Jaishree Kalia assesses the winners and losers as the US reporting season kicks off
The broad-based economic recovery in the US proved a boon to many leading advisers in 2014, with firms enjoying a resurgence in corporate work, and robust levels of disputes and regulatory activity.
Among the pool of strong performances, Latham & Watkins’ 2014 stood out as turnover surged 14% to $2.61bn from $2.29bn in 2013, making it the largest law firm by revenue in the world. Managing partner Bill Voge put the growth down to the global M&A recovery and that its clients were increasingly using multiple offices. The firm also posted its highest ever profits per equity partner (PEP), which rose 17% to $2.9m, placing the firm closer to peer Gibson, Dunn & Crutcher, while also bridging the gap with some of New York’s traditional elite, such as Davis Polk & Wardwell and Simpson Thacher & Bartlett.
Davis Polk itself posted a strong performance, breaking through the billion-dollar mark in revenues, posting a 10% rise to $1.07bn. The firm’s average PEP crossed the $3m threshold to $3.3m, rising 12%; last year only eight American firms from the Global 100 managed to make it past that mark. The performance underlines the revival for a firm perceived to have drifted off course during the 2000s.
Gibson Dunn also broke the $3m barrier, with a rise of 3% to $3.04m from $2.9m the previous year, with revenues up 6% to $1.47bn from $1.39bn – its 19th consecutive rise. Gibson Dunn managing partner Kenneth Doran told Legal Business: ‘For each of the past 18 years we have managed to set the bar a little higher and are very pleased to have had another record year.’ Doran added that the firm’s litigation practice was very active, especially in white-collar, compliance and investigations, with these practices accounting for 60% of the firm’s overall revenue.
Disputes leader Paul, Weiss, Rifkind, Wharton & Garrison also continued a record-breaking streak with its 15th year of revenue increases in a row. Turnover surpassed $1bn, rising 11% to $1.04bn. Paul Weiss chair Brad Karp, told Legal Business: ‘The legal landscape is continuing to evolve and has become increasingly segmented. As we’ve seen, a firm’s size and geographic reach are not determinative of its success. We’ve seen smaller elite firms succeed by operating only in a small number of jurisdictions and practice areas where they are market leaders, and conversely, we’ve seen some global behemoths struggle by trying to be all things to all clients. The consequences of identifying an effective strategy and executing that strategy have never been greater.’
Latham managing partner Bill Voge put the firm’s growth down to the global M&A recovery and that its clients were increasingly using multiple offices.
Also enjoying double-digit growth was energy-focused Houston firm Baker Botts, which saw its revenue shoot up 11.4% to $653m from $586m in 2013, while net income soared 22.6% to $299.3m. The firm’s PEP increased to $1.7m – a 25% increase on 2013’s $1.36m. Similarly, technology, media and telecoms specialist Cooley’s revenue rose 19% to $802m from $674m – up 55% since 2009. Revenue per lawyer (RPL) increased 6% from $1m to $1.06m, while PEP rose 11% to $1.74m.
Higher up on the Global 100 list, Mayer Brown enjoyed solid growth with PEP rising 13% to $1.45m, after generating revenues of $1.2bn, up 7% from $1.1bn in 2013. London senior partner Sean Connolly cited the rise in client demand for global advice across different practices and jurisdictions as one of the key reasons for growing profits. Peer firm White & Case saw a less dramatic increase, up a steady 4% to $1.5bn from $1.44bn in 2013. RPL grew 5%, while PEP rose more confidently at 7% to $2m, giving a 36% increase over three years. Shearman & Sterling saw revenues up 3% to $845m, while PEP came in 5.8% up at $1.9m.
However, standing apart from the robust trend was K&L Gates, which saw revenues decline slightly by 1.2% from $1.16m to $1.15m, while RPL and net income per partner stayed essentially flat. The firm attributed this performance to currency fluctuations, with the dollar strengthening in the second half of 2014, and figures for its London office showing a more positive 11% revenue growth.
Cadwalader, Wickersham & Taft also turned in a below trend performance, as gross revenue marginally fell to $481.5m compared to 2013’s level of $481.7m, RPL decreased 3.2% and partner profits took a severe 15.3% drop to $2.21m from $2.61m.
While Latham sits at the top for now, many of the US global elite, such as Skadden, Arps, Slate, Meagher & Flom and Kirkland & Ellis, are yet to reveal their numbers, although it is unlikely any will surpass the bar set, with only DLA Piper, which pulled in over $2.48bn in 2013 and Baker & McKenzie, which earned $2.42bn for the year ending 30 June 2014, in contention.
What is clear from the US results is that ground is being gained on the Magic Circle and other Legal Business 100 firms, in terms of both revenue and profitability growth.
jaishree.kalia@legalease.co.uk