Great news for Biglaw partners and the associates who love them. Early returns suggest that despite the global economic meltdown that wrecked multiple American industries, profits per partner remained relatively stable in 2009.
Biglaw partners made out okay. They survived. And they’re looking forward to even more profit in 2010. The WSJ Law Blog reports:
Here’s one thing that’s not in dispute: 2009 was awful for firms. A survey by Citi Private Bank’s Law Firm Group of 50 of the country’s 100 largest firms, as measured by revenue, found last year’s revenue at the firms was down an average 4% from 2008. These same firms, according to Citi, averaged 7% revenue growth in 2008, and 12% growth from 2001 to 2007. And the profit picture would have been worse had firms not aggressively cut expenses, by an average of 7% in 2009, says Dan DiPietro, the Citi’s Law Firm Group advisory head.
I think a four percent haircut, in the middle of the worst recession anybody can remember, is actually strikingly good for Biglaw partners. A lot of associates saw salary cuts of 10% or greater — to say nothing of all the people who saw salary cuts of 100%, i.e., who lost their jobs. Relatively speaking, I think a four percent drop in revenue — with the possibility that PPP won’t even fall by that much — is good news.
Of course, some firms beat the curve….
Am Law Daily reports that K&L Gates crossed the $1 billion mark for gross revenue in 2009:
K&L Gates passed the $1 billion revenue mark in 2009, the firm announced today. The Pittsburgh-based firm saw gross revenue increase by 8 percent, to $1.034 billion, while profits per equity partner (PPP) also increased to $861,000, up 1 percent from $855,000 last year.
Revenue growth was driven largely by the firm’s March 2009 merger with Chicago-based Bell Boyd & Lloyd, which added 250 lawyers and an office in San Diego. The firm also continued its overseas expansion with new offices in Frankfurt, Singapore, and Dubai.
You see, freezing salaries, cutting salaries, deferring associates, laying off staff, and laying off associates really does work if you want to keep PPP stable. Give them credit; I bet a lot of firms did all of this without realizing a slight increase in PPP at the end of the cost-cutting rainbow. (Of course, K&L Gates is not alone in showing higher profit for 2009; see also Locke Lord.)
Still, many firms — and most Above the Law readers — seem positively excited about the prospects for 2010. On the Law Blog, Sonnenschein and Orrick sound almost bullish about the future:
“We are now beginning to see traditional financial-institution clients return to the market,” says Elliott Portnoy, chairman of Sonnenschein Nath & Rosenthal, which last year generated about $500 million in revenue, roughly the same as 2008. The firm’s average partner earnings declined in 2009, although it hasn’t yet determined the precise decrease.
Orrick, Herrington & Sutcliffe saw increased fourth-quarter deal flow in China and Silicon Valley, among other sectors, says Chairman Ralph Baxter. “We don’t see signs of the market making a U-turn and going backward again, so we are projecting better results” for 2010, Mr. Baxter says.
Leaner law firms that pay their associates less while charging more for their work? Maybe this whole “recession” thing was a Biglaw blessing in disguise?
Let the Sun Shine! Firms Cautiously Optimistic Heading Into 2010 [WSJ Law Blog]
THE AM LAW 100: K&L Gates Passes $1 Billion in Revenue [Am Law Daily]
I am firsty, EVER SO FIRSTY :)
Second?
Skadden Deferred Secure
Flow is pickin’ up, but it ain’t deal flow.
3 – Captain Fail
3 – son, you was PWNED.
hugs&kisses,
-1
Wow! It’s so nice to hear that the partners made out so well! Even if it took numerous attorneys having their careers trashed, it was all worth it to keep those PPP numbers looking good.
Figgiti FIRST!
Captain FIRST!
first
Why does it take a recession for associates to realize that high PPP is good for the partners but always bad for the associates? Even during good times, where do the associates think the profits came from?
No wonder lawyers are such bad businessmen.
Mystal, pay your debts you ridiculous drain on society.
first in ten is first indeed
1-3, 6, 9-10 = children
A 4% drop in revenue may mean a much larger drop in profits. You’re comparing apples with oranges.
I bossed u.
A 4% drop in revenue may mean a much larger drop in profits. You’re comparing apples with oranges.
I bossed u.
Something about gays, please. I’m dying here.
A 4% drop in revenue may mean a much larger drop in profits. You’re comparing apples with oranges.
I bossed u.
A 4% drop in revenue may mean a much larger drop in profits. You’re comparing apples with oranges.
I bossed u.
A 4% drop in revenue may mean a much larger drop in profits. You’re comparing apples with oranges.
I bossed u.
15-17,19-21,
You’re certainly the boss of that “post comment” button…ooooooh BURNED!
