After a turbulent year in which at least three dozen partners left and some core practices fell into the doldrums, Weil, Gotshal & Manges reported substantial declines in revenues and profitability in 2013. Revenue dipped 7.4 percent to $1.14 billion from $1.23 billion a year earlier, while profits per equity partner fell by the same percentage, to $2.07 million from $2.23 million. Meanwhile, revenue per lawyer was down nearly 4 percent to $985,000 from $1.03 million last year.
While PPP was at its lowest level since fiscal year 2006, things could have been worse: Weakness in the first three quarters was mitigated by a busy fourth quarter, particularly for corporate and litigation work, according to the firm.
Characterizing the year as one of “repositioning,” Weil executive partner Barry Wolf says earnings came in right at the target set by the firm last spring. “Given everything that went on last year, we’re satisfied with the way things went,” Wolf says.
It’s been an eventful year, to say the least. In June, citing a drop in demand for premium legal services, Wolf announced that the firm would trim associate head count by 7 percent, lay off 110 nonlawyer staff, and cut compensation to about 10 percent—or roughly three dozen—of its 334 partners, as we reported at the time. Plans also included downsizing its complex litigation practice in Houston and Boston, where Wolf says that both demand and rates were eroding. “These decisions were very, very painful on a personal level,” says Wolf, “but I’m more and more convinced that they were the right things to do from a business perspective.” The firm paid out six months of severance to some 70 lawyers who were laid off at midyear, increasing one-time expenses as part of the retooling effort.
After the announcement, partners, mostly in Houston and Dallas, left in droves in the early fall. Total lawyer head count declined by 3.7 percent to 1,157 lawyers, and there were nearly 11 percent fewer partners last year than the year earlier. (The firm announced nine new partners and nine counsel in December.)
Not all those who left the firm were encouraged to go, according to three partners who left last year. The most notable were a handful of practice group heads and two management committee members, and three Washington, D.C., partners experienced in disputes before the International Trade Commission.
Major departures in Dallas included Yvette Ostolaza, a top-of-the-line commercial litigator and former Weil management committee member, and banking and finance cohead Angela Fontana, for Sidley Austin; and in Houston, John Strasburger, a top litigation partner, for Winston & Strawn, among others. The departures continued in 2014, with at least eight departing so far this year, including senior leveraged finance partner John Cobb, who is heading to Paul Hastings.
Several partners assert that they have not been paid yet; Wolf says some people who left may not have been fully compensated, but that remaining compensation owed them will be paid in the next year.
The bad news, however, was mitigated by a major uptick in demand at the end of the year. “The good news is that, since the last quarter of 2013 and continuing into the first quarter of this year, we have been doing extremely well, so we are looking at a very strong 2014,” Wolf says. “Things have picked up meaningfully in corporate and litigation.”
Bankruptcy work has remained slow, notes Wolf, but the firm remains committed to its marquee practice. “It’s a real hedge when the economy goes bad, as we’ve seen,” says Wolf. Nationally, new large Chapter 11 matters have plunged by nearly half since 2009, as we noted in The American Lawyer in December. In 2013 Weil helped steer American Airlines through the conclusion of its bankruptcy and an $11 billion merger with US Airways; it was also tapped as debtor’s counsel in two midsize Chapter 11 matters for the Reader’s Digest Association Inc. and for LodgeNet Interactive Corporation. In other restructuring matters, it is advising New York regulators in the court-supervised rehabilitation of Financial Guaranty Insurance Company.
Litigation work increased in the second half of the year. Among the highlights last year: it secured two victories for client ESPN in two major commercial disputes brought by Dish Network; the dismissal of claims against the independent directors of Satyam Computer Services in a securities class action arising out of a $1 billion-plus multiyear fraud known as “India’s Enron”; and won a victory for Marvel Entertainment before the U.S. Court of Appeals for the Second Circuit in a copyright ownership dispute related to Marvel’s iconic comic book characters, including Spider-Man, the X-Men and the Fantastic Four.
Meanwhile, dealmaking, particularly from the firm’s Silicon Valley office, strengthened near the end of the year. Late 2013 deals the firm had a hand in included advising Applied Materials Inc. in its $29 billion merger with Tokyo Electron Limited, announced in September; representing Jazz Pharmaceuticals plc in its acquisition of Italian biotech company Gentium S.p.A. for $1 billion, announced in December; and helping Oracle Corporation in its $1.5 billion acquisition of Responsys Inc., a cloud-based marketing software company, announced in December.
Deal flow remains strong this year, says Wolf. The firm is representing RF Micro Devices Inc. in its $1.6 billion merger with radio frequency chip maker TriQuint Semiconductor Inc.; Facebook Inc. in its $16 billion acquisition of WhatsApp; and China-based Lenovo Group Limited in its pending $2.9 billion acquisition of Google Inc.’s Motorola Mobility Holdings Inc. smartphone business.
Nonequity partner head count at Weil surged by 23 percent last year, to 138 from 112, but that number should decline this year. Wolf explained that the number is artificially high, because it includes all equity partners who departed before the year’s end. Under the firm’s system, partners who depart before the end of the year are considered nonequity partners, receiving a fixed income, but not a share in profits for their last incomplete year. According to Wolf, some of those departing partners saw compensation haircuts last year of as high as 20 percent.
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.