For the second year in a row, O'Melveny & Myers reported a decline in both revenue and profits as the firm struggled with the continuing economic downturn and client pressure on rates. The Los Angeles-based firm reported 2009 gross revenue of $826.6 million, a decline of 8.9 percent. Profits per equity partner were $1.47 million, a decline of 4.2 percent.
Last year "was the most challenging year that I can recall since I've been a partner and certainly as my tenure as chair," says Chairman Arthur B. Culvahouse Jr. The beginning of the year was particularly challenging, Culvahouse says, with a large number of busted deals in the capital markets and private equity practices, and slow collections from clients. O'Melveny's litigation department, which constitutes 55 percent of the firm's lawyers and was a Litigation Department of the Year finalist, suffered from client pressure to significantly discount rates and fees. And Culvahouse also pointed to a "somewhat surprising lag" in regulatory enforcement activity from the Obama administration last year, although the firm is starting to see an increase in volume in those matters.
There were some bright spots. The firm's private equity finance practice stayed busy with restructuring and refinancing work for portfolio companies with heavy debt loads. Most prominently, O'Melveny advised Harrah's Entertainment Inc., a portfolio company controlled by longtime client Apollo Global Management LLC and TPG Capital, on an almost $8 billion restructuring that spanned from late 2008 through the fall of 2009. O'Melveny's global investment funds and its Asian transactions practices spiked in the latter half of the year, says Culvahouse. And O'Melveny's sports and entertainment practice was strong throughout 2009. The firm is primary U.S. counsel to the International Olympic Committee. (Partner Christopher Brearton ran with the Olympic torch earlier this month.)
O'Melveny reported a 7.9 percent decrease in total head count, and a 1 percent decline in revenue per lawyer to $960,000. The firm laid off 90 lawyers last March, but O'Melveny has been reducing associate class size for the last few years, Culvahouse says, as the firm has relegated some junior litigation work to contract attorneys and outside vendors in an effort to control client costs. O'Melveny also deferred 2009 associates to a Dec. 1 start date.
Equity partners declined by 2.7 percent in 2009, a number that includes a few high-profile departures. In March IP star Dale Cendali left O'Melveny to join Kirkland & Ellis, and class action rainmaker John Beisner left the firm in May to join Skadden. Culvahouse disputes that the high-level departures constitute a trend and emphasizes that the firm's IP and class action practices continue to be strong.
The firm reported a 33 percent increase in nonequity partners, a phenomenon due in part to expansion in the firm's practice in Asia, a significant point of focus for the firm in recent years. O'Melveny now has approximately 100 lawyers in five offices in the region, including more than 20 lawyers in Singapore, an office that opened in August 2008 with two former White & Case partners. O'Melveny did not de-equitize any partners, Culvahouse says.
This report is part of The Am Law Daily's ongoing Web coverage of The Am Law 100’s 2009 financials. Results are preliminary. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2010 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.
The final published results of last year's Am Law 100 rankings are available here.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
