John "Jack" Sheridan, Wilson Sonsini Goodrich & Rosati co-managing partner
Image: courtesy photo
SAN FRANCISCO — After surging 11 percent in 2011, Wilson Sonsini's revenue growth sputtered in 2012.
The Silicon Valley stalwart's gross revenue fell 2 percent to $539 million. That $10 million decline, coupled with a 3 percent uptick in head count, contributed to a 4 percent drop in Wilson Sonsini Goodrich & Rosati's revenue per lawyer, which now stands at $890,000. As the firm's partnership grew 3 percent, profits per partner fell 7 percent to $1,645,000.
Wilson Sonsini's leaders said they expected the firm's growth to level off in 2012 after the blockbuster year that preceded it, which also saw profits per partner soar 18 percent and revenue per lawyer jump 11 percent. M&A work drove those gains, Wilson Sonsini's management told The Recorder at the time.
"We look at [2012] as being flat year coming off of a very strong year," said partner John "Jack" Sheridan, who manages the firm with partner Douglas Clark. "We feel very good about sustaining that performance."
Litigators helped the firm hold the line in 2012, Clark said. Intellectual property and securities litigation had strong showings and the firm's antitrust lawyers generated buzz for their representation of Google Inc. The Federal Trade Commission announced earlier this year that the company had not violated any U.S. antitrust laws, ending a 19-month investigation.
Turmoil in capital markets hampered corporate lawyers' work in 2012, though that wing of Wilson Sonsini completed notable deals. The firm advised on more than 15 IPOs, including Palo Alto Networks Inc.'s $260.4 million offering and Trulia Inc.'s $102 million offering. The firm's M&A group worked on about 130 publicly announced transactions, most notably representing Micron Technology Inc. in its $2.5 billion acquisition of Elpida Memory Inc., which is pending.
Wilson Sonsini handled more private financings and issuer-side IPOs in 2012 than any other firm, Clark said. But the firm's growth paled in comparison to fellow Valley heavyweights like Fenwick & West and Cooley. Fenwick's revenue surged 13 percent, and Cooley boosted its profits per partner by nearly 10 percent. Wilson Sonsini is more dependent than Cooley on corporate work, which was in short supply for much of the year, and Fenwick benefited from a wave of work from the Facebook Inc. IPO, law firm consultant Peter Zeughauser said.
"We're very optimistic about state of the Valley and what the next year and beyond will hold," Sheridan said.
2012 was a year of significant investment for Wilson Sonsini, Sheridan added, with the firm debuting offices in San Francisco's South of Market neighborhood and Beijing. Those openings followed the launch of outposts in Delaware, Brussels and Hong Kong, a trio of offices that were largely paid for in 2012 though they opened earlier, Sheridan said. Rather than incurring debt, Wilson Sonsini financed the offices with current earnings, eating into 2012's gross revenue, he noted.
"As Doug and I took over, our focus is on future growth and investment," said Sheridan, who took the reins with Clark last January. "That was what we did last year, and what we're going to do going forward."
But it is still hard to present declining numbers to partners, legal recruiter Larry Watanabe said. Even when investing heavily in overseas outposts or lateral teams, law firm leaders are careful to keep their financial statistics afloat, he noted.
"Most law firm managers try really hard at minimum to be flat," he said.
Slumping financial statistics sometimes cause partners to look to other firms, Watanabe noted. After bringing on three lateral partners in 2012, Wilson Sonsini has seen the departures of corporate partner Richard Blake to Gunderson Dettmer Stough Villeneuve Franklin & Hachigian and M&A partner Michael Ringler to Kirkland & Ellis so far this year. The firm was sorry to lose Ringler, a leader of its M&A practice, but there are no plans to make changes to account for his loss, Sheridan said.
One bright spot was the firm's net income, which rose 7 percent to $194 million. Wilson Sonsini's efficient operations squeezed more profit out of the year's flat revenue, Clark and Sheridan said.
"We have always run the firm very conservatively on cost basis," Clark said. "We have a healthy percentage of our revenue fall to the bottom line."
This report is part of Recorder parent company ALM's early coverage of 2012 financial results of The Am Law 100/200. Final rankings and full results for The Am Law 100 and 200 will be published later this year.
