Top New York-Based Firms See Mostly Modest Growth
The Am Law Daily
CORRECTION, 3/15/2013, 9:30 a.m. EDT: An earlier version of this article referred to Raja Chatterjee as a Davis Polk partner. Chatterjee is actually in-house at Morgan Stanley. The tenth paragraph of this article has been corrected.
Head count at the firms was largely unchanged on average in 2012, though Cadwalader, Debevoise, Skadden, and Willkie all saw their attorney ranks shrink by up to 5 percent, and Cahill, Cleary, and Paul Weiss all ended the year with at least 5 percent more lawyers than they started it with.
Partnership ranks at the 12 firms declined 0.3 percent on average. Only Weil which increased its equity partner ranks 4.8 percent added more than a handful of equity partners. At the other end of the spectrum, Shearman lost more than 10 percent of its equity partners. The mostly static partner figures are in line with data collected by Citi Private Bank, which found that the 160 firms it surveyed most of them members of The Am Law 200 increased their equity partner ranks just 0.1 percent on average.
Litigation figured heavily in the revenue results at the New York firms, although several managing partners said that rate pressure continued to erode the profitability of the practice. The impact of the financial credit crisis, which has triggered an unprecedented surge in premium litigation on behalf of financial institutions, continues to be felt. A quick scan of the docket for the U.S. District Court for the Southern District of New York indicates that firms in the city are getting the biggest slice of that market. "There are certain firms that are always going to get the big-ticket meltdowns in the financial services industry," says Paul Weiss's Brad Karp. Government investigations especially the LIBOR antitrust investigations and Foreign Corrupt Practices Act and False Claims Act work are keeping hundreds of fee-earners busy, and New York firms with strong litigation departments are particularly well positioned to benefit.
While corporate work was flat to down through the first three quarters of 2012, many firm leaders said the picture brightened considerably in the last few months of the year as the tax hikes approached. "A lot of clients were trying to get deals done in December," says Weil managing partner Barry Wolf. "There was a significant pickup." Indeed, domestic M&A had rebounded to levels not seen since 2007 by year-end, a development that benefited many transaction-focused firms, including Davis Polk, Paul Weiss, Skadden, S&C, and Weil. (As The Am Law Daily has previously reported, Skadden topped three separate M&A league tables in terms of deal volume in 2012.)
Gretta Rusanow, senior client adviser with Citi Private Bank's Law Firm Group, says that for the nation's largest firms, and the New York firms in particular, both dealmaking and collections were notably higher in the fourth quarter of 2012 than in any of the seven previous years. "In terms of collections, it was in some instances clients driving to make payments to firms by the end of 2012," she notes. "That was a shift."
Below are the key financial results for the 12 firms in question.
Cadwalader: Gross revenue was up 4 percent, to $466.5 million, while profits per partner jumped 11.6 percent, to $2.65 million the firm's first increase in the latter category since 2009. Cadwalader's overall head count declined 6 percent, to 435, while the number of equity partners was static at 55. The firm's transactional work last year included representing medical device manufacturer AngioDynamics on its $372 million acquisition of Navilyst Medical and American Renewables LLC in connection with a $500 million project finance deal. Cadwalader's notable litigation engagements included representing pharmaceutical giant Pfizer Inc. in connection with a $15 million settlement announced in August with the U.S. Department of Justice over an FCPA investigation.
Cahill: The firm hit new highs across the board in 2012, with gross revenue climbing 6.9 percent, to $348.5 million, and profits per partner jumping 10.7 percent, to $3.56 million. Cahill's litigation practice was especially strong on both the government investigations and securities fronts. Partner David Kelley represented HSBC Holdings plc on a $1.25 billion ($1.9 billion with other penalties) deferred prosecution agreement with the U.S. Department of Justice and other regulatory settlements related to allegations that the bank failed to maintain an effective antimoney laundering program. On the corporate side, Cahill burnished its reputation as a go-to firm for banks in the high-yield debt and leveraged loan markets by completing 230 deals in the former category and 150 in the latter.
Cleary: Last year was essentially flat for the firm, which collected $1.13 billion in gross revenue, compared to $1.125 billion in 2011. Profits per partner, meanwhile, dropped by a similarly small margin, from $2.695 million, to $2.685 million. Head count rose 5.8 percent, to 1,252, while the number of equity partners grew just 1 percent, to 193. Cleary, which opened offices in Seoul and Abu Dhabi in 2012, was involved in a number of large M&A, restructuring, and capital markets matters, including Dollar Thrifty's $2.3 billion acquisition by Hertz, CEMEX's $7 billion refinancing, Overseas Shipholding Group's Chapter 11 filing, and the multbillion-dollar IPOs of Russian mobile phone operator MegaFon and Malaysia's Felda Global. On the litigation front, the firm kept busy defending various financial institutions in a number of suits, including some stemming from Bernard Madoff's Ponzi scheme.
