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….
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]