6 Baker McKenzie Nears $3BN Revenue, Buoyed by Global Deals (13 March 2019) https://www.law.com/legal-week/2019/03/13/baker-mckenzie-boosts-revenues-and-profits-buoyed-by-global-deals-378-101310/ 7 Baker McKenzie Hires Leading London M&A Lawyer to Bolster China Strategy (04 February 2019) https://www.bakermckenzie.com/en/newsroom/2019/02/peter-lu 8 'It’s a Question of When, Not If'—Baker McKenzie Sets Sights on US Merger (18 September 2018) https://www.law.com/international/2018/09/18/its-a-question-of-when-not-if-baker-mckenzie-sets-sights-on-us-merger-396-7086/ 9 Bakers UK Arm Achieves Double-Digit Turnover, Profit Growth As Board Pay Surges (04 April 2019) https://www.law.com/legal-week/2019/04/04/bakers-uk-arm-achieves-double-digit-turnover-profit-growth-as-board-pay-surges/ 10 Baker McKenzie further grows transactional practices with two Partner hires in London (17 January 2018) https://www.bakermckenzie.com/en/newsroom/2018/01/two-transactional-hires-in-london 11 Baker McKenzie Nabs 5 Hogan Lovells Partners, Launches Los Angeles Office (08 March 2018) https://www.law.com/therecorder/2018/03/08/baker-mckenzie-nabs-5-hogan-lovells-partners-launches-los-angeles-office/ 12 Baker McKenzie Adds Leading Wall Street M&A Lawyer Mark Mandel in New York (25 February 2019) https://www.bakermckenzie.com/en/newsroom/2019/02/mandel 13 Baker McKenzie Adds Morgan Lewis Life Sciences Duo in New York (19 February 2019) https://www.law.com/americanlawyer/2019/02/19/baker-mckenzie-adds-morgan-lewis-life-sciences-duo-in-new-york/

17 Firm Report Size of Bubbles Colors BAKER MCKENZIE $3 Billion in Highly Profitable Global Firms Annual Revenue ANNUAL REPORT Baker’s Potential Peers Verein Firms Asian Firms European Firms Key Financial and Headcount Metrics Transatlantic Firms For Baker McKenzie and the Firm’s Peer Group, 2018 A group of highly profitable firms UK Firms which are less global than DLA Piper $3,500 Latham & Watkins A group of Verein firms that are similar in profitability, $3,000 White & Case Cleary Allen & Overy although ranging in global coverage $2,500 Freshfields

$2,000 Baker McKenzie Mayer Brown DLA Piper $1,500 Reed Smith Jones Day KWM Squire Hogan Lovells

Profit Per Equity Partner ($k) Partner Equity Per Profit $1,000 K&L Gates Norton Rose Fulbright Eversheds CMS $500 Ashurst Gowling Bird & Bird Yingke $0 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Lawyers Outside of Home Country

18 Firm Report BAKER MCKENZIE ANNUAL REPORT Baker McKenzie Peer Group

Am Law Verein firms were selected as a peer group for comparison due to their common structure, geographic coverage, and similar financials

Key Financial and Headcount Metrics For Baker McKenzie and the Firm’s Peer Group, 2018

Percentage Revenue RPL CPL PPL PEP Total Total Leverage of Lawyers $M ($k) ($k) ($k) ($k) Lawyers Offices In USA

Baker McKenzie 2,900 614 407 208 1,443 4,720 5.9 78 16%

DLA Piper 2,836 766 563 203 1,874 3,702 8.2 75 35%

Hogan Lovells 2,119 804 530 274 1,381 2,636 4.0 46 36%

Norton Rose Fulbright 1,969 583 400 183 907 3,376 4.0 58 23%

Squire Patton Boggs 1,035 691 575 116 1,027 1,497 7.9 47 43%

19 Firm Report