You know what? I’m gonna do it.
FIRST!!!!!
Law firm partners might be some of the worst human beings to have ever lived. These guys would rape your wife/girlfriend without a second thought.
So, their profits came from cannibalizing their operations (layoffs, deferrals, pay cuts, salary freezes, etc.), not from any real increase in business.
Which begs the question, if that’s how made money in 2009, how are you going to make the same money or more in 2010?
I once saw a biglaw partner walk by a lake with a drowning child in it. The child was flailing madly and sputtering, trying to call for help. The partner said something off color about there being no affirmative duty to assist and how he had an important client meeting, and went on his way.
And where as I during all this? I was that child.
Or rather, my career was.
26 – by levering up again.
Also, that’s not what begs the question means. So many people confuse “begs the question” with “leads one to ask.”
Begs the question means, assuming that which is sought to be proven as a means of proving that which is sought to be proven.
27, when times were good, associates were leaving law firms in droves, even though that screwed over the firms badly since they had to find a fill-in at short notice who had no clue what he was doing. But hey, at-will employment meant anyone could leave at any time.
Why the sudden interest in employer-employee loyalty and bonding now?
29 implies that having to make another one of your employees bill an extra 10 hours (that you *might* have to write off) to get spun up on something is the same as shattering someone’s career.
29 = either partner, or idiot.
Law firm partners are businessmen, and damn good ones. This is capitalism, and you have to make your own way in this country. If you don’t like it, move to Cuba or stop complaining. Use the severance pay to buy some boots with straps and pull yourselves up folks.
That’s American-style capitalism: morally bankrupt and protective of complete tools.
Thirty figgiti figgiti first!!!!!!!!
Greetings from the Middle East. I have been enjoying a fantastic vacation here with my girlfriend, although we must return to US soon so she continues her blogging.
-ShaFeef
fuck. thirty figgity figgity fail.
-33
“when times were good, associates were leaving law firms in droves, even though that screwed over the firms badly since they had to find a fill-in at short notice who had no clue what he was doing. But hey, at-will employment meant anyone could leave at any time. ”
Hmm. Yes, who can forget how well firms treated those associates then? Throwing salary increases at them, when most simply wanted a better work life balance, and then demanding that the hours stay up, up, up.
Way to show you cared, partner. I mean, after all, it is not like you guys weren’t dumping associates and restricting partnership slots even during the good times, searching for ever-escalating PPP.
33 / 35 = fucking idiot
36, wow you must be delusional. How many people objected to those big bad salary increases “thrown” at them? Remember “NY to 190″?
I can’t believe I keep on reading this crappy blog.
To start with, revenue is not equal to profits per partner, you imbecilic moron.
Second, it is entirely normal for a 4% drop in revenue to correlate to a 10% drop in associate comp or layoffs. Associates are cheap in the scheme of things; if you need to make cuts equal to 4% in revenue, cutting associate salaries by 10% is not likely to be even close to enough. This is particularly true when firms have made investments predicated on future growth. If the expectation in 2007 was that there would be 5-10% revenue growth in 2009, firms made the appropriate choices to hire entry level attorneys and/or begin recruiting laterals. When those projections turned out to be false, cuts had to be made that are not even accounted for by the drop in revenue.
Third, associates at any given firm should be glad to see their PPP stay up. Undercompensated partners means partner departures, which means Heller Ehrman. Associates are replaceable; rainmakers are not. This isn’t about morality or the workers of the world uniting – its about basic realities.
Why the fuck can’t this profession seem to attract people who have taken a basic course in microeconomics?
-Junior associate who is not a flaming retard
42 – nice job citing the correct post numbers, fucktard.
NY to 190!
41: Partners didn’t leave Heller Ehrman because PPP was low. Partners who weren’t contributing to PPP were shown the door. So, it’s not like they left voluntarily to find a more profitable firm. They just didn’t leave in time to leave behind a firm that could have been profitable.
Peeved about your partners’ profits? Or are you a partner and need to justify it? Vent about it at http://www.locksteplawyer.com. Chance to win free iPod.
45-
If I understand your incomprehensible post correctly, you are saying unprofitable partners left HE, leaving behind only the profitable ones, but the firm was no longer profitable.
After Elie’s post, that’s the dumbest thing I have read this week.
47: Thanks! That actually is what I’m saying, except that the firm did not effectively communicate the fact that the departing partners were dead wood, so the legal community (including some within the firm) thought the firm was losing valuable lawyers. While what was left of the firm could have been profitable, the cutting of the dead wood was delayed too long for the firm to recover. Plus, it didn’t help that the most profitable group of partners decided to leave at the 11th hour (though I’m not one of those that blindly blames that group).
