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The Am Law 100, the Early Numbers: Blank Rome Sees Profits Soar 15.4 Percent, Revenues Rise 6.3 PercentAfter suffering declines in many key financial categories between 2010 and 2011 thanks to its investments in a variety of areas, Blank Rome reaped the rewards last year by recording notable gains in billable hours, revenues, and profits.
2013-02-12 12:00:00 AM
After seeing a dip in many key financial metrics between 2010 and 2011 driven by a number of investments, Blank Rome reaped the rewards in 2012 with significant jumps in billable hours, revenue and profits.
Blank Rome's gross revenue grew 6.3 percent from $309.5 million in 2011 to $329 million in 2012. The firm's revenue per lawyer (RPL) jumped nearly 7 percent from $655,000 to $700,000. On the profit side, profits per equity partner (PPP) soared 15.4 percent from $650,000 to $750,000 and the average compensation for all partners rose 19.4 percent from $490,000 to $585,000.
Blank Rome Chairman Alan J. Hoffman noted the firm was able to increase revenue while keeping total attorney headcount essentially flat at 471 lawyers. He said the firm's overall billable hours increased 4.7 percent and the average hours per attorney rose from 1,767 in 2011 to 1,804 in 2012.
Core practices such as litigation, real estate and financial services, particularly in the consumer financial services group, had a strong year in 2012, Hoffman said. So too did the environmental, family law and maritime practices. A few years ago, Blank Rome decided to invest in industry groups as well as practice areas and those are paying off, Hoffman said. He pointed to the financial services, chemical and maritime industries.
Much of the firm's revenue growth stemmed from existing clients of attorneys who joined the firm in 2011 and were able to provide those clients additional services in 2012 through their joining Blank Rome.
In 2011, Blank Rome acquired 10-attorney litigation boutique Abrams Scott & Bickley in Houston. Hoffman said that group has been able to cross-sell other Blank Rome services in 2012, bringing in more revenue for the firm. Blank Rome's maritime and chemical and energy practices have benefited from having the Houston office, he said. The consumer financial services practice brought on board in early 2011 also expanded significantly in 2012, Hoffman said.
In 2011, Blank Rome also added attorneys to its nearly four-year-old Los Angeles office, opened in Shanghai and added a four-person white-collar litigation team in Washington, D.C.
"When you open an office in California or in Asia or in Houston, it takes your partners that are in Philadelphia and [other existing locations] some time to really become familiar with the kinds of services that we can offer in other locations throughout the country," Hoffman said, noting those additions are expected to generate more revenue over time.
Blank Rome's overall attorney headcount fell by one lawyer to 471 attorneys in 2012. The equity partner tier increased by one lawyer to 140 equity partners and the nonequity partner tier decreased 10.7 percent from 121 nonequity partners to 108. Hoffman said the firm did not conduct any de-equitization or layoff program in 2011 or 2012 that would have accounted for the drop in nonequity partners. Hoffman said some nonequity partners left or became counsel.
In looking ahead to 2013, Hoffman said the firm spent a lot of time last year reorganizing its staffing models and integrating its 2011 expansion efforts. Now the focus is revenue growth, Hoffman said.
"We've maintained our expenses at a pretty level clip," Hoffman said. "That's led to [the fact that] growth in revenue becomes growth in profitability."
Keeping Expenses in Line
Blank Rome has placed a keen eye on expense management over the past few years. While the firm actually carried some accounts payable over from 2011 into 2012, it was able to prepay $2 million worth of 2013's expenses out of 2012 profits, Hoffman said.
Between 2010 and 2011, Blank Rome's net income fell 12.1 percent. But between 2011 and 2012, that figure rose 16 percent from $90.5 million to $105 million. The firm's profit margin rose from 29 percent in 2011 to 32 percent in 2012.
Regardless of where the firm's revenue has been over the past few years, Blank Rome's expenses have hovered between $186 million and $188 million since 2007. For 2013, the firm is budgeting for a second straight year of $188 million in expenses, meaning it isn't expecting expenses to rise year over year.
In an effort to manage expenses, Blank Rome has shifted its staffing models, most recently by offering its entire secretary pool voluntary separation packages in an effort to decrease the firm's secretary-to-lawyer ratio to 1-to-4. Sources had said the firm was looking to eliminate about 30 secretarial positions, though Blank Rome would not confirm that number. The time period for accepting the buyouts recently passed and Hoffman said enough people took the buyout that the firm was not forced to do any layoffs to meet its staffing goals.
Hoffman also confirmed that in 2012 the firm outsourced its document services or word processing department to Wheeling, W.Va.-based Williams Lea. One source said the number of Blank Rome staff affected by that move was approximately 20 people. Hoffman said he didn't think it was quite that many. He said he thought some of the firm's staff was hired by Williams Lea.
Hoffman said there were a couple of "initial bumps" when the firm made the transition, but he said the arrangement is working fine as far as he is aware. He said the cost savings of such a move aren't necessarily realized in the first year, but will more likely be seen in two or three years.
Williams Lea also does billing collections work and Hoffman said the firm is looking at that option among others.
"Anything where you can continue to deliver the services where staffing functions and other support services that the law firm needs [are done] on a less expensive basis that ultimately saves your clients money is what we're looking to accomplish," Hoffman said.
That could include outsourcing or moving those functions to a cheaper geographic location or cheaper building in their current markets, he said.
In 2012, Blank Rome hired Bea Seravello from Dechert to serve as the firm's first chief strategy officer. She has been working with practice groups on how to implement project management techniques in the firm. Project management has been rolled out in more of the commodity practice areas and that data will be reviewed to see how best to implement it in other practice areas, Hoffman said.