Work slowdown is just one reason for 2022 profit drop among Am Law 200 firms
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Profits decreased by double-digit percentages for many law firms in the Am Law 200 in 2022, but the blame is not entirely with a work slowdown.
Firm leaders told Law.com that the decline in profits was partly due to increased travel costs and necessary growth investments.
“The return of travel and business development costs that were halted during the COVID-19 pandemic and roared back in 2022, amplified by inflation, was one of the most common causes of profitability declines firm leaders cited in interviews,” the article reports.
The profit decreases at some firms follow what was generally a blockbuster year, Law.com reports in a separate story reporting firm financials as the numbers are released. Among the firms with double-digit declines in profits per equity partner are:
• Armstrong Teasdale (a 14.4% decrease in profits per equity partner)
• Cadwalader, Wickersham & Taft (a 29.8% decrease in PEP)
• Cahill Gordon & Reindel (a 27.1% decrease in PEP)
• Cooley (a 19.6% decrease in PEP)
• Debevoise & Plimpton (an 11.8% decrease in PEP)
• Dechert (a 14% decrease in PEP)
• Ice Miller (a 14.5% decrease in PEP)
• Ogletree, Deakins, Nash, Smoak & Stewart (a 15.7% decrease in PEP)
• Shearman & Sterling (a 17.5% decrease in PEP)
• Womble Bond Dickinson (a 13.3% decrease in PEP)
Many firm leaders told Law.com that increased travel costs were worth the decrease in profits because many newer hires hadn’t yet met with colleagues.
“At the end of the day, law is an apprenticeship,” said Mike Millikan, the chief managing partner at Ice Miller, in an interview with Law.com. “The only way you’re going to get good at this profession is to practice and be around people with more experience than you.”
Henry Nassau, CEO at Dechert, told Law.com that his firm is making an investment in the future by hiring lateral partners and promoting partners into the equity tier. The firm supports its lateral attorneys until their practice takes off and becomes profitable, Nassau said.
Investments in partner growth don’t necessarily pay off in the short term, Nassau said.