Bingham McCutchen suffered its worst-ever financial performance in 2013, posting steep declines in both revenue and profits.
The firm saw a full $110 million wiped off its topline last year, as gross revenue crashed 12.6 percent to a six-year low of $762 million. The falloff in revenue was mirrored on the bottom line, with Bingham’s net income plummeting 24.4 percent, to $213.5 million. Average profits per partner, meanwhile, slid for a second consecutive year, declining 12.7 percent, to $1.475 million. (That figure is still higher than the $1.445 million the firm achieved in 2009, however.)
Not so long ago, Bingham had established itself as one of the Am Law 100’s most consistently strong performers, making seemingly light work of the recession and powering to its 15th straight year of topline gains in 2010. That streak finally ended in 2011, when revenue fell one-half of 1 percent, to $868.5 million.
But Bingham’s 2013 financial results were bad across the board. After falling 4.4 percent in 2012, the firm’s revenue per lawyer dropped again in 2013, dipping 1 percent, to $960,000, and its profit margin tumbled 4 percentage points, from 32 percent to 28 percent.
Bingham chair Jay Zimmerman admits that 2013 was “obviously quite challenging,” which he attributes to three main factors.
First, Zimmerman says, Bingham’s historical strength in such countercyclical practices as litigation and restructuring means it was always likely to see its performance sag as the U.S. economy recovered. He says the firm suffered through a similar slump in the 1990s following the last major recession. “Quite frankly, we run on a different cycle to a number of our competitors,” he explains. “We grew at a record pace from 2008, as a recession related to real estate and banking is a very vibrant period for us. But once a lot of those problems are worked out and you start to look toward an [economic] uptick, there is usually a lull for us.”
Zimmerman says Bingham’s revenues were further affected by the conclusion of a number of major cases that had been keeping large teams of its lawyers busy—and, by extension, keeping its coffers filled. Those assignments included the firm’s representation of Anadarko Petroleum in the Deepwater Horizon oil spill litigation, and Japanese electronics company Olympus Corp. in a $1.7 billion accounting scandal. The Olympus engagement spanned crisis management, corporate governance, claims litigation, and securities and financial regulatory issues, including working to keep the company’s stock from being delisted from the Tokyo Stock Exchange.
Finally, Zimmerman says, for the second year in a row Bingham invested $11.5 million in the 250-employee business services center in Lexington, Ky., that it launched last April. While the investment cost each equity partner about $100,000 in profits last year, Zimmerman says, the center is expected to generate annual cost savings of $25 million beginning in 2016. (In addition to knocking six figures off average partner profits, the centralization of the firm’s business services function also led to 31 support staff being laid off in January. Zimmerman says the firm is now “largely through that process.”)
Those layoffs followed a series of senior partner exits, with four onetime practice heads or coheads leaving the firm in the past 13 months.
Just last week, Bingham’s white-collar cochair Raymond Marshall, a member of the firm’s executive committee, moved to Sheppard, Mullin, Richter & Hampton. In January, real estate cochair Kenneth Lore joined Katten Muchin Rosenman alongside three partners and five other lawyers to head the Chicago-based firm’s East Coast real estate practice. (Lore also took a spot on Katten’s management committee.) Last summer, Bingham’s health care industry cochair and pro bono practice head Peter Carson decamped for Sheppard Mullin Richter & Hampton in San Francisco. Carson’s departure followed the defection of an 11-partner financial regulatory group led by former broker-dealer head Neal Sullivan that jumped to Sidley Austin. And in January 2013, Bingham energy and project finance cochair Tara Higgins took two partners with her to Orrick, Herrington & Sutcliffe, where she now coheads the firm’s energy practice. Orrick dipped into the Bingham pool again a few weeks ago to poach Los Angeles–based litigation partners Marshall Grossman and Stacy Harrison.
Zimmerman refused to comment on the specific departures, but says the firm has “very carefully managed our business over the last couple of years.” This management, he adds, has included a “conscious decision” to downsize in certain practice areas in an attempt to lessen the cyclical nature of its business. Bingham’s 150-lawyer financial institutions regulatory, enforcement and litigation group had grown to the point that it accounted for roughly 20 percent of the total firm revenue in the early stages of the recession, for example. Zimmerman says that the practice, which had become Bingham’s largest, was “clearly too large,” and that the firm has sought to bring it more in line with its offerings in corporate, tax, restructuring and funds, which each account for about 10 percent of firmwide revenue.
Despite Bingham’s disappointing performance in 2013, Zimmerman says he is “bullish” about the firm’s prospects for the current year, during which he expects a return to growth in both revenue and profit.
“Of course I’m bullish,” he says. “There’s no question in my mind that we’ll see topline growth [in 2014], but we’re going to manage profitability much more than revenue. Topline growth is the easiest thing to achieve—all you have to do is hire some of the many people that are in the market looking for jobs. We’re much more focused on profitability, and we’re going to be able to put a significant extra amount, $100,000 or more, into the pockets of each equity partner this year just from the savings of our business center. I feel very good.”
This report is part of The Am Law Daily’s early coverage of 2013 financial results of The Am Law 100/200. Final rankings and full results for The Am Law 100 will be published in The American Lawyer’s May 2014 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.