Davis Polk: The firm's gross revenue rose 4.4 percent, to $950 million. Profits per equity partner rose 6.7 percent, to $2.455 million. The firm's head count increased 2.3 percent, to 787, while the number of equity partners declined 1.2 percent, to 159. Davis Polk had a busy year domestically. During the first five months of last year, partner Karen Wagner represented the owner of the New York Mets, Fred Wilpon and Sterling Equities Inc., in a trial that ultimately produced a $162 million settlement over clawback claims filed by Irving Picard, the liquidation trustee for Madoff's defunct investment firm. Davis Polk represented Morgan Stanley in connection with an FCPA investigation that the Justice Department publicly announced it was declining to prosecute in October. On the corporate side, the firm advised Aetna Inc. on its $5.7 billion acquisition of Coventry Health Care Inc. in August; CNOOC Limited in connection with its acquisition of Canada's Nexen for $15.1 billion in July; and Dalian Wanda Group in its acquisition of AMC Entertainment for $2.6 billion in May, the largest outbound U.S. acquisition by a private Chinese company.
Debevoise: The firm posted financial results that were largely flat for 2012, with gross revenue at $675.5 million and profits per partner at $2.075 million. The firm's attorney head count, meanwhile, fell for the third year in a row, dropping 5.1 percent, to 615. Areas of particular strength included private equity fund formation, the insurance and financial institutions practice, the international disputes practice, and the overall M&A practice. In terms of international disputes, Debevoise represented Occidental Petroleum Corporation in an arbitration with Ecuador that resulted in a landmark award of approximately $1.8 billion (plus interest). The firm also represented J.P.Morgan Chase in its historic settlement with 49 states and the federal government over mortgage-servicing and foreclosure practices, as well as The Carlyle Group in a deal with Getty Images management to acquire Getty Images from Hellman & Friedman for $3.3 billion.
Paul Weiss: An outlier in this group, the firm saw its gross revenue jump 12.4 percent, to $877 million, and profits per partner climb 8.2 percent, to $3.35 million. Head count grew by 9 percent, to 803, while the firm's partnership ranks grew a more modest 2.4 percent, from 126 to 129. Paul Weiss's Karp says the firm handled more multibillion-dollar deals than ever, jumping from 55th to 20th on mergermarket's M&A league tables in the process. The firm also profited from a similar surge in big-ticket litigation and regulatory work. A Paul Weiss team helped Citigroup Inc. defeat a $4 billion arbitration claim brought by the Abu Dhabi Investment Authority in late 2011 and ADIA's appeal attempting to vacate the arbitration decision last month. The firm also won an appeal on the dismissal of a securities class action filed by the Ohio attorney general against client Fitch Inc. in December. On the corporate front, Paul Weiss served as U.S. counsel to Nexen Inc. in its $15.1 billion acquisition by CNOOC Ltd., and Oaktree Capital Management in its sale of its aircraft leasing company to Mitsubishi UFJ for $1.3 billion in October.
Shearman: The firm's gross revenue rose a meager 0.3 percent, to $752 million, while its profits per partner fell 2.6 percent, to $1.52 million. And while Shearman's total attorney head count was up 1 percent, to 842, its equity partner ranks plunged 10.2 percent, 158 the second straight year that Shearman's equity partnership contracted. The firm's dispute resolution practice had a strong year, with highlights that included winning an international arbitration award of more than $2 billion for Dow Chemical Company in compensation for Kuwait Petroleum Company ducking a joint venture deal during the financial crisis and fending off a claim for more than $4 billion brought by the Chrysler bankruptcy estate against Daimler AG. The firm's capital markets group was also busy, managing both the largest IPO in Mexico's history and Mongolia's virgin sovereign debt offering.
Simpson Thacher: The firm's gross revenue rose 2 percent, to $982.5 million, while profits per partner stayed generally flat, at $2.67 million. Simpson Thacher increased its attorney head count 2.1 percent, to 837, and its equity partner ranks by 2.2 percent, to 186. The firm's litigators handled nearly 33 percent more cases last year than they did in 2011, with much of the increased workload related to the financial crisis. Simpson Thacher's corporate lawyers, meanwhile, had a hand in some of the year's biggest spin-offs, representing Tyco International in connection with the $10 billion sale of its water pump and filter company to Pentair Inc. in March, as well as Ingersoll-Rand plc on the $2 billion spin-off of its commercial and residential security business in December. The firm's lawyers also worked for a special committee to the board of directors of Clearwire Communications in December as that company moved to buy the remaining shares of Sprint it did not already own for $2.2 billion, and represented Getty Images and Hellman & Friedman in August as the photo archive was sold to Carlyle for $3.3 billion.
