Stephen Vajtay, Jr. of McCarter & English. HANDOUT. (Bob Laramie)
McCarter & English, one of New Jersey’s largest and most well-established firms, enjoyed good revenue growth in fiscal 2013 led by strong performance in its bankruptcy and tax practices.
The Newark firm posted a 5 percent revenue increase last year to $222.5 million gross, up from $212 million in 2012.
And its profits spiked by 8.6 percent spike to $57 million from $52.5 million.
The marked improvements were largely due to significant revenue gains in four practice groups, chief among them bankruptcy and restructuring, which saw a 30 percent increase, says managing partner Stephen Vajtay.
Most of that gain was on the restructuring side, which accounts for 8 percent of firm business. “Creditors have been working hard to restructure debt and keep companies out of bankruptcy,” Vajtay says.
Not far behind, with a 29 percent revenue spike, was the tax and employee benefits practice. And the intellectual property/information technology group, with an 18 percent revenue increase, “continues to be a juggernaut” and “a very robust practice for us right now,” Vajtay says, citing patent prosecution and other IP litigation.
Billie Watkins, who oversees the New York office of recruiter Robert Half Legal, says: “We’ve never really seen a slowdown in demand” for IP lawyers, and the demand is growing because pharmaceutical companies are ramping up research and development efforts.
Rounding out McCarter’s top-performing practice groups was public finance, which saw a 17 percent revenue increase.
Revenues in other practices – including construction, labor & employment and insurance defense – were “more moderately up or largely flat,” Vajtay says, though he declines to provide details.
“We’ve certainly noticed there’s a measure of litigation reluctance,” Vajtay says. “The litigation landscape has changed over the last three or four years.”
Litigation-support companies have encroached to some extent, and McCarter is assessing whether to form a litigation-support unit, Vajtay says—the “in-house capability to compete with some of those service providers.”
Litigation, including IP, accounts for 48 percent of firm business, McCarter reported.
Real estate was relatively flat, though Vajtay says he sees signs of life.
“Real estate deals are coming back—banks are lending again to more aggressive…projects,” he says. “We think there are some opportunities there, particularly as the credit markets begin to open up.”
Other metrics, aside from gross revenue and profit, also were promising. Revenue per lawyer increased 5.3 percent, to $600,000 from $570,000. And profits per partner jumped 19.5 percent, to $675,000 from $565,000.
The PPP spike as attributable in part to McCarter’s 9.7 percent dip in equity partner head count (to 84 from 93), which was accompanied by a 6.5 percent decrease in total nonequity compensation (to $29 million from $31 million).
Vajtay explains that, as a number of equity partners left the firm for “other pursuits,” senior nonequity partners elevated to equity status were replaced with nonequity partners at lower compensation levels.
Those personnel changes, along with the revenue growth, yielded the PPP spike, he says.
In the end, head count stayed essentially flat: 371 lawyers, 0.5 percent fewer than 373 in 2012.
McCarter made routine hires in 2013 and didn’t execute any big moves, but it was in the process of ferrying through its acquisition of Miller, Balis & O’Neil in Washington, D.C., which gave the firm 14 more lawyers and its eighth office. The deal was official Feb. 1.
The move brought on energy industry clients and nearly doubled McCarter’s environment & energy practice. Vajtay calls D.C. “a beachhead for us to grow a federal regulatory presence” and says there are plans to add attorneys to that office.
Miller Balis historically has represented regional and municipal energy providers in the Midwest, rather than giant utility companies on the East Coast, though the added regulatory capability should open doors to representing private companies and universities with significant energy needs, Vajtay says.
Vajtay says there aren’t further plans to add new practices or expand geographic footprint, but the firm is actively recruiting across all practice groups.
“We are always in discussions with other individuals and groups,” he says.
“It’s not news to anyone, with demand for legal services being relatively flat,” that firms are seeking lateral targets with established books of business, he adds. “That’s the type of recruiting that’s going on right now.”
McCarter’s D.C. campaign is the “best evidence” of its status as a “super-regional” firm that’s adapting well to changes in the legal market, says Stewart Cohen of recruiter Topaz Attorney Search in Livingston.
“We’re not a growth market in New Jersey,” Cohen says. “They [McCarter] were smart enough to anticipate where growth was going to be in the future…They’re trying to anticipate cycles.”
“Expansion, in most cases, works,” he says. “Your clients aren’t in one location.”
Cohen adds that McCarter has emphasized high-yield areas such as corporate practice—which accounts for 35 percent of the firm’s business, according to its report.