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Preliminary numbers show significant increases in Dechert’s key financial indicators, with gross revenue, revenue per lawyer and profits per equity partner all jumping by double-digit percentages in 2006. The firm’s gross revenue rose by 26.1 percent to $728 million, up from $577 million in 2005, according to Chairman Barton J. Winokur. Dechert’s revenue per lawyer (RPL) rose 16.5 percent in 2006 from $700,000 to $816,000 and in an even larger increase of 27 percent, the profits per equity partner (PPP) rose from $1.56 million in 2005 to $1.985 million in 2006, he said. The PPP figure is significant because it puts Dechert in rarified air. Only 10 firms in last year’s AmLaw 100 had PPP higher than $1.985 million. This is the second-straight year in which the firm has had a 27 percent jump in PPP. Winokur said the firm had to be strong in virtually every practice area to achieve those numbers. In 2005, Dechert saw a smaller increase in RPL compared with some of its other financial showings. The RPL rose from $650,000 in 2004 to $700,000 in 2005. At the time, Winokur attributed the slower growth in RPL to an increase in the hiring of non-partner track associates who did not generate much revenue but were brought in to help with mass torts litigation. Winokur said this week that the ratio did not change much in terms of the number of non-partner track associates within the firm. The firm was still able to produce, however, a 16.5 percent increase in its RPL. Winokur added later that Dechert is increasingly handling more “significant” and “important” work. While several law firms chose the merger route in 2006, adding to gross revenue and PPP through that approach, Dechert has grown more organically or through smaller grabs. Lisa R. Smith of consulting firm Hildebrandt International said there are a few factors that could play into big increases in firm financial performances other than mergers. “The economics of law firms are pretty simple,” she said. Firms have become much better at managing expenses by taking a look at the vendors for everything from computers to highlighters, she said. Leverage in terms of partner tiers, productivity and rate increases are also big factors in financial performance, Smith said. A lot of these metrics, she said, are at no cost to the firm and go directly toward the bottom line. That can allow for a higher jump in PPP than in RPL, she said. Culling out less-profitable work has become a common practice by larger firms as well, she said. Alisa F. Levin of Greene Levin Snyder Legal Search Group in New York said Dechert has been very good at selecting the right practice groups for the firm and moving away from ones that may not work. That has been seen at Dechert with the recent departure of media attorney Amy B. Ginensky for Pepper Hamilton. Ginensky was the vice-chairwoman of the firm’s litigation department, but her practice wasn’t always conducive to Dechert’s rates, she had said. Winokur said the economic pressure on media clients had made it harder to run a media practice at the firm. The firm in general has grown in size, he said, without pointing to any specific practice area. Winokur said the New York office has grown substantially over just a few years to 225 attorneys. The Philadelphia office is growing too, reaching close to the 300-lawyer mark when including non-partner track attorneys, he said. Levin said