The end is in sight
18 January 2010 | By Matt Byrne
With many US firms performing far better than predicted for 2009, can the rest of us take heart?
The starting pistol was fired on this year’s US firm financial reporting season last week. Pillsbury Winthrop Shaw Pittman became the first firm to report when it posted a 7.5 per cent drop in total revenue for 2009.
Pillsbury’s gross revenue last year was $533m (£326.5m), down from $576m in 2008. Average profit per equity partner (PEP) was also down to $950,000, a 2.6 per cent drop on last year’s $975,000. Revenue per lawyer remained flat at $805,000.
Chairman Jim Rishwain admitted 2009 had been “a very tough year on so many levels”, but reiterated his firm’s commitment to its international footprint, stating that now more than ever US companies were looking abroad for business opportunities.
On the same day elite New York firm Paul Weiss unveiled provisional results that showed the firm had generated slightly lower fees in total during 2009, but had registered a rise in PEP.
Although it is understood the firm’s books had still to close on last year, the signs last week were that Paul Weiss generated a total turnover of around $678m, some 2 per cent lower than in 2008. In contrast, PEP was up, from $2.65m to $2.69m.
The firm’s chairman Brad Karp said the year had ended strongly - a trend that continued into 2010.
“We’re starting the year in a very strong position,” said Karp. “We have a great deal of inventory and we’re busier across our practice areas than ever. In fact, we’re coming off the strongest October, November and December in the firm’s history.”
The third firm to state publicly how its 2009 had been came in on Friday (15 January). And arguably it was the most dramatic so far.
K&L Gates underlined the tremendous growth it has achieved over the past five years by breaking through the $1bn barrier on revenue for the first time. The newest member of the billion-dollar club posted a total revenue of $1.03bn, an increase of 7.8 per cent on 2008’s $959.5m.
Average PEP was also up, albeit marginally, from $855,000 to $860,000, representing an increase of 0.6 per cent.
K&L Gates’ growth has primarily, although not exclusively, been powered by merger activity. Last summer the US firm hired the former head of Ashurst’s Dubai office Paul de Cordova to open its first base in the Middle East.
In March K&L Gates launched its fifth Asia office by setting up shop in Singapore. This came just weeks after the firm had hired a two-partner team from Simmons & Simmons to launch in Frankfurt.
Recent merger activity includes the firm’s deal with Chicago-headquartered Bell Boyd & Lloyd in March last year and the summer 2008 takeover of Carolina-headquartered Kennedy Covington Lobdell & Hickman.
While it is too early to spot any trends in this year’s results, towards the end of last year word was already circulating in the New York market that 2009 could turn out to have been not quite as much as a shocker as most had predicted 12 months previously.
Legal market recruitment consultant Paul Roxburgh of Macrae Roxburgh Appleby was in New York just before Christmas. The most surprising thing, he says, was that most firms said they reckoned they would be flat, or even up, on revenue, when a year ago they all thought they would be way down.
“There’s a lot of positive feeling,” confirmed Roxburgh.
Throw in the cost savings (read layoffs) that most firms have made, and even with flat revenues year-end profits could well be up.
As The Lawyer reported last week (11 January), the move by Latham & Watkins to reverse its salary freeze for associates has also added weight to the growing feeling that, for US firms at least, the worst may be over.