New Jersey’s bellwether firms continued in 2013 the retrenchment that began a year earlier, as revenues stayed virtually flat while profits abated slightly.
Firms held back on new hires and kept equity partnership ranks tight, in some cases thinning the herd. In so doing, they guarded against higher overhead and stretched profits but also made a decision—perhaps a calculated one—not to grow.
It was the second straight year that New Jersey’s top-grossing firms drew back from the rebound they had enjoyed after the doldrums of the 2008-09 recession.
Their combined revenues for 2013 were $1.694 billion, a 1 percent improvement from $1.677 billion in 2012. That reversed the 1 percent drop that occurred the prior year, putting the total at the 2011 plateau.
But net profits were down for the second straight year. They fell 3.35 percent to $533 million from $551.5 million. It wasn’t as bad as the 5.2 percent drop the year before, but it made for a $48.7 million deficit from the postrecession high of $581.7 million in 2011.
But with equity partnership ranks falling by 5 percent, those remaining avoided taking a personal hit. Profits per partner averaged $648,000, a 1.9 percent increase over 2012. That was a turnaround from the 5.5 percent drop in PPP suffered in 2012, when equity partnership growth was null.
However, nonequity partners (NEPs), while increasing in number (3.25 percent), took an $8 million (4.27 percent) loss in compensation to $196.5 million. That was a reversal of fortune from last year, when NEPs grew in number (10 percent) and in compensation (10.85 percent).
The combined statistics made compensation for all partners (CAP) inch down by 1.12 percent, which was a stabilization following last year’s 5.42 percent drop.
Total lawyers employed at the Top 20 were down 1.8 percent, to 2,943 from 2,997. That was a bigger cut than last year’s 1 percent drop.
But fewer lawyers meant revenue per lawyer (RPL) increased at a better rate (2.86 percent) than revenue growth (1 percent). Last year, by comparison, RPL and gross revenue both flat-lined. In fact, the 2.86 percent RPL uptick was better than the 2.7 percent shown in 2011—a year when gross was up.
Ten of the Top 20 firms in 2013 showed gross revenue gains, nine took losses and one stayed the same as in 2012. The highest raw increase was at McCarter & English: $10.5 million.
Percentage-wise, the best increases were at Cole, Schotz, Meisel, Forman & Leonard (6.8 percent) and Connell Foley (6.7 percent).
The largest loss in gross was at the New Jersey branch of bistate Day Pitney, both in dollars ($5.5 million) and percentage (9.48 percent). That coincided with a loss of 12 lawyers, so RPL actually increased by 3.2 percent to $611,000 from $592,000.
The second largest dollar loss of gross was at Archer & Greiner ($5 million) and in percentage was at Wilentz, Goldman & Spitzer (6.2 percent).
Net profits were up at nine firms, down at nine and flat at two.
The growth rate was meager in raw numbers. McCarter & English showed the best dollar increase ($4 million), followed by McElroy, Deutsch, Mulvaney & Carpenter ($3 million).
Only three firms showed double-digit growth in profits: Connell Foley (13.7 percent), Greenbaum, Rowe, Smith & Davis (12.9 percent) and McElroy Deutsch (10.3 percent).
Profit fall-off was highest at Fox Rothschild ($12 million, or 30.7 percent), which also showed a loss of 24 equity partners. But the survey results for the firm’s New Jersey operations are fractions of their national AmLaw numbers, the losses may be partly due to relocations or restructuring.
Among New Jersey-based firms, the loss leader in profits was Sills, Cummis & Gross, at 19.2 percent, followed by Archer & Greiner and Stark & Stark, each at 12.5 percent.
The two firms whose profits stayed flat were Greenberg Traurig (N.J. office) and Wolff & Samson.
Lowenstein and McCarter Tie
McCarter & English’s $10.5 million revenue spurt brought it into a dead heat with Lowenstein Sandler for highest gross in the Top 20.
However, Lowenstein, which in 2012 vaulted over McCarter for first time in the Law Journal survey’s history, is ranked first in 2013 because of its higher RPL—the key indicator of firm income generation.
Lowenstein also showed a healthy increase ($7.5 million), but with seven more lawyers, RPL was flat. It took a $5 million loss in profits, attributable to the loss of five equity partners. That meant PPP actually increased 3.7 percent, to $1.495 million from $1.44 million.
McCarter also lost equity partners—nine in fact—so its PPP jumped by 18.4 percent, to $675,000 from $570,000. That was a major turnaround from 2012, when equity partners took a 3.4 percent cut in PPP, to $570,000 from $590,000. And the firm’s 7.5 percent net profit hike was a comeback from a 4.5 drop in profits in 2012.
The rest of the top 10 firms stayed in the same order as last year except for Riker Danzig Scherer Hyland & Perretti, which fell from seventh to ninth place. The firm suffered a 4.3 percent fall in revenue, to $78 million from $81.5 million. That appears to have been due to the loss of six lawyers, since the firm’s RPL was basically flat year over year.
McElroy Deutsch, with a 5.2 percent revenue increase, stayed in third place at $122.5 million. Gibbons, despite a $500,000 loss, was fourth at $114.5 million.
Archer & Greiner, despite its $5 million loss, stayed in fifth place, which it secured last year by vaulting over Sills Cummis, which stayed in sixth place this year despite a $3 million loss. Both firms’ revenue declines may be factored to attorney attrition: Seven lawyers left Archer, five left Sills Cummis.
Last year was the third straight period of lack of lawyer growth. As in 2012, 12 firms saw decreases in attorney ranks. McElroy Deutsch was down by 14 lawyers, Day Pitney by 12, Gibbons by nine and Wilentz by eight.
Perhaps even more telling was that lawyers showed a net increase at only four firms and there only in handfuls, with Lowenstein’s seven the most. Four other firms kept their numbers flat.
Equity partner attrition was also fairly distributed across the field. Nine firms saw a net loss and seven kept the books closed. Only four firms showed growth—scant at that. Connell Foley added five, Cole Schotz two and Drinker Biddle & Reath and Norris, McLaughlin & Marcus one each.
Nonequity partner growth was the one positive. Eleven firms added NEPs, six lost and three stayed flat. The biggest gains were six NEPs each at Cole Schotz, Gibbons and Sills Cummis. The largest losses were six at Drinker Biddle and five at Norris McLaughlin. •
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