Client Needs Drive Texas Firms' Out-of-State Expansion

Mark C. Evans, the managing partner of Houston’s Bracewell & Giuliani, doesn’t harbor any doubts. Roughly 27 percent of the firm’s 418 lawyers are in out-of-state offices now, and he expects that percentage to grow over the next five years.

“I don’t know what the number is going to be, but easily at least 35 percent,” says Evans.

His confidence about Bracewell’s growth outside Texas reflects the enthusiasm expressed by managing partners of other big Texas firms about why they are happy to increase the size of their national and international footprints with a network of new offices.

An analysis by Texas Lawyer, based on lawyer counts as of Jan. 1 at the 100 largest firms in the state, shows that 10 Texas-based firms now have 21 percent or more of their attorneys in offices outside the state. Dallas-based Akin Gump Strauss Hauer & Feld — with 14 offices and 1,023 lawyers — leads the pack with 71 percent of its lawyers outside of Texas.

R. Bruce McLean, Akin Gump’s Washington, D.C.-based chairman of the executive committee, says the primary advantage is obvious: “It increases the scope of service we can provide to our international clients.”

But William Cobb, the founder of WCCI Consulting in Houston, says firms need to be wary of the cost of offices outside Texas. “If I were a managing partner, unless I had a real strong motivation from clients, I would not be opening up an office,” Cobb says.

The rough U.S. economy has resulted in lawyer layoffs at firms based in New York City and elsewhere, but that’s apparently not affecting the out-of-state operations of some expansive Texas firms that have offices around the world.

At Bracewell, Evans says, “We find ourselves in the areas that we are in doing great and growing. Actually, we think the reductions elsewhere are going to provide opportunities for us to hire some people.”

Peter Riley, managing partner of Dallas-based Thompson & Knight, says his firm’s network of offices ranging from Rio de Janeiro to Algiers isn’t dependent on the U.S. investment banking or financial markets, and the offices are busy. Except for the offices in Mexico, Thompson & Knight’s offices outside Texas are all tied to the energy industry, and the firm’s government-owned oil company clients are “oblivious” to U.S. economic troubles, he says.

Joseph Dilg, managing partner of Vinson & Elkins of Houston, says, “Our offices seem to be doing very well, and our big problem is finding good [legal] talent in” regions outside Texas.

Client needs seem to be the primary motivating factor for the 10 firms to open offices outside Texas. However, management at the 10 firms with at least 21 percent of their lawyers outside of Texas also cite other reasons for launching out-of-state offices. Those reasons range from making a prominent partner happy — consider Stephen Susman’s affinity for Manhattan and the opening of Susman Godfrey‘s office there in 2006 — to addressing a client’s specific needs — for example, Bracewell & Giuliani and the opening of two offices in Kazakhstan since the late 1990s.

While each of the firms has launched offices by hiring laterals or by transferring Texas lawyers, some expanded geographically in a big way through mergers, such as the 2007 combination of Texas firm Locke Liddell & Sapp with Chicago firm Lord, Bissell & Brook to form Dallas-based Locke Lord Bissell & Liddell. As of Jan. 1, 43 percent of Locke Lord’s lawyers were located outside of Texas.

Much of the activity outside Texas has occurred over the past eight years. Since 2000, seven of the firms appearing on Texas Lawyer‘s “Texas 100” list of the state’s largest firms launched at least four offices outside the Lone Star State. Three of the 10 firms — Austin’s Linebarger Goggan Blair & Sampson; Thompson & Knight, and Locke Lord — opened at least eight new offices outside Texas.

Most of the firms aren’t trying to leave Texas behind, despite a far-flung network of offices.

V&E, for instance, isn’t ashamed of its Texas roots, and it isn’t trying to shed its Texas-based image, Dilg says.

“We will always be known as a firm with roots in Texas … but operate very much on a national scale,” he says.

At Bracewell, Evans says Texas is still tops: “We want our Texas roots to be part of who we are. We think from a marketing standpoint it helps identify us with energy. Houston for the foreseeable future will be the energy capital of the world.”

On the other hand, Riley says Thompson & Knight really doesn’t play up the fact that it’s a Texas-based firm. He says its clients “don’t care” that the firm is based in Texas.

“We want our clients focused on our practices and not our geography,” he says.

At Akin Gump, McLean says the firm also stresses its worldwide reach more than its Texas roots. “We want our firm to be thought of as a national and international firm. The strategy of the firm is being in places all over the world,” he says, but adds, “We are extremely proud of our Texas beginnings. They are something that we continue to be quite proud of, and a number of partners from Texas have had a huge impact on the growth of the firm.”

