Biglaw, Musical Chairs, Partner Issues, Partner Profits

What’s Going On At O’Melveny & Myers?

Last month, we broke the news of seven key corporate partners leaving O’Melveny & Myers to join Paul Weiss. Shortly thereafter, we learned that two other prominent partners were leaving O’Melveny to join Weil Gotshal.

Of course, partners come and partners go at large law firms — but some of these nine were major rainmakers and practice group heads. Paul Weiss snagged Gregory Ezring, who chaired O’Melveny’s corporate finance and capital markets practice, and Brad Okun, who headed O’Melveny’s tax practice. Meanwhile, Weil scored Harvey Eisenberg, a leading private-equity adviser, and M&A partner Douglas Ryder.

Could something more be going on at OMM?

“You guys are missing a huge story about O’Melveny,” a tipster recently told us. “In the last two years or so, around 60 partners have disappeared.”

“The pace is now quickening,” this source added. “Since January 1, around 10% of the OMM partners, including many practice group leaders and other key rainmakers, have departed.”

These numbers sound significant — but, in fairness to O’Melveny, they should be viewed in context. Let’s hear what the firm had to say about them….

We reached out to the firm for comment on the recent partner departures. O’Melveny provided us with the following statement, through a spokesperson:

It’s important to remember that partners have left for different reasons. Some have left to go to good clients, which creates growth opportunities for O’Melveny; some have left for government; and some left because either they or we believe their fit with our firm wasn’t quite right.

None of these departures impact our core strengths: we have one of the world’s top litigation practices; ours is one of the strongest Asia practices of any U.S.-based firm; and we have stellar transactions practitioners throughout our 14 offices. All of our practices are staffed by talented lawyers serving a diverse client base, and this year we have been busier than ever.

These are all fair points. One source at the firm told us that of the partner departures, at least half of them were “not undesired” by the firm — e.g., partners going in-house to clients, who can then send business back to the firm, or less-productive partners who were “counseled out” of the firm. We’ve also heard that the firm finances are “very strong,” with an increase in profits last year of almost 5 percent.

It should be noted, however, that the profit growth wasn’t fueled by revenue growth. Am Law Daily reports:

O’Melveny & Myers experienced a decline in revenue in 2010, while profits per equity partner were on the rise, according to financial figures released by the firm [in February].

The Los Angeles-based firm reports gross revenue of $782.4 million for 2010, a 5 percent drop from 2009. Profits per equity partner of $1.525 million represent a 4.8 percent increase from the 2009 average, due in large part to a decrease in equity partner head count.

And that decrease in partner head count has continued into this year. We have pasted below a list that a source provided to us of 22 partners who have left OMM since January 1, 2011. If you see errors or omissions, please note them in the comments, or inform us via email (subject line: “O’Melveny”).

There’s a backstory behind some of these departures, related to the leadership of firm chairman Arthur B. Culvahouse Jr. (who remains at the head of the firm, but who has faced challenges to his leadership lately). It relates to the partners that OMM picked up when it absorbed the well-regarded New York corporate firm of O’Sullivan Graev & Karabell, in an effort to build its NYC transactional practice. A source reported:

There’s a big irony here. For the last eight years, A.B. Culvahouse’s sole objective has been to keep the O’Sullivan cabal happy – to say that NY transactions are the most important thing in the firm. Other partners were treated like second-class citizens, so they’ve left in droves.

Now the O’Sullivan cabal (accounting for some of the people on this list) has announced it’s going, some to Paul Weiss and others to Weil. It should be a happy day at OMM, because the O’Sullivan partners were a selfish, destructive force.

But their departure comes too late. Many key rainmakers ran for the door earlier, and the business cupboard is growing bare. To survive, OMM needs to merge with a healthy firm, but most stronger practices have already walked. For that reason, contrary to industry trends, OMM revenues have been falling steadily. And during A.B.’s tenure, what once was a top ten firm in PPP [profits per partner] has fallen to around 40th on the latest AmLaw list.

The data on revenue do seem to confirm these observations, at least for the past three years. O’Melveny’s gross revenue fell 5 percent in 2010, 8.9 percent in 2009 – and 3 percent in 2008. The firm did manage to reverse the profit slide last year, but by cutting equity partner headcount — not by growing revenue, which is ideally what a firm wants to do.

If you have additional info to add about O’Melveny & Myers, please feel free to email us (subject line: “O’Melveny”). Thanks.

The Am Law 100: Revenue Down, PPP Up at O’Melveny in 2010 [Am Law Daily]

Earlier: Musical Chairs: Paul Weiss Snags Corporate Partners from O’Melveny
Prior ATL coverage of O’Melveny & Myers

(as of June 8, 2011)

(1) Greg Ezring (co-chair, firmwide corporate finance/capital markets practice – New York)
(2) Brad Okun (chair, firmwide tax practice – New York)
(3) Paul Koepff (chair, firmwide insurance practice – New York)
(4) Brian Brooks (chair, firmwide financial services practice — Washington)
(5) Tim Muris (co-chair, firmwide antitrust practice — Washington)
(6) Harvey Eisenberg (co-chair, firm strategy committee; investment funds and M&A partner — New York)
(7) Brad Finkelstein (corporate finance partner — New York)
(8) Mark Wlazlo (finance and restructuring partner — New York)
(9) Monica Thurmond (corporate finance partner — New York)
(10) John Scott (M&A partner — New York)
(11) Doug Ryder (transactions partner — New York)
(12) Mark Easton (M&A partner – Los Angeles)
(13) Stephen Ackerly (intellectual property partner – Palo Alto)
(14) Christine Wilson (antitrust partner – Washington)
(15) Ed Hassi (antitrust partner – New York)
(16) David Enzminger (intellectual property partner – Los Angeles)
(17) Paul Loynes (private equity partner — London)
(18) Todd Triller (M&A partner – New York)
(19) Maritza Okata (M&A partner — Washington)
(20) Steve Olson (white collar partner – Los Angeles)
(21) Tom Jerman (labor partner – Washington)
(22) Brian Finnegan (M&A partner – New York)

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