For Drinker Biddle & Reath, 2007 was a year of investment and transformation. A year its leaders called historic for the nearly 160-year-old firm.
The firm's gross revenue and headcount each grew by more than 40 percent after a Jan. 1, 2007, merger with Chicago-based Gardner Carton & Douglas. The combined firm then created a new practice group management system that is more industry-focused.
But payment for the investment has to come from somewhere, and in 2007 it came, in part, from partner profits.
Drinker Biddle's revenue per lawyer (RPL) increased by 2.5 percent, the profits per equity partner (PPP) decreased by 1.7 percent and the average compensation per all partners dropped by 4.9 percent.
Gross revenue increased 45 percent from $246 million in 2006 to $357 million in 2007 and the RPL grew from $580,000 to $595,000.
The firm's PPP dropped from $585,000 to $575,000 and the average compensation for all partners decreased from $530,000 in 2006 to $504,000 in 2007.
Drinker Biddle managing partner Andrew C. Kassner said he was happy that the RPL increased in a year when so many of the firm's attorneys were focused on integration. He said tens of thousands of hours were spent by all of the attorneys getting to know one another and making sure they all emerged from what he calls the "merger year" as one firm. The other financial metrics beat the firm's budget, Kassner said.
"If you're going to grow over 40 percent in one year, there's a cost," he said. "When I use the term investment, that's literally what it was."
While its average compensation for all partners dropped, the firm's ratio of compensation for the highest-paid partner to the lowest-paid partner widened from 6-to-1 in 2006 to 8-to-1 in 2007.
Kassner agreed that the drop in average compensation for partners was because of an increase in lower-level partners that came in from Gardner Carton and the increase in the compensation ratio was due to paying some of the top people at Gardner Carton. He said each of the Gardner Carton attorneys retained their same position after moving to Drinker Biddle.
As with many Chicago firms, Kassner said, Gardner Carton had a "significant" nonequity partner tier.
The combined firm's overall headcount grew by 41.6 percent from 423 attorneys to 599 full-time equivalent attorneys. Kassner said in total number of lawyers, Drinker Biddle currently has around 665 attorneys.
In looking at equity and nonequity partner tiers, which are calculated using the full-time equivalent attorney metric, the equity tier increased by 42 percent from 143 equity partners to 203 in 2007 and the nonequity tier increased by 73.5 percent from 34 nonequity attorneys to 59 in 2007. That puts the firm's equity tier at about 33.8 percent of its total attorney headcount, a number larger than many of the similar-sized firms in Pennsylvania.
Kassner said the majority of the headcount increase of 176 full-time equivalent attorneys was from the Gardner Carton merger. The firm's fiscal year ends Jan. 31, so that increase also accounts for 13 attorneys from the disbanding Miller Alfano & Raspanti firm, including name partner Gregory P. Miller, who joined the firm in January to bolster its white-collar group. The firm also added a group from Mayer Brown in Chicago, a public finance practice in New Jersey and a labor group on the West Coast.
Drinker Biddle didn't really feel the effects of the turn in the economy in the middle of 2007 because of its focus in 2006 and the early part of 2007 on growing practices that would thrive in a down economy. The way to plan for economic changes, Kassner said, is to be diversified in practice scope.
Kassner pointed to the growth of the firm's bankruptcy, labor and employment, white-collar and securities and litigation practices as some that will carry the firm through a rough economic patch.
He said he thinks some practices will have a flat 2008 while others are picking up. Overall, he said, it makes for an expected good year.
The combined firm is already seeing millions of dollars in work going across offices from legacy Drinker Biddle attorneys to legacy Gardner Carton attorneys, and the firm is picking up work it wouldn't have had it not done the merger, Kassner said.
In 2007, the products liability practice continued to be what Kassner called a "tremendous success story" for the firm, with its representation of big pharmaceutical companies serving as a big driver of revenue.
The class action practices, particularly in the area of telecommunication, also had a strong year along with the litigation group as a whole. Other traditional Drinker Biddle practices like the corporate and insurance groups also did well for the firm, Kassner said. Under the combined firm, the new-and-improved health care group and the employee benefits group both had strong years and gained a national presence, he said.
A lesser-known practice for the firm is government relations, which Kassner said also had a really strong year in 2007.
The real estate group didn't take a hit in 2007, and Kassner said he wishes he could predict what the case would be for 2008. The firm has more than 50 real estate attorneys, but the practice isn't beholden to Wall Street and capital markets, he said.
The work for the firm's larger developer clients is down, but its leasing work is still robust, Kassner said. Drinker Biddle is "cautiously optimistic" that 2008 will be a good year for the real estate group, he said.
Looking at the broader picture, the firm is looking to see in 2008 some return on its investment from last year. Kassner said, however, that no one could stand still in the legal industry, particularly when clients are using fewer law firms and expecting their firms to handle a wide variety of complex work.
Drinker Biddle will expand its national labor and employment practice in 2008 and will look to grow in the mid-Atlantic, Midwest, West Coast and Washington, D.C., markets. Kassner said he would also look to address and expand the firm's presence in New York. The office currently houses six full-time attorneys and four others who spend part of their time there, according to the firm's Web site.
While he wouldn't say exactly where the firm might look, Kassner said there isn't a firm out there that isn't thinking about expanding abroad. When a good business opportunity presents itself, he said, the firm would look to grow organically in a foreign market.