Below are the stories of how each of the 10 firms expanded outside Texas, along with forecasts for future growth. The firms below are in order based on the percentage of lawyers they have outside of Texas. [See related chart below.]

THE FOOTPRINT PHENOMENON

• Akin Gump Strauss Hauer & Feld: Firm chairman R. Bruce McLean says Akin Gump doesn’t have what he terms “a home-office mentality.” With 14 offices and 1,023 lawyers — 71 percent of the lawyers office outside Texas — Akin Gump is the model for all big Texas firms that aspire to establish an international footprint.

The Dallas-based firm’s geographic diversity began with founder Robert Strauss’ desire to move to Washington, D.C., in 1972 when he became treasurer of the Democratic National Committee. By the early 1990s, McLean says, the firm had four offices in Texas and its D.C. location, and partners decided it was time to re-position the firm as an international powerhouse.

“We knew that we needed a change. That is what drove us to California, London and China,” he says.

Since then, the firm has grown and spread its reach, opening offices in Beijing, London, Los Angeles, New York, Moscow, Philadelphia, San Francisco, Palo Alto, Calif., and Beijing.

But in late January, the firm closed its office in Dubai, United Arab Emirates, with the intention of opening an office in Abu Dhabi to better serve clients, says firm spokeswoman Sheila Turner, but that office has not opened.

Also, McLean confirms that as of Aug. 1 the firm will close its Taipei office. McLean says the closure is an anomaly and the firm plans to continue expanding worldwide. He says Yitai Hu, an intellectual property partner in the firm’s Palo Alto, Calif., office who relied upon the services of the Taipei office, will be leaving Akin Gump, and his planned departure precipitated the decision to shut down the Taipei office. Hu did not return a telephone call to his office before press time on Thursday.

To maintain the firm’s culture, Akin Gump largely has relied upon existing partners moving and lateral hires to staff the expansion. The challenge of getting a whole firm to merge into Akin Gump’s culture trumps the speediness of such expansion tactics, McLean insists. “In the best of all possible worlds, we like to send an Akin Gump partner,” he says.

Given the startup expenditures tied to renting space and hiring talent, which is the biggest cost factor, McLean warns, “You need to be really sure about why you are opening and about the clients you intend to serve, or you can get swamped.” Every time the firm has opened a new office — six over the past 11 years — the costs have been substantial, he says.

McLean doesn’t set an across-the-board time frame for an office to become profitable. The firm’s office in Beijing, he says, is not profitable yet, almost two years after it opened, but that’s OK because “we’re in it for the long haul.” In contrast, he says, the firm’s office in Los Angeles operated profitably six to nine months after it opened in 1997.

In five years, McLean doesn’t predict the firm will have any higher percentage of lawyers outside Texas, particularly because he expects and hopes the firm’s Houston office will grow. He says growth in Houston will counter out-of-state expansion “if we are clever and effective.”

• Locke Lord Bissell & Liddell: Forty-three percent of the lawyers in Dallas-based Locke Lord hang their hats outside of Texas, but most of the firm’s expansion is the result of its October 2007 merger of Locke Liddell & Sapp with Chicago firm Lord, Bissell & Brook. As of Jan. 1, 303 of the firm’s 699 lawyers worked in offices outside Texas; all of the firm’s offices except for London are within the United States.

On the part of both firms, the merger was aimed at meeting client needs with a larger network of offices.

In Texas, Locke Lord dates back to an office in Dallas in 1891. The firm doubled its size in 1999 when Houston firm Liddell, Sapp, Zivley, Hill & LaBoon merged with Dallas’ Locke Purnell Rain Harrell in what was at the time the nation’s largest firm merger, joining two firms of about 200 lawyers each.

In 2005, Locke Liddell opened an office in Washington, D.C., but the largest number of out-of-state offices were added in 2007 — Atlanta, Chicago, London, Los Angeles, New York and Sacramento, Calif. — when Locke Liddell and Lord Bissell combined.

In 2007, when merger talks between the Texas and the Chicago firms got serious, Locke Liddell had three offices in Texas and offices in New Orleans and Washington, D.C. Jerry Clements, managing partner of Locke Liddell when it began merger talks with Lord Bissell, says the Texas firm had client service as the first and foremost consideration and started looking at ways to improve that by increasing its geographic reach.

Client service is the basis for each new office, she says.

