Freshfields adds non-equity tier as market shift continues

Freshfields has introduced a non-equity partner tier, according to Law.com, bringing it closer to a model now prevalent across Big Law - particularly for elite US firms and UK rivals looking to compete.

The move comes nearly a year after reports first emerged that the firm was considering the change, and almost a decade after it moved away from a pure lockstep system.

Freshfields declined to comment when approached by Non-Billable.

The domino effect

Kirkland & Ellis has famously championed the two-tier model, annually making up 200-plus partners in recent years, while keeping equity concentrated to top rainmakers. Over the past two years, even the most historically pure-equity US firms have followed.

Cravath introduced a non-equity partner tier in 2023, a striking departure for a firm synonymous with lockstep orthodoxy. Cleary and Paul Weiss followed in 2024 and Debevoise also voted to create a non-equity tier, ending its status as one of the few remaining all-equity firms among the top 100 in the US.

Non-equity partnership is both an economic and talent lever. It allows firms to expand the partnership ranks and push billing rates higher without materially diluting the profit pool, while offering partner titles to their most promising associates, helping firms retain top performers amid aggressive lateral hiring.

In turn, firms retain tighter control of equity - freeing up partnership points and stretching the system to give star performers a bigger slice of profits.

US momentum

Freshfields’ growing US ambitions are likely part of the equation. The firm has made the US a strategic priority, becoming increasingly active on major M&A mandates, as it seeks to compete more directly with Wall Street firms.

Freshfields’ US business jumped 20% year-on-year to £473 million in its most recent financial year, now making up 21% of its global revenues, up from 11% five years ago.

Like its Magic Circle peers, however, the firm operates at a lower profitability level than the highest-grossing US firms. After sustained lateral hiring and growing pressure to retain top performers in the US, the adoption of a more flexible partnership structure will strike many as an inevitable step.