Summary: The most recent Am Law data shows New York firms again top the list when it comes to financial performance.
According to the American Lawyer, partners at elite New York law firms had a great 2014. According to the most recent Am Law 100 data, the top New York-based law firms financially outperformed other firms in 2014.
Revenue grew roughly 4.5 percent at 17 different law firms, including Cadwalader, Wickersham & Taft; Cahill Gordon & Reindel; Cleary Gottlieb Steen & Hamilton; Cravath, Swaine & Moore; Davis Polk & Wardwell; Debevoise & Plimpton; Fried, Frank, Harris, Shriver & Jacobson; Kramer Levin Naftalis & Frankel; Milbank,Tweed, Hadley & McCloy; Paul,Weiss, Rifkind, Wharton & Garrison; Schulte Roth & Zabel; Shearman & Sterling; Simpson Thacher & Bartlett; Skadden, Arps, Slate, Meagher & Flom; Sullivan & Cromwell; Weil, Gotshal & Manges; and Willkie Farr & Gallagher.
Law firm revenue grew the first half of 2014.
Profits per partner also increased by 5.6 percent. Many expected the increase to be closer to 7 percent, but Cadwalader witnessed its profits per partner decrease by 15.3 percent last year after a change in leadership. Productivity in the New York firms increased slowly. Revenue per attorney increased 2.7 percent to $1.2 million.
Wells Fargo Wealth Management Legal Specialty Group and Citi Private Bank have reported similar numbers. Wells Fargo reports that the 12 most profitable New York firms had their revenue increase by 8.2 percent last year, which was double the national group’s 4.8 percent growth. Profits per equity partner increased 7.7 percent, whereas the national average was 5.59 percent.
Citi analyzed the results at the 15 most profitable firms, which includes mostly New York law firms. Revenue increased by an average of 6.6 percent in 2014, and profits per partner increased by 8.3 percent. This is roughly 33 percent faster than the rate the national revenue and profits per equity partner increased, which was 4.5 percent and 5.7 percent, respectively.
Previously, profits per partner of $3 million were rare in New York, but those days seem to be long gone. Now, the average is around $2.8 million, and most partners earned in excess of $2 million last year. Paul Weiss, the highest earner in the sample, saw its partners take home roughly $3.85 million.
Although most firms saw single-digit increases, some even saw double-digit increases. Six firms that experienced double-digit increases were Cleary Gottlieb, Davis Polk, Fried Frank, Simpson Thacher, Weil and Willkie.
Dan DiPietro, the chair of Citi Private Bank’s law firm group, said, “The flood gates opened in 2014. The firms with the strongest brands were the beneficiaries” of an increase in transactional work that shot up in 2013. According to DiPietro, New York has the highest concentration of top legal brands.
Jeff Grossman, the senior banking director of Wells Fargo’s legal specialty group, said that prestigious New York firms were “situated well for the activity that took place last year.”
Global mergers and acquisitions grew toward the third-highest annual total since 2001, and an increase in capital markets work helped the New York firms as well. Senior client advisor Gretta Rusanow of Citi Private Bank said, instead of the rate driven increases that 2013 witnessed, “What we saw this year is two balanced drivers—more work and rate increases.”
According to Wells Fargo, lawyer hours increased by 4.6 percent, whereas nationally, they increased by 1.71 percent. Citi noted that the demand at the 15 most profitable firms grew 4.1 percent. Last year, the national average was 1.9 percent.
Last year, associates at these firms earned bonuses that were 33 percent to 100 percent higher than years past, depending on their seniority. Senior associate bonuses are close to those of 2007. However, paying these bonuses increased expenses at the firms, even weakening profits per partner by a percentage point or two.
Analysts predict that it will be hard to maintain the increases that 2014 saw. DiPietro said, “The stars aligned perfectly last year. I don’t think profitability growth will be as high this year.”
Specifically, the firms saw the following growth.
Cadwalader’s financial performance was the worst in the group, even though it had more than seven attorneys for every equity partner. Revenue per attorney decreased by 3.2 percent after chairman-elect James Woolery left the firm.
The firm recently added three partners.
Cahill’s performance was just a bit weaker last year, but it is still one of the most profitable firms in the United States. Revenue dropped down by 1.7 percent, and partners earned 4.4 percent less than the previous year.
Cleary Gottlieb’s revenue increased 5 percent to $1.25 billion, and profit per partner increased 12.3 percent, breaking the $3 million threshold. The firm did a great deal of debt restructuring work for Greece, Argentina, and Puerto Rico.
Cravath’s revenue and profitability increased. Revenue increased 5.5 percent to $648 million, and profits per partner increased 2.3 percent to $3.37 million. The partnership was the fastest growing of New York’s elite firms.
Davis Polk’s revenue increased to over $1 billion for the first time in its history. The firm topped year-end league tables in areas such as corporate debt and equity offerings to underwriters.
Debevoise’s growth was modest. In 2013, the firm experienced double digit gains in profitability, but this year, its revenue rose 3.24 percent, and profitability increased by 3.1 percent. Its litigation group was honored as one of the best in the business by the American Lawyer in 2014.
Fried Frank’s numbers were steady. Its gross revenue was flat, but profits per partner and revenue per lawyer were the highest in the firm’s history.
Milbank demonstrated significant growth in both revenue and profits. Gross revenue increased by 7.8 percent, and revenue per attorney increased by 3.8 percent. Profits per partner increased by 7 percent.
Paul Weiss set new records for partner profitability and attorney head count. Gross revenue increased to $1.036 billion, a 10.9 percent increase. Profits per partner were $3.845 million.
Schulte Roth benefited from a strong demand for transactional work. Its revenue increased by 3 percent, and profits per partner increased by 4.5 percent.
Sherman & Sterling saw its profits per partner increase by 5.8 percent, to about $1.9 million.
Simpson Thacher enjoyed one of the strongest years of all of the New York firms. Associate bonuses were increased, and profits per partner increased by 10.1 percent to $3.485 million.
Skadden’s litigation and transactional work increased, but its bankruptcy practice did not see any major increases. Partner head count dropped 4 percent to 383, but profits per partner increased 6.4 percent to $2.9 million.
Skadden was the top mergers & acquisitions firm in 2014.
Sullivan & Cromwell’s performance saw little change. Attorney head count remained at 805, and partner headcount dropped from 172 to 170.
Weil reported a 16.5 percent increase in profits per partner in 2014, after two years in a row of declines. Revenue increased 1.2 percent to $1.151 billion.
Willkie’s gross revenue and profits per partner increased by an impressive 14.5 percent, and added 5.3 percent to its attorney head count.
Source: American Lawyer
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