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Finally, Eilers referred to various investments made by the firm during the last fiscal year, such as the continued development of its U.S. offices, which in recent years have grown via a number of splashy hires. It also made reference to its Manchester legal and business services center, which opened in 2015 and now employs almost 600 staff. Such investments will have eaten into the firm's margin to a certain degree, but should only have added to its revenue. You wouldn't expect an investment to generate immediate returns, but if it causes revenue to fall, something has gone very badly wrong indeed.

So, what else could be to blame?

Freshfields is marginally less international than the other three firms 42 percent of its lawyers are based in the U.K., compared to 38 percent at Linklaters, 36 percent at Allen & Overy and just 29 percent at Clifford Chance, according to Global 100 data and is therefore likely to have received less of a boost from foreign revenue. It also means that Freshfields is slightly more exposed to a U.K. market that has proved decidedly patchy ever since the Brexit vote. The subsequent decline in transactional activity the volume of U.K. M&A deals dropped to a four-year low in the first six months of 2017, according to Mergermarket data will no doubt have had an impact on a firm best known for its market-leading corporate and M&A practice.

Also notable is Freshfields' massive exposure to the highly challenging German market. Freshfields has one of the largest presences of any law firm in the country even including domestic German firms with over 500 lawyers and no fewer than five offices. Indeed, the Freshfields that exists today was formed in 2000 through a three-way merger between the U.K. firm and two German outfits: Bruckhaus Westrick Heller Loeber and Deringer Tessin Herrmann & Sedemund.

International law firms have found their finances squeezed in Germany by a combination of severe pricing pressure from clients particularly listed German companies and extremely high salary costs. Lawyers are paid more in Germany than almost anywhere else on earth, apart from New York.

Things have come to a head in the last 12 months, with each of the Magic Circle firms investigating ways to combat the tightening profit squeeze. To that end, Freshfields is planning to cut its German partnership by up to 20 percent by 2020, while Clifford Chance and Linklaters have both introduced compensation caps for partners in the country. Despite this, a Freshfields source who did not wish to be identified told The American Lawyer that the firm's German practice actually had a pretty strong year, and that things were instead a bit softer across the board. The firm has responded to changing market conditions by rebalancing its practice downsizing in finance, for example and has also seen an unusually high number of retirements from its aging partnership, the source said. The size of the firm's partnership is likely to continue to contract over the coming years without causing a fall in revenue, the source added, leading to continued growth in average profit per equity partner (PPEP).

That changing internal demographic already played out in the results for the last fiscal year. The roughly 6 percent reduction in equity partner numbers meant that while net income fell slightly, PPEP still increased by 5 percent, to 1.55 million pounds ($2 million).

Indeed, viewed from a broader perspective, Freshfields' results are clearly disappointing, but hardly catastrophic. Revenue provides an important indication of a business' performance particularly when tracked over a number of years but most would agree that profit is more important. After all, it's revenue for vanity, profit for sanity, as the saying goes. And on that measure, Freshfields is still firmly at the head of the U.K. pack, just 20,000 pounds ($26,000) below Linklaters, the Magic Circle's new leader by that metric. (The weak sterling means that even Linklaters would only have ranked 32nd by that metric in U.S. dollars in this year's Am Law 100, however, providing a stark illustration of the difficulties British firms face in competing with American rivals for lateral hires.)

Still, increasing profits by reducing equity partner numbers is clearly not sustainable in the longer term. Freshfields will be hoping that its investments in the U.S. and elsewhere start to bear fruit in the form of renewed growth.

For now, the firm has been overtaken in the revenue charts by both Allen & Overy and Linklaters. Having previously ranked second among its Magic Circle peers by revenue, Freshfields is now 110 million pounds ($141 million) adrift from the group and a full 210 million pounds ($270 million) behind Clifford Chance.

Allen & Overy's performance was particularly impressive, capped by a 16 percent increase in revenue and a 26 percent jump in average profit per equity partner. The spectacular results, which look strong even in currency neutral terms, were widely expected after the firm announced record growth at the half-year mark. Clifford Chance also achieved double-digit gains in both revenue and PPEP. Its results could actually have been even better. Sources at the firm said that it front-loaded some costs into last year's accounts including those relating to partner exits and the reorganization of its southeast Asia practice, which saw the firm withdraw from Indonesia and Thailand and that its PPEP would otherwise have topped 1.4 million pounds ($1.8 million). Clifford Chance declined to comment.

It is, of course, unwise to draw too many conclusions from a single year's results. We won't know until next year whether these fascinating figures are merely a reflection of a short-term blip or the beginning of a strategic divergence among historic rivals.

Global Firms in Focus is a weekly column about international law firm business by chief global correspondent Chris Johnson. Reach him at cjohnson@alm.com. On Twitter: @chris_t_johnson.