Despite Decreased Revenue at Some Law Firms in 2009, Sunnier Year May Be Ahead
After a year of unprecedented BigLaw cost-cutting and a new emphasis on delivering value to corporate clients in the aftermath of a global economic crisis, annual revenue reports for 2009 being released this month suggest a sunnier forecast for 2010.
While revenue has dropped significantly at a number of firms, it could have been worse, administrators and observers say:
Holland & Knight, for example, saw a 10 percent decrease last year, reports the Daily Business Review. However, average profit per partner rose 2.6 percent, perhaps due in part to lawyer layoffs last year.
But the 934-attorney firm, which has its historic roots in Florida, did relatively well under difficult circumstances, says managing partner Steven Sonberg.
As at other law firms, most attorney cuts didn’t involve equity partners, the article notes.
“They’re taking care of the equity partners because the equities put the gas in the engine,” says legal consultant Joe Ankus of Weston, Fla., who himself used to practice at Holland & Knight. “Without rainmakers, you have no firm. Without clients, you have a social club.”
He tells the Business Review he sees the firm’s 10 percent revenue reduction as relatively good news; falloff of 25 percent is not unheard of in this economy.
Similarly, Robert Ruyak, who serves as chairman of Howrey, says the firm’s 16 percent revenue decline in 2009 from an all-time high a year earlier was “not entirely unexpected.” Meanwhile, the firm’s profit-per-partner figure plummeted by almost 35 percent, reports the Blog of Legal Times.
“It was a tough year. A lot of things changed, and we’ve had to make some changes to account for that,” Ruyak tells the legal publication.
Looking to the future, the firm brought in new construction and intellectual property practice groups within the past year, he notes, even though this may have hurt short-term performance. Howrey also made some layoffs recently.
Some firms actually saw revenue increase in 2009 despite the difficult economy. Among this favored group was Crowell & Moring.
Blessed by strong antitrust, litigation and government contracts practice groups, the firm had a banner year. Gross revenue rose by 14.5 percent and profit per partner increased nearly 10 percent, reports the National Law Journal.
Chairman Kent Gardiner credited alternative billing—which he says accounts for nearly one-third of Crowell & Moring’s business—for the financial surge.
“When talking to our clients at the beginning of 2008, they told us that all of their business was on the table. They said they needed a law firm that was much more responsive to their needs than what they have received in the past,” he tells the NLJ. “By relying more heavily on alternative billing arrangements than we ever have before, we were able to bring in a lot more work.”
Gross revenue rose by 9.79 percent at Covington & Burling, which also had no reported layoffs and no associate start date deferrals, recounts the Blog of Legal Times.
However, the firm’s aggressive lateral hiring cut into individual attorney paychecks: Revenue per lawyer fell by 5.29 percent and profit per partner dropped by 7.69 percent.
Although managing partner Tim Hester declined to comment, three partners said the firm’s antitrust, litigation and white-collar defense practice groups had done well.
At all of the firms, lawyers practicing there are still bringing home hefty paychecks:
The PPP figures for 2009 range from $1.2 million at Covington & Burling to $696,000 at Holland & Knight.
At Crowell & Moring and Howrey they were $1.098 million and $846,053, respectively.
While all four of these firms have a significant practice focus in Washington, D.C., revenue reports from competitors tell similar stories.
ABAJournal.com: “Cost-Cutting Helps Cadwalader Post 28% Hike in Partner Profits”
ABAJournal.com: “Managing Partners More Confident, Expect Increased Legal Work”
Bloomberg: “Law Firm Revenue May Drop as Much as 10% This Year”
JD Journal: “Revenue Drops at Paul Hastings”
Law Blog (Wall Street Journal): “Is Plaintiff-Side Work BigLaw’s New Pathway to Riches?”