And there I was, silly me, judging from the title that this would be about people who take food from the firm fridge that they know isn’t theirs, and NEVER return what they took, forget bringing it back several hours later…
This makes me positively sick.
The reason people are owners is because they are the ones who bear the biggest risk, and the biggest potential for the reward.
And yet here what we see is that the owners in the end risked only a little, while the employees risked more, proportionally.
Basically, the way the owners made out like bandits (and make no mistake, that’s EXACTLY what happened last year) was to ruthlessly slash and hack everyone beneath them. The reason they were able to do this and get away with it (just like the bankers on the east coast sitting pretty courtesy of the tax dollars wrested from the hands of us peons) is because the wealth gap has gotten too large. If we had an actual, non-laugably-small middle class, this NEVER would have happened.
Don’t fall into the trap of thinking the financial crisis is over. Things are only stable for those on top. For most of the rest of us, the nightmare is only beginning.
41 is a flaming retard for not recognizing that overhiring was exactly the problem. Nice to be a partner, you can just shift the cost of your mistakes onto other people’s careers.
Yeah, its their firm, I get it. But I don’t have to like it.
51: basically, you’re saying that a bunch of people shouldn’t have been hired in the first place, because that would have prevented them from working for a while and then getting fired.
Hopefuly you wear a bell around your neck to alert the villagers when an idiot is in their vicinity.
Of course. I’ve been saying it for month. I’m sure there is more of this to come when more firms release their numbers. Especially firms with good bankruptcy and IP departments.
52: It’s called opportunity cost. Those people could have accepted offers from firms that were managed properly. Instead, their careers were destroyed.
Elie Mystttal only got a 163 on the LSAT and somehow he was let into harvard
54: Yeah. They could have all gone to work for that one firm/company/dude that wasn’t laying people off over the last year and was instead hiring lazy morons by the millions. LMFAO.
K&L Gates seems like an inefficient, unprofitable firm. How can you have revenue in excess of $1 billion, but profits per partner of only around $850,000. K&L Gates’ PPP figure is about the same as many firms less than half its size that provide better and more efficient client service, have not laid off staff or lawyers and that have much nicer cultures and better morale.
I think it is great that you are all sharing information. Big law preys on associates that don’t have enough information to make the choices that are in their best interest. Good job. I have taken another route and have written a tell all blog exposing my old firm, Levinson Axelrod, PA’s dirty secrets. It has landed me in the middle of a Lanham Act action but some things are worth the fight. http://www.levinsonaxelrodreallysucks.com. Viva the associate!
First?
28 begs the question, ” are you an anal retentive douche?”
The Death of The Middle Class Is Complete:
http://www.businessweek.com/magazine/content/10_03/b4163032935448.htm
Take it from an 80s Guy like me—bank as much as you can from these firms before you hit 40. The partners don’t care about you, so don’t show any loyalty. If you can make more with another firm, make the move.
And please, ignore the lefty trolls. They don’t reside on the same planet as us. Money is all that matters in this life—anyone who ignores that reality is a moron.
60 – it is a law blog. Are you new here or something?
As a former partner and survivor who jumped ship from a failed firm, my experience is that revenues and profits per partner remain stable or actually increase as the firm contracts, because of aggressive cost cutting and departures (voluntary and involuntary). Although profits and revenue per partner may be stable as the firm contracts, overhead per partner begins to climb rapidly, because the lease and debts remain. At some point, the firm leadership comes to grip with reality, and the firm abruptly implodes.
The people left holding the bag all profess disbelief that a firm which recently was so profitable could implode so quickly. In my opinion, it is like driving a car off a cliff at a 100 mph. It takes a while and you are still going really fast when you hit the ground.
23: I thinkthe likely outcome here is that when the economy picks up, we see a rapid movement of associates lateraling away from the firms that treated them like crap and towards other firms that treated different associates like crap. So we’ll all be hapily moved to new places that treated someone like crap but not us. This is how firms will lose their institutional memory of the shenanigans that occurred in 2009. Everyone will say to recruits, “you should have seen how my last firm treated associates. I’ve never seen anything like that here.”
We’ll be no better off, but we’ll feel better about our situations.
Latham laid off over 400 associates (over 200 in the stealth round and 190 in the public round) so Mark Flagel could continue his Tiffany’s shopping sprees.
31 – “Law firm partners are businessmen, and damn good ones.” HAHAHAHAHAHAHAHAHAHA. That was a good one…thanks for the laugh.
26 – right on…if you’re not a partner at K&L Gates, your only reason for existence is to ensure Pete and his wife continue to draw $7 million +. Oh, and even if you are a partner, that’s still your only reason for existence.