For many of Washington’s largest law offices, 2012 was neither the best nor the worst of times.
In a year when few lawyers expected soaring profits, given the still-sluggish economy, D.C. firms generally mustered decent showings, interviews with firm leaders and legal consultants show.
It’s still too soon for definitive year-end financial results, but preliminary reports indicate a year marked by moderate growth in revenue along with an ongoing focus on controlling costs.
“I can’t think of any firms that had an absolutely spectacular year, but I don’t think anyone had a terrible year either,” said consultant Lisa Smith, a principal at Fairfax Associates in Washington. “It’s more of the same — the fifth year of relatively flat-ish results.”
Still, some firms had a fairly strong year. At Wiley Rein, profits per partner increased by about 10 percent, and Arent Fox managing partner Matthew Clark said his firm set a record for revenue in 2012, calling the year “terrific.”
Leaders at other firms such as Akin Gump Strauss Hauer & Feld and Hogan Lovells were less effusive.
“Bumpy” is how Akin chairman R. Bruce McLean described 2012. “We started out slow and finished very strong,” he said, noting that the first two quarters of the year were “not good,” but that during the third and especially the fourth quarters, business picked up sharply. In December alone, he said, the firm’s corporate lawyers worked on $35 billion worth of deals.Overall, McLean said, he expected a “modest” increase in revenue compared with 2011, when Akin pulled in $770 million, according to The American Lawyer. Profits in 2012, however, are likely to be flat or somewhat down from 2011, he said, when firm equity partners took home nearly $1.7 million on average.
“It’s still very challenging. The firm’s performance follows the economy,” McLean said, adding that “we’re paying close attention” to profitability, and that one factor is an increase in the number of partners. He flagged the firm’s corporate practice, as well as international trade, health care, communications, energy regulation and lobbying as bright spots.
“We’re pretty confident that as we move into 2013, we’re coming into the year with good momentum,” he said.
‘QUITE AN ACCOMPLISHMENT’
At Wiley Rein, chairman Richard Wiley said that in 2012, “both profits and revenue were at record levels.” He anticipates that profits will be about 10 percent higher than in 2011, when firm partners averaged just above $1 million. Gross revenue in 2011 was $216.5 million.
Wiley credited successful business-development efforts and rigorous cost management for the strong showing in 2012. “We’re a very efficient organization,” he said.
The biggest practice remains communications, where firm lawyers advised Deutsche Telekom A.G. on its (failed) sale of T-Mobile USA to AT&T Inc. and its ongoing deal to combine T-Mobile with MetroPCS Communications Inc. Government contracts is a close second, where firm lawyers have been busy advising clients including Booz Allen Hamilton Inc., which faced a proposed debarment action.
Arent Fox also enjoyed a robust 2012. Clark said the goal entering the year was to match the performance of 2011. Not only did the firm top 2011, but, Clark said, the firm exceeded expectations in metrics like gross revenue, net income and revenue per lawyer. “This year will have the highest gross revenue that Arent Fox has achieved,” he said. “If we can do that again in this economic environment with the uncertainty out there, it will be quite an accomplishment.” Arent Fox had a gross revenue of $230.5 million in 2011.
Clark said the firm aims to open a San Francisco office by the middle of this year built around its intellectual property, health care and litigation practices. Overall, Clark said, the firm will likely continue along the same path it carved during the past few years. “Because we were so strong in 2012, we don’t want to tinker with a recipe that gets results.”
For Hogan Lovells, 2012 was on par with the results of 2011, according to co-chief executive officer J. Warren Gorrell Jr. “Our expectation is that our financial results for 2012 will be consistent with the financial results of 2011,” he said. “Those expectations were not that we would do better but do more of the same.” In 2011, Hogan’s gross revenue was $1.665 billion, with profits per partner of $1.165 million.
Gorrell said the firm’s dollar results would be affected by the weakness of the euro, given the firm’s global footprint. He predicted that privacy, cybersecurity and data protection would be an increasingly active practice.
Arnold & Porter chairman Thomas Milch said he expects the firm’s financial performance in 2012 will be up slightly from 2011. In 2011, the firm posted gross revenue of $639.5 million and profits per partner of more than $1.4 million. “We feel good about 2012,” Milch said. “The last few years have been such a challenging time for law firms.…We did well under the circumstances.”
The key, Milch said, has been “really concentrating on combining great legal work and great client service with painstaking attention to cost control and project management.” He said the firm’s regulatory practices, including antitrust and health care, were strong, as well as litigation and assistance with government and internal investigations.
Arnold & Porter’s revenue also was bolstered by its merger with 82-lawyer Howard Rice Nemerovski Canady Falk & Rabkin, which went into effect on January 1, 2012.
At 150-lawyer BuckleySandler, chairman Andrew Sandler said he expects revenue and profits in 2012 will be comparable to 2011, when the firm grossed $96 million and profits per partner were $1.67 million.
“For us, the real lesson of 2012 was that focusing on more efficient delivery of services and using alternative-value billing approaches results in happier clients and doesn’t necessarily decrease profitability if done right,” Sandler said.
BuckleySandler, which was founded in 2009 and focuses on financial services, added several prominent laterals last year from the government, opened a new office in Orange County, Calif., and expanded its presence in New York.
Another D.C. speciality firm, IP powerhouse Finnegan, Henderson, Farabow, Garrett & Dunner, is also “expecting to have a good solid year and strong numbers,” according to a firm spokeswoman. The firm declined further comment because year-end collections were ongoing when the firm was contacted on December 28. In 2011, Finnegan’s gross revenue was $342 million and profits per partner were $1.13 million.
One key variable as firms tally up their final numbers is collections.
“Some firms have done better than expected in amounts billed, but were running behind on collections,” said Smith of Fairfax Associates. “People were really nervous going into the end of the year.”
Still, she said, “Law firms are probably outperforming the overall economy. It’s still a pretty good place to be.”