“In every instance we felt like we could be better service providers to our existing clients and also attract new clients because of particular expertise and geographic location. That’s the core strategic business plan for all of this. It doesn’t just relate to getting bigger,” she says.

Clements, chairwoman of Locke Lord, says that pre-merger Locke Liddell corporate clients in Texas wanted the firm to have a presence in New York City — an office picked up in the 2007 merger — because of the financial markets, but they also wanted the firm to move into areas where they are expanding such as Europe and Asia.

Some of that expansion will come in the future. The firm opened an office in Boston in February, but nothing else is on tap for this year or even 2009, Clements says. That’s because it’s been only eight months since the big merger, and the firm is focused on integration instead of expansion for the time being.

She says lawyers from both legacy firms understand the 2007 deal was “not the final step.”

Clements says that opening new offices is expensive, considering the cost of real estate, lateral hires and technology, but it’s also an investment.

“Certainly, if you get the right people in the right markets, it’s a very good and prudent investment,” she says.

Locke Lord doesn’t set a strict time frame for any office to become profitable, she says. Profitability depends on the office, the number of lawyers and their practice areas and the firm’s strategy — whether the office was opened to serve a particular client or to expand and develop a new client base, she says.

Clements says that because of due diligence connected to the merger, both legacy firms began looking closely at costs in 2007, and that’s been a “real blessing” for Locke Lord in 2008 as the economy slowed.

Within five years, Clements says, Locke Lord will probably have more lawyers outside Texas than within it.

• Fulbright & Jaworski: The year 1987 was a watershed one in the history of Fulbright & Jaworski. That year, the Houston firm had a large Washington, D.C., presence, an office in London and the clout of Watergate prosecutor and founding partner Leon Jaworski. But at a partners’ retreat, Gibson Gayle, then chairman of the executive committee and managing partner, posed the question: Was Fulbright a national firm with offices in Washington and London, or was it a national firm with roots in Texas?

Steven Pfeiffer, Fulbright’s current executive committee chairman, says the partners answered that question more than 20 years ago resoundingly and ambitiously: They wanted Fulbright to be a national firm.

Their response gave management the authority to consider a merger that, ultimately, took place in 1988 with Reavis & McGrath, a 100-lawyer New York City-based firm. At the time, the merger was the largest merger of two U.S. firms.

As of Jan. 1, 39 percent of the firm’s lawyers — 366 of 948 — were based outside Texas.

Since then, Pfeiffer says, the firm has stayed the course and opened offices worldwide at a steady and sometimes even dizzying pace. In launching the new offices, the firm’s objective most frequently has been to suit client needs but also sometimes to bolster strategically attractive practice groups such as health care, he says.

In 1990, the firm opened an office in Hong Kong when clients wanted an Asian presence. In 2000, the firm added an office in Minneapolis, when it hired a group of intellectual property lawyers from Houston firm Arnold White & Durkee. In 2002, the firm opened an office in Munich, because German clients investing in the United States wanted help at home.

In 2005, Fulbright opened offices in Dubai, United Arab Emirates, and Riyadh, Saudi Arabia, to meet the need of energy clients who want the firm on the ground in the Middle East. In 2006, the firm bolstered its already strong health-care practice group by adding lawyers and opening a St. Louis outpost. Also in 2006, Denver and Beijing offices opened to satisfy energy clients’ needs.

Fulbright’s growth reflects the nationalization and globalization of business, Pfeiffer says. “There are very few major American companies or banks or even family businesses which are only in one location anymore.”

Pfeiffer says Fulbright never sets a firm time schedule for an office to operate profitably. “If you are lucky, they are busy at the beginning. But it can take a while,” he says. If the office was opened in strategic areas to satisfy, for example, energy client needs, the firm has even more patience, Pfeiffer says. “We are not going to be focused on making money in Beijing or Denver,” he says. Instead, the firm will look at how it is performing overall in the energy sector.

The Fulbright chairman is not ready to predict whether his firm will grow faster outside the state or inside Texas.

Since he became chairman of the executive committee in 2003, Pfeiffer says, Dallas and London have grown the fastest. “I think smaller offices work best when they are connected to what the firm does well in the U.S. and in Texas. We are in places where Texas companies are involved.”

• Susman Godfrey: Susman Godfrey rarely fits into anyone’s pre-cut mold. Given its relatively small size — 83 lawyers as of Jan. 1 — it might surprise some that Houston-based Susman Godfrey has such a high percentage of lawyers outside the state.

Susman Godfrey now has 35 percent of its lawyers outside the state. That’s 29 of 83 lawyers.

What is the big advantage to having lawyers in significant numbers outside the state? Harry Susman, the son of name partner Stephen Susman and a partner in the firm, says given the tort reform laws that went into effect in recent years, the litigation-only firm has relied upon geographic diversity to keep its economics booming. But it has been the wishes of some partners who have largely dictated where the firm has opened offices outside of Houston over the past 20 years.

In 1995, Parker Folse III, a partner known for his successes in antitrust and intellectual property litigation, wanted to move to Seattle. So the firm opened an office there. As of Jan. 1, Susman Godfrey’s Seattle office had 14 lawyers.

In 2006, Steve Susman — a Houstonian down to his cowboy boots — wanted to spend more time with his grandchildren who live in Manhattan, so the firm opened an office there. The New York City branch had four lawyers as of Jan. 1.

The firm can indulge its partners’ geographic preferences, because its economics largely are based on contingent-fee billing. That strategy has led to major paydays. In 2007, Susman Godfrey profits per partner averaged more than $3 million, according to Texas Lawyer‘s Annual Report on Firm Finance.

“We know it probably doesn’t make a lot of economic sense if we had only hourly rates, but we enjoy practicing with everyone, and we’re willing to pay the cost,” Harry Susman says.

The firm’s out-of-state offices, however, generally have thrived despite their economically unorthodox beginnings. Indeed, Harry Susman says, he expects the out-of-state offices to grow faster than their Texas counterparts over the next five years — so much so that half the firm’s lawyers may be outside the Lone Star State by 2013.

• Baker Botts: According to Walter J. Smith, managing partner of Houston-based Baker Botts, it’s hard to identify the main benefit of having a significant number of lawyers — 261, or 33 percent, of the firm’s 796 lawyers as of Jan. 1 — living outside Texas.

“It’s hard to single out one ‘biggest’ advantage, but certainly, being in locales proximate to where our clients need us has to be at or near the top,” Smith writes in an e-mail.

With 12 offices around the world, Baker Botts has relied largely on transferring partners instead of hiring laterals or merging with other firms to expand the firm geographically.

“In most instances when we have opened an office, whether in the United States or internationally, we have transferred partners from other offices to help develop the practices in the [new] office during its early stages. This enables us to maintain our strong firm culture and the consistent quality of service for which we are known. We decide to open an office based on the needs of our clients and our views about our practice-development opportunities,” Smith writes.

Generally, the cost of doing business rises when Baker Botts leaves Texas, Smith writes. The firm doesn’t judge an office solely on its economics; instead it looks at how an office fits into the firm’s larger plans.

“As with many international firms, we have gotten away from viewing profitability by office (whatever that means) as an important metric. We open offices for strategic reasons related to client service and overall practice development, and it’s generally impossible to measure their success, financial or otherwise, based on office-centric models,” Smith writes.

Smith expects in five years, the firm will grow faster outside Texas than inside. “We don’t have a goal in that respect one way or the other,” he writes.

• Bracewell & Giuliani: Why would a Houston-based firm open an office in Almaty, Kazakhstan, a former Soviet Republic? The answer centers on one word: clients.

In 1997, a Bracewell financial industry client wanted Bracewell to have a lawyer working in Kazakhstan, which is sandwiched between Russia and Afghanistan. Although firm spokeswoman Melanie Hillis declines to name the client, business must have been good, because in 2000 Bracewell opened a second office in Astana, Kazakhstan.

Much of the firm’s expansion into seven offices outside the state also has been client-driven, managing partner Mark C. Evans says.

But the firm’s 2005 decision to open a Manhattan office had a different impetus, since it was the result of hiring a high-powered lateral: former New York City mayor Rudy Giuliani, who this year unsuccessfully sought the Republican nomination for president of the United States. The addition of Giuliani was so significant the firmed changed its name from Bracewell & Patterson to Bracewell & Giuliani.

The New York City office had grown to 46 lawyers as of Jan. 1. “We do a tremendous amount of white-collar crime, corporate investigation, restructuring of securities from our New York offices, and it’s high-rate hourly work,” Evans says. As of Jan. 1, 113 of the firm’s 418 lawyers worked in out-of state office, 27 percent of the total.

Former managing partner and chairman Patrick Oxford told Texas Lawyer in February that New York will generate enough revenue to cover its own operating expenses this year and repay this year’s portion of a $25 million, 10-year loan the firm took out to finance the Manhattan office in 2005. [See "Rudy's Return: With Giuliani Out of the Presidential Race, a New Chapter Starts at His Houston-Based Firm," Texas Lawyer, Feb. 11, 2008.]

