Last month was all about associate salaries. February’s US firm-by-firm comparison concentrated on the nitty-gritty of 2006’s financial results. The overall picture was one of steady if undramatic growth, despite the frenzied M&A activity seen in the past 12 months. There were, however, some notable exceptions.
White & Case managed a 21 per cent rise in average profit per equity partner (PEP) to $1.5m (£815,220). Chairman Duane Wall says the firm has done exceptionally well across all its jurisdictions.
This is more than true for the firm’s London office, where a staggering 67 per cent increase in PEP for 2006 was posted, as first reported by The Lawyer (12 February). London senior partner Peter Finlay says the figures were the result of tight cost controls and “growth in revenues across all practice areas”.
Paul Hastings Janofsky & Walker’s turnover skyrocketed by 22 per cent, with PEP also experiencing a similarly striking 21 per cent jump to $1.61m (£875,000).
Also impressive was Philadelphia-headquartered Dechert, which sustained the massive 30 per cent growth it saw in 2005 by posting a 27 per cent increase in both PEP and turnover for 2006.
But for the vast majority of firms, increases occurred, but of no more than 10 per cent.
Of course there were some firms that just did not want to participate in such comparisons at all – mainly the elite New York firms such as Cleary Gottlieb Steen & Hamilton and Wachtell Lipton Rosen & Katz – the very firms that would have probably benefited the most from the M&A boom.
Simpson sizes up record-breaking deal mandates
Talking of the M&A boom, Simpson Thacher & Bartlett likes superlatives. Fresh off the back of securing the biggest buyout in history by successfully advising private equity client Blackstone on its $38.9bn (£20.25bn) acquisition of Equity Office Properties, the Manhattan firm advised its other marquee client Kohlberg Kravis Roberts (KKR) on a new record-breaking deal.
A KKR and Texas Pacific-led consortium has tabled a $44.5bn (£23.17bn) bid for Texan utilities company TXU, making it the world’s biggest private equity deal (for this week at least).
Simpson Thacher teamed up with Texan firm Vinson & Elkins to advise the bidders, while the deal gifted roles to a raft of advisers, including TXU’s counsel Sullivan & Cromwell, which was evidently not put off by forgoing the Equity Office Properties deal, on which it advised a failed bid.
Meanwhile, Simpson Thacher’s long-serving London head Walt Looney is returning to the firm’s New York headquarters, with M&A partner Greg Conway taking over.
Jenkens adamant that it is not another Coudert
When more than 40 lawyers leave various offices of a firm in a week, the smart money would be on that firm closing its doors for good soon after.
But the mass exodus that Texan firm Jenkens & Gilchrist suffered on the week beginning 26 February was not to be seen as an “unravelling” of the 56-year-old firm, said a spokesperson. So what was it then?According to a senior source who is heading for the door, it was decided as long ago as last summer that Dallas-headquartered Jenkens would close down all of its satellite offices, bringing partner numbers back down to the 250 mark.
Revenue has seen a steep slide since the firm’s 2001 heyday, when turnover stood at $312m (£216.67m). In 2005 (the most current information available) it stood at $179m (£98.35m). It is understood that the firm set out to restrict its size in order to stem the profit slide.
The firm’s reputation suffered from a 2003 Internal Revenue Service investigation, which found that several tax shelters on which some of Jenkens’ Chicago-based lawyers had advised were abusive.
Jenkens spent the next three years firefighting by firing and demoting the partners involved and paying $82m (£41.74m) in settlements. Departing partners claim the matter had no bearing on their leaving.
Since January Fulbright & Jaworski, Berry Appleman & Leiden, Baker Hostetler, Nixon Peabody and Jackson Walker, in that order, have picked up teams of Jenkens lawyers in Houston, Los Angeles, Chicago and San Antonio respectively. It is clear that Jenkens managed the departures once the downsizing strategy had been decided upon.
What is also apparent is that, despite the firm’s shrinking revenue, it was still in good financial standing and had met all of its obligations at the end of 2006. It is not like Coudert Brothers, which was highly indebted at the time of its collapse.
Which makes it all the more interesting to see what will happen next. At press time chairman Patrick Mitchell had yet to make a statement beyond wishing his departing partners well. A spokesman said Mitchell had been in back-to-back meetings.
Normally The Lawyer would dismiss this excuse as a brush-off, but given that these meetings include emergency talks with firms such as Hunton & Williams about taking on a team of Dallas lawyers, we are inclined to believe him.
Heller makes up for lost time after London launch
West Coast firm Heller Ehrman finally opened in London, a year after The Lawyer first revealed (16 January, 2006) the firm’s intentions to do so.
The firm wasted no time in executing three daring raids to start up the office, first taking PricewaterhouseCoopers’ general counsel, then three corporate technology partners from rival WilmerHale‘s London office followed by a competition senior associate (who Heller is making up to shareholder on arrival) from Slaughter and May, all in quick succession.
Poor old WilmerHale then suffered a repeat performance when Heller returned for a tax partner and four corporate associates at the end of February.
Heller chairman Matt Larrabee tells The Lawyer: “We plan to have 25 lawyers by the end of the year. Beyond that our priority is to get it up and running.”
MBRM de-equitises 45 partners
Transatlantic behemoth Mayer Brown Rowe & Maw (MBRM) is another US firm that has been losing partners.
February began with five partners departing from its New York office, which has been beleagured ever since litigation star Dennis Orr led a four-partner defection from MBRM to Morrison & Foerster last September.
This month five finance partners left for White & Case, following M&A rainmaker William Candelaria, who headed for Gibson Dunn & Crutcher, out of the door.
But as exclusively revealed by The Lawyer (5 March), senior management took matters into its own hands by deciding to de-equitise 45 of its equity partners, or nearly 10 per cent, in an attempt to sustain profitability – even though the firm has announced record financial results for 2006, with turnover surpassing $1bn (£543.48m) and profit per equity partner coming in at more than $1m (£543,480) for the first time.
Partners will be de-equitised in MBRM’s spiritual home of Chicago and litigation will be particularly hard hit, as it was felt the practice area was not leveraged enough.
The UK arm will be generally spared. UK revenue rose by 21.8 per cent in 2006, from $145m (£83m) in 2005 to $176.64m (£96m).