Baker & McKenzie reported Friday that global revenue declined 3 percent to $2.11 billion and profits per partner fell a more significant 17 percent to $992,000 in fiscal year 2009, bringing an end to a four-year period over which the firm experienced consecutive double-digit revenue growth and an 85 percent increase in profits.
While Chicago-based Baker & McKenzie, which generated 66 percent of its fees outside the United States, highlighted the role currency exchange rates played in the falling benchmarks for fiscal year 2009, management admitted the economic downturn negatively impacted the firm's financial performance.
"The financial crisis progressed into an economic recession that has been very challenging for our clients, for all law firms and for us," said John Conroy, chairman of the firm's executive committee. According to Conroy, the impact of the economic downturn has been muted by the firm's proactive efforts, beginning more than eight months ago, to engage clients and adjust to their legal needs. This has included expanding the firm's restructuring practice.
Other practice areas helped hold up the firm's bottom line. Labor and employment, intellectual property and tax remained resilient throughout the downturn, Conroy says.
But the firm's exposure to the wider economic downturn was made clear by cost cutting measures implemented during the most recent fiscal year, which ended in June. In April 2009, the firm laid off 38 lawyers in addition to 86 staff members and paralegals. Just last month, Baker & McKenzie announced plans to lay off 11 percent of its 350 lawyers and professional staff in China.
The search for cost reductions has led to more outsourcing. According to Conroy, the firm expanded by 25 percent in what is now a 500-person facility in Manila that handles some of its word processing, client research and desktop publishing needs. "We have tried to be innovative in reducing cost by further developing what we can do in Manila," Conroy says.
Baker & McKenzie's growth hasn't been limited to its Philippines outsourcing outpost. In late 2008 the firm opened an office in Abu Dhabi. To date, Baker & McKenzie has 3,900 lawyers practicing at 67 offices in 39 countries. Over the past year, the firm has added nine shareholders bringing principal headcount to 720.
But the firm's $214,000 drop in PPP and $76 million fall off in global revenue is a break from its recent trend of steady growth. For fiscal year 2007, Baker & McKenzie reported profits per partner of $1.06 million, breaking the $1 million mark for the first time in the firm's history. The firm reached another milestone in fiscal year 2008 when total revenues came in at $2.2 billion, surpassing the $2 billion barrier for the first time.
This upward trajectory has coincided with efforts by management to both grow and rebrand the firm, which have included focusing on 11 core practices and the firm's 200 most important clients. These initiatives were the subject of an October 2008 article about the firm in The American Lawyer magazine.
"Our goals are still the same. We still want to focus on our 200 global clients," Conroy says. "Of course, the composition of that group looks differently especially in the financial sector."
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.