Skadden: The firm's gross revenue rose 2.1 percent, to $2.21 billion, while its profits per partner increased 5.4 percent, to $2.62 million. Overall head count dipped 5.3 percent, to 1,735, and the equity partner ranks fell 2.2 percent, to 405. Skadden's corporate and bankruptcy practices performed well in 2012, with the firm ending the year atop three separate rankings of M&A legal advisers in terms of total deal value handled.
Among the assignments that vaulted Skadden to the top of those lists: advising a consortium of Russian oligarchs that sold Rosneft the half of TNKBP it did not already own for $28 billion; representing Anheuser-Busch InBev, in connection with its $20.1 billion purchase of the 50 percent stake in Grupo Modelo it did not already own; and acting as outside counsel to Sprint Nextel, which sold a 70 percent stake in itself to Japanese telecom SoftBank for $20.1 billion. Skadden also served as lead creditors' counsel in the AMR Corp. bankruptcy, and handled the same role on the debtor's side in Danish shipping company Torm A/S's out-of-court restructuring. Litigation high points included successfully appealing the dismissal of two derivative suits that sought to compel the Bank of America board to force its Merrill subsidiary to bring claims against various former officers and directors in connection with Merrill's allegedly risky investments in collateralized debt obligations.
S&C: The firm posted a 6.4 percent increase in gross revenue, which grew to $1.18 billion, while its profits per partner rose 7.1 percent, to $3.45 million, according to reporting by The American Lawyer. Head count increased 1.6 percent, to 776, and the equity partnership fell by 1 to 170. S&C benefited greatly from both an uptick in deal work and the bump in financial industryrelated litigation. The firm is representing Bank of America in its long-running multibillion-dollar claim against monoline insurer MBIA Inc. in which BofA argues that the insurer should not have been allowed to spin off its municipal bond insurance business from its crippled structured finance division. It is also defending Porsche Automobil Holding SE against more than $2 billion in claims brought by hedge funds that accuse Porsche of manipulating the market in Volkswagen AG stock. (It won an appeal in a New York State Appeals Court in December.) It also has been tapped by a number of banks in credit crisisrelated litigation. Its M&A lawyers handled, among other matters, AT&T Inc.'s acquisition of NextWave Wireless Inc. last fall; and Coca Cola Hellenic Bottling S.A. in its relisting on the London Stock Exchange under a new Swiss holding company.
Weil: The firm's partnership ranks expanded significantly last year, but gross revenue was essentially flat at roughly $1.23 billion and profits per partner was down 8.6 percent, to $2.23 million. The decline in profits was largely the product of the uptick in lateral growth, as the firm picked up 20 laterals in 2012 to end the year with 195 partners. Weil's overall head count, meanwhile, grew by 4.2 percent, to 1,201. Its litigation docket was busy, with Weil lawyers helping SEACOR Holdings Inc. resolve the issue of its liability in the Deepwater Horizon oil spill; serving as lead trial counsel to Anadarko Petroleum Corporation in a high-profile fraudulent conveyance action; and obtaining a successful infringement verdict for client General Electric Company. The firm's bankruptcy practice was also busy, serving as lead debtor's counsel in both AMR Corporation's ongoing $11 billion Chapter 11 case and the mammoth Lehman Brothers Holdings Inc. bankruptcy, which wrapped up last year.
Willkie: The firm was the only one among the 12 to see its gross revenue which fell 2.7 percent, to $533 million slide in 2012. Profits per partner dropped 3.5 percent, to $2.07 million. In a year that kicked off with a group of five partner and 15 associates taking in-house positions at client Bloomberg L.P., Willkie's attorney head count plunged 7.7 percent last year, from 585 to 540; partner head count increased 1.5 percent, from 131 to 133. Litigation highlights included the firm's representation, with Kirkland & Ellis, of Facebook Inc. in a suit brought by disgruntled shareholders over the social media giants IPO. ( The suit was tossed out by a U.S. district court judge in Manhattan in mid-February.) On the transactional front, Willkie lawyers advised Aviva USA Corporation on its $1.8 billion sale to Athene Holding Ltd and Kenneth Cole Productions Inc. on the designer's bid to take his eponymous apparel company private. In the fall, the firm represented Sunrise Senior Living, Inc. in its landmark $1.9 billion merger with Health Care REIT Inc. one of the largest REIT deals in recent years.
This report is part of The Am Law Dailys early coverage of 2012 financial results of The Am Law 100/200. Click here to see an interactive chart comparing this firm's 2012 finances to those of other Am Law 100 and Second Hundred firms that The Am Law Daily and its sibling publications have reported on to date. Final rankings and full results for The Am Law 100 will be published in The American Lawyers 2013 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.