By 2013, Evans predicts that the percentage of out-of-state lawyers will grow to 35 percent, up from 27 percent in January.

• Linebarger Goggan Blair & Sampson: No other Texas-based firm has more out-of-state offices than Linebarger Goggan, with 15 offices outside Texas. The Austin-based tax collection firm has 26 percent of its lawyers — 31 of the firm’s 117 lawyers — working in out-of-state offices, and it has opened 11 offices outside Texas since 2000.

But partner Mike Vallandingham writes in an e-mail, “Opening additional offices isn’t part of a long-range plan per se, but as we continue to expand our client base throughout the country it is quite often a necessary part of the equation. We like to say that we are ‘local everywhere.’”

The firm exclusively handles the collection of receivables, a service it sells nationwide. The formula for opening offices, Vallandingham writes, is to transfer a lawyer to oversee the startup and then hire locally. “Some of our offices become profitable in as little as six months to a year, but it takes some several years or more before they begin operating in the black.”

Asked about the future, he writes: “Linebarger Goggan will continue to grow its business in both Texas and elsewhere. In five years, who knows? One thing is certain, the state of Texas is a big place, it is where we got started all those years ago, and it continues to provide the heartbeat for our law firm.”

• Vinson & Elkins: If Houston-based V&E had a theme song for its network of offices outside Texas, it might be Ricky Nelson’s “I Will Follow You.”

The firm consistently has opened new offices because of client needs, says managing partner Joseph Dilg.

“We have followed our clients for, I guess, the course of the firm, and the offices are in areas where our clients had needs,” he says, noting that much of the growth is energy-related.

Ten of V&E’s 13 offices are outside the state, with 192, or 26 percent, of the firm’s 732 lawyers, as of Jan. 1, working outside Texas.

Dilg says the firm opened its first office outside of Houston in 1971, when it moved into the London market to support clients involved in North Sea energy development. Two years later, the firm moved into Washington, D.C., for energy regulatory matters. The firm opened offices in Austin in 1979 and Dallas in 1986, due to opportunities to handle work for current clients or to pick up new ones.

The opening of the New York City office a decade ago was driven by capital markets and work for private equity funds, but the firm now does a “fair amount” of energy work there as well, he says.

Energy clients also prompted V&E’s international offices. The firm moved into Moscow in 1991, and into Asia, with offices in Beijing in 1999, Shanghai in 2005 and Hong Kong in 2007. The firm opened United Arab Emirates offices in Dubai in 2003 and Abu Dhabi in 2007. The Tokyo office opened in 2004 to do finance work for Lone Star Funds, private equity funds based in Dallas, he says.

The out-of-state offices provide the firm with opportunities to hire more talented lawyers while also giving the firm the benefits of being in the same time zone as clients and having office space to work with them, he says. The offices outside Texas are staffed by a combination of lateral hires and transfers from other offices, Dilg says.

“The work is a mix. … [W]e open the office around needs of U.S. clients that we are doing work for in those regions, had operations in those regions [or] needed legal services, but in each case, we’ve been lucky to attract work,” he says.

Dilg says the firm doesn’t look at any office as a separate profit center; it evaluates each office on the basis of whether it makes the firm economically stronger.

Dilg says in 1971, when V&E opened its London office, the firm didn’t have a strategic plan that called for a network of offices like it has today. In deciding where to open offices, the firm evaluated the strategic opportunities that office would provide the firm.

While another new office isn’t imminent, Dilg says, V&E has talked about a California outpost to support the firm’s Texas-based technology practice or an office in India, which currently has restrictions on foreign firms doing business in the country. Over the next five years, though, Dilg expects the firm to continue to grow within Texas, because the state’s economy is strong, as well as in New York and internationally.

• Bickel & Brewer: The founders of litigation firm Bickel & Brewer selected Dallas for the firm’s headquarters 34 years ago because of the city’s quality of life. But they opened a New York City office four years later, because so many of the firm’s clients are located there or have work in the nation’s financial capital.

“We started Dallas, not so much because we really wanted to handle cases in the Southwest but I thought it was a great place to stage our firm from,” says co-founder William A. Brewer III. “The reason we have an office in New York is because at least half of our clients emanate from the tri-state area.”

Brewer says the firm represents a number of investment banks, hedge funds and private equity funds headquartered in the New York City area, but it also does work in New York City for longtime clients, such as Starwood Hotels & Resorts Worldwide Inc. of White Plains, N.Y., and Brunswick Corp. of Lake Forest, Ill.

