King & Spalding broke the billon-dollar mark in revenue last year—the first Atlanta-based firm to do so—reporting revenue of $1.02 billion, a 9 percent increase over 2014.
Net income increased 12 percent to $447.6 million, which pushed profit per equity partner to just over the $2.5 million mark—another first for King & Spalding.
The firm’s chairman, Robert Hays, noted that overall demand in the legal marketplace remains flat. “The ‘no growth’ economy is no fun. Unfortunately it looks like an eighth year in a row of a weak global economy. We are prepared for it,” he said.
Despite the sluggish economy, King & Spalding has increased revenue 18 percent over the past two years, on top of significant gains in prior years.
Hays attributed King & Spalding’s $84.5 million jump in revenue last year to a significant expansion in the number of partners and more work in six high-value areas of focus: global disputes, government investigations, energy, financial institutions, life sciences and health care, and technology. An uptick in transactional work in those areas contributed to the revenue increase, he said.
King & Spalding increased rates slightly, Hays said, adding that clients remain price-sensitive and so that was not the main driver of revenue. In fact, the firm’s revenue per lawyer increased only 3 percent, to $1.09 million.
King & Spalding added a record number of partners in 2015 after doing the same in 2014. Last year it added 33 lateral partners, up from 25 in 2014, and it promoted 24 new partners for 2016, up from 17 the prior year.
Overall lawyer head count increased to 936 lawyers—a net gain of 62 lawyers—unlike 2014, when lawyer head count was relatively flat. The firm had a net gain of 31 partners, for 361. The number of equity partners increased by a net of 14 for 178 and nonequity partners by a net of 17 for 183.
Last year marked the 10th year that Hays, 57, has run King & Spalding, after being elected chairman in 2006. In that decade, the firm’s revenue has almost doubled—from $515 million in 2005 to last year’s $1.02 billion—and net income has increased by 165 percent (from $169 million in 2005).
Total lawyer head count increased only 24 percent for the period.
“The increase in revenue has outstripped the head count growth over the decade,” Hays said. “That comes from doubling-down on our high-value and cross-border practices.” Over that decade, the firm has opened 14 offices, including nine internationally, for a total of 19.
Hays said the firm has done this through organic growth—adding key laterals and promoting from within—rather than through acquisitions, adding that it has incurred no debt. “We are trying to move increasingly into high-value practices where clients need very specialized legal services,” he said.
Since 2005, partners have steadily made up a greater proportion of the lawyer head count—39 percent last year, compared with 31 percent a decade earlier.
Hays noted the 24 newly promoted partners include six outside the United States, in London, Paris, Frankfurt, Abu Dhabi and Dubai. “Several of these offices are not that old, so it’s really powerful to already have associates who can be promoted to partnership organically,” Hays said.
While the highest number of partner promotions, eight, were at the firm’s Atlanta headquarters, only one of last year’s 33 lateral partner additions was in Atlanta: Alana Griffin from Synovus Financial. The firm recruited laterals primarily in London, Singapore, New York and Washington—and opened new offices in Tokyo and Sacramento, California, in September with its two largest lateral hires of the year.
“The action and growth is outside of Atlanta,” Hays acknowledged. “That does not mean we do not continue to find great opportunities here.”
In Tokyo, the firm recruited four partners from Ashurst who handle energy and infrastructure projects, and international arbitration—the same strategy it’s pursued for its six-year old Singapore office.
In the United States, King & Spalding landed an eight-lawyer group of health care lawyers in Sacramento from DLA Piper, gaining its first health care practitioners in California. They represent Sutter Health, a Sacramento-based hospital system, and also do work in Los Angeles, representing Los Angeles-based hospital system Prime Health Care.
Jay Harris, who leads the health care practice, told the Daily Report last August that King & Spalding, which also has California locations in San Francisco and Silicon Valley, does not plan to expand the Sacramento office beyond the health care practice.
“We’re looking to expand further in California and especially in Southern California,” Hays said.
The firm made significant investments in Washington, its second-largest office, recruiting nine partners, including trial lawyers Bobby Burchfield and Matt Leland from McDermott Will & Emery and three tort and environmental litigators from Kirkland Ellis: Joseph Eisert, Granta Nakayama and Illana Saltzbart.
The office is a “driver of growth” for the firm, Hays said, focusing on regulatory work and litigation, including corporate internal investigations and government probes. “That tracks with the economy—there has been more regulation, questions around compliance, and more investigations.”
King & Spalding ranked No. 1 in The National Law Journal’s most recent Influence 50 list of Washington public policy practices, reporting $117.8 million in 2014 revenue. The firm vaulted to the No. 1 spot because the NLJ broadened its criteria last year beyond traditional lobbying work to include government investigations, which account for the bulk of King & Spalding’s public policy revenue.
International arbitration has also been a key growth area, Hays said. “We had no international arbitration lawyers to speak of except a couple in Houston ten years ago,” he said. The firm now has that capability in all its international offices with global name recognition.
In one multibillion-dollar arbitration, the firm is defending Turkey and its state-owned pipeline company, BOTAS, in a claim brought by Iraq before the Paris-based International Chamber of Commerce. Iraq seeks to stop Turkey from facilitating Kurdistan oil exports via the Kirkuk-Ceyhan Pipeline in northern Iraq to Turkish ports.
In an unusual pro bono case, a team of international trade lawyers helped Liberia become a member of the World Trade organization in December.
In Saudi Arabia, King & Spalding advised Arabian Company for Water and Power Development (ACWA) on the Islamic financing for a new $2 billion industrial gases project outsourced by the state-owned oil company, Saudi Aramco.
Closer to home, the firm advised Charlotte-based Belk Inc. in its $3 billion acquisition by private equity firm Sycamore Partners. Atlanta lawyers advised Cousins Properties on a high-profile deal with NCR Corp. to develop and own a 22-story, $200 million Midtown office tower for NCR’s new world headquarters.
King & Spalding lost four partners to retirement—in Atlanta, former health care practice leader Rick Shackelford and finance partner Albert “Chip” Conrad, and, in Washington, FDA practice co-chair Edward Basile and Joe Dorn, who started the international trade practice.
In Atlanta, trial lawyer John Harbin decamped for local IP firm Meunier Carlin & Curfman, and real estate partner Clayton Howell joined Sutherland Asbill & Brennan.
In Washington, a health care regulatory duo—partner Donna Thiel and counsel Tracy Weir—returned to Baker, Donelson, Bearman, Caldwell & Berkowitz. Russ Ryan joined FINRA as the deputy chief of enforcement.