Monday 23 Feb 16:17
By Matt Byrne
Cravath Swaine & Moore has spent so long at the top of the US profitability charts – second only to the unique boutique that is Wachtell Lipton Rosen & Katz – that maybe it’s suffering from altitude sickness.
Could that explain the Icarus-style 24 per cent drop in average profit the firm posted last week? Or could it be that the days of Cravath and its New York elite rivals being able to charge a hefty premium rate for their services are now behind them?
If it’s the latter, that could also explain why Cravath’s presiding partner Evan Chesler seems so keen to see the back of the billable hour. In January, Chesler was quoted in Forbes magazine as saying: “The billable hour makes no sense, not even for lawyers”.
Certainly if it’s the continuation of the billable hour that’s to blame for Cravath’s figures this year, then yes, it makes no sense for one firm at least.
In 2007, Cravath’s PEP stood at $3.3m. Now it’s fallen by roughly a quarter to $2.5m.
The subtext behind Chesler’s slamming of the billable hour seems clear: now that much of that premium work has disappeared, let’s look at different charging structures that might just coincidentally prove beneficial to Cravath.
The demise of the hourly rate is a debate that has run for years. As US legal market commentator Bruce MacEwen put it in a recent posting on his blog, Adam Smith, Esq: “Are we, then, about to witness in some grandiose fashion the ‘death’ of the billable hour? I see no such incipient revolution.”
A bigger question than the unitary cost is surely how Wall Street’s top law firms are facing up to their very uncertain future. Or, as MacEwen adds: “How are the Wall St firms going to work if there is no longer a Wall Street as we know it?”
That would appear to be the fundamental challenge, not only for Cravath, but for all of its competitors.
Friday 20 Feb 17:27
By Julia Berris
As expected Shearman & Sterling had a tough 2008. Revenue was down 14.2 per cent to $876m while average profit per equity partner (PEP) dipped by 5 per cent to $1.665m ( 19 Feb 2009).
But Shearman is taking action. Partners and associates have been shifted to busier parts of the network and a hiring freeze has been in place since the beginning of 2008. Both have contributed to a relatively healthy revenue per lawyer (RPL) of $1.02m.
“This explains our good global revenue per lawyer number,” says London managing partner Anthony Ward. “We’re also looking to maximise the opportunities presented by our client base around the world to get more work.”
Ward also points to the fluctuating exchange rate as a factor that has exaggerated Shearman’s plummeting revenues.
“When expressed in US dollar terms revenue is greatly influenced by exchange rates,” he argues. “There has been an approximate 25 per cent drop in sterling as against the US dollar between 2007 and December 2008.”
Friday 20 Feb 10:05
Think Paul Weiss and one generally tends to think litigation powerhouse. But there’s more to the firm than that.
It seems Paul Weiss’ bankruptcy and restructuring group is currently so busy handling investments into distressed companies, smaller private equity deals and asset sales it’s turning away work.
Or, as group head Alan Kornberg puts it, “We’re raging. We’re in the enviable position of being able to choose what work to do.”
In an interview with The Lawyer earlier this week, to be published in full next week, Paul Weiss’ chairman Brad Karp offers a typically restrained view on what he and his partners clearly believe will be a positive year for the firm.
“Our hope is that 2009, like 2008, will be a strong year,” Karp says.
Last month Paul Weiss posted another year of steady, if unspectacular growth. Total revenue was up 6.3 per cent to $692m while average profit per equity partner (PEP) increased by 2.3 per cent to $2.7m. The past three years have seen similarly slow and incremental growth at Paul Weiss.
But Kornberg’s group is currently busy enough it is providing overspill work for some of Paul Weiss’ lawyers outside of the seven-partner bankruptcy group.
“We’re doing a ton of high-profile bondholder work and also handling company side matters,” says Kornberg.
“The split is roughly 40 per cent bondholder. Several of the companies we’re acting for are multinationals plus there are also mandates for foreign clients buying companies that are in Chapter 11.”
The international angle is interesting. Paul Weiss likes to think of itself as a global firm, although in truth that might be more precisely characterised as a firm with global capabilities (via its loose alliance of international friends).
As far as bankruptcy is concerned, the firm only practises it in New York. Still, its US-only approach to bankruptcy doesn’t appear to be a barrier to winning work.
As Karp puts it, “The distressed space has provided enormous investment opportunities for our private equity, hedge fund and financial institutions clients. The asset markdowns have been extraordinary.”
Thursday 19 Feb
By Julia Berris
The demise of the highly leveraged private equity deal sure seems to have hit Simpson Thacher & Bartlett hard.