The New York office is necessary because “our partners needed to have a place to meet and greet our clients and to conduct our business from,” he says.

As of Jan. 1, 10 of the firm’s 42 lawyers, or 24 percent, were based in New York City. That percentage will be higher by the fall, Brewer notes, when he expects to hire and have 21 lawyers in the firm’s Manhattan office. The firm picked up some lateral hires this year, and five of the 11 first-year associates joining the firm in the fall will work in New York City instead of Dallas.

Because the firm handles commercial litigation, Brewer says lawyers work all around the country and the world on a regular basis. But Dallas and New York City are good home bases for the firm’s lawyers. He says the Manhattan office costs more to operate than Dallas, but it’s necessary because of the firm’s client roster and because so many of the firm’s lawyers want to live there. The firm allows its lawyers to choose between Dallas and New York.

Brewer says the firm may expand outside the United States for its next office. Bickel & Brewer is considering Hong Kong or possibly Singapore, because the firm does a lot of international arbitrations in Asia and because clients have business in the Far East, he says.

While recruiting new lawyers this year, Brewer says the firm will ask prospective associates if they want to work out of Dallas, New York City or Hong Kong to help gauge whether the firm will open an outpost in Asia.

For his part, Brewer says he wouldn’t mind having an office in Hong Kong. “If I’m going to be spending a lot of time seeing clients, I might prefer to have a space to call my own, and I might prefer to have an apartment to leave some suits,” he says.

• Thompson & Knight: Every time Dallas-based Thompson & Knight opens an office outside Texas, whether inside or outside the United States, it’s to fill the needs of one of the oil companies it represents.

“We represent … nationally owned oil companies from Brazil to Algeria to China — government-owned oil companies — and they require presence on the ground,” says managing partner Peter Riley.

Thompson & Knight, which was founded in 1887, opened a Houston office in 1978, an Austin office a year later and one in Fort Worth in 1988. But its growth outside Texas over the past 15 years, starting with a one-lawyer office in Monterrey, Mexico, in 1993, largely has been outside the United States.

Because of those nationally owned oil company clients, the firm launched outposts in Algiers, Algeria, and Paris in 1993; then Rio de Janeiro, Brazil, and Vitoria, Brazil, in 2003; and London, Mexico City and New York City in 2005. The firm moved into San Antonio earlier this year. As of Jan. 1, 87 of the firm’s 421 lawyers, or 21 percent, were located outside of Texas.

Riley says the firm’s niche practice of representing government-owned oil companies, which led to the network of offices outside of Texas, grew largely because of the work of Dallas partner Andrew Derman, an energy lawyer with a business background who joined the firm in 1998 and started doing work for the government-owned oil companies.

The firm’s international reach began in Mexico, but it spread as the firm picked up more government-owned oil companies as clients, including Petrobras (Brazil), PetroSA (South Africa), Sonatrach Petroleum Corp. (Algeria), Sonangol (Angola) and PetroChina and Sinopec (China). Riley, managing partner since 2001, says international growth is important for the firm, because it capitalizes on Thompson & Knight’s strengths.

Derman says while the firm opened the offices because of the government-owned oil companies, it has picked up other business in those countries.

Riley says the firm’s international offices are economical. For instance, while the ratio of associates to partners is 1-to-1 in the firm’s U.S. offices, leverage is more like 4-to-1 outside the country, he says. Associate salaries are much lower, too, he notes.

“We are not paying them $160,000 to start,” he says, adding that associates outside the United States make 30 percent to 40 percent of what the firm pays U.S. associates.

For international work, the firm charges U.S. rates, but it might charge lower rates for domestic work in Mexico, for example, he says.

If non-U.S. lawyers “work on a global transaction, of which there are many, we will charge our standard rates,” he says.

Riley says the firm generally launches its international offices by hiring lawyers the firm has worked with before, such as a former general counsel of a national oil company. No U.S. lawyers work in the firm’s international offices, although many of the non-U.S. lawyers may have earned a master of laws degree from a U.S. law school.

Riley says the offices located outside the United States break even after two or three years, but the New York City office, which opened in 2002, will take longer than that.

Over the next five years, Riley expects Thompson & Knight to increase its numbers outside Texas, and he says there’s a need for an office in Washington, D.C., and perhaps London. While the firm’s current network of offices outside Texas stems from energy clients’ needs, Riley sees potential in building on the firm’s financial practices and project finance work.

Notes Riley, “You just build on your strengths.”