Kaye Scholer saw its gross revenue decline for the third straight year in 2013, but managed to eke out small gains in revenue per lawyer and profits per equity partner thanks to an accompanying contraction within its attorney ranks, according to The American Lawyer’s reporting.
The firm’s total revenue dipped 5 percent last year, to $380 million, on the heels of a nearly 5 percent drop in 2012 and a 3.4 percent decline in 2011. Overall head count, meanwhile, fell by slightly more than 5 percent in 2013, to 392 lawyers, and the equity partnership ranks shrank 7 percent, to 115.
With the census decline outpacing the the falloff in revenue, revenue per lawyer inched up by one-half of 1 percent, to $970,000, and profits per partner rose a bit more than 2 percent, to $1.385 million.
Kaye Scholer cochair and managing partner Michael Solow says there was nothing unexpected in the numbers and that the firm met its budget projections for the year.
“We did exactly what we anticipated,” Solow says. “The focus of our management and our executive committee is growing profits per equity partner.” To that end, he adds, Kaye Scholer has spent the past several years working to control expenses by, among other things, consolidating much of the firm’s support staff in the relatively low-cost city of Tallahassee.”There’s not a lot more I can do on the expense side.”
The firm—which in 2012 saw the departure of high-profile IP litigators and executive committee members Leora Ben-Ami, who joined Kirkland & Ellis, and Alan Fisch, who launched a patent litigation boutique—continued to endure lateral losses in 2013.
In May, special counsel Chris Griner, a former managing partner of Kaye Scholer’s Washington, D.C., office and the founder of the firm’s practice representing clients before the Committee on Foreign Investment in the United States, left to help Stroock & Stroock & Lavan open its own D.C. office. Los Angeles corporate partners Barry Dastin, Sheri Jeffrey and Russ Cashdan left for Hogan Lovells in October, the same month that finance and renewable energy partner Jeffrey Chester moved to Morrison & Foerster. G. Thomas Stromberg, another former executive committee member and the former co–managing partner of the firm’s Los Angeles and Palo Alto, left for Jenner & Block in December. Already this year, Kaye Scholer has seen former corporate department cochair Adam Golden leave for Hogan Lovells.
Asked about the spate of departures, Solow says, “I have to say that all the partners we’ve had at this firm, I think they’re excellent lawyers. I think they’ll continue to be excellent lawyers.” As to the losses in California specifically, he says the firm has decided to focus on litigation in that market.
“The marketplace there doesn’t support our rate structure on the corporate side,” says Solow, adding that the partners who defected in California wanted more resources poured into practices that Kaye Scholer has decided don’t fit the firm’s core strengths. “They decided that they needed a certain level of support right on their doorstep.”
According to Solow, Kaye Scholer will remain focused on litigation, with a particular emphasis on investigations and defense work for pharmaceutical clients, as well as complex intellectual property and financial services matters. In terms of the firm’s corporate lawyers, he says they will devote themselves to private equity– and finance-related matters, especially bank financings and real estate finance. Solow, a bankruptcy specialist, says he also considers his own practice one of the firm’s core areas, though it is somewhat stagnant these days. “Those are the drivers of firm revenue and where we target our growth,” he says. And while the firm’s budget projections anticipate revenue to remain flat in 2014, he says, profits are expected to climb between 4 and 5 percent.
To help hit that target, the firm has hired Beatrice Seravello to serve in the newly created role of chief strategy officer. Seravello, who held the same position at Blank Rome for two years before joining Kaye Scholer in February, says her position encompasses the duties of the typical chief marketing officer—and more. “My responsibilities are about profitable revenue growth,” she says. Along those lines, she says, she will be keeping an eye on Kaye Scholer’s “practice management structure” by using “financial tools to gauge success and a more numeric approach. … I think it resonates more with lawyers when you can show them the numbers and they can see how to achieve certain things.”
This report is part of The Am Law Daily’s early coverage of 2013 financial results of The Am Law 100/200. Final rankings and full results for The Am Law 100 will be published in The American Lawyer’s May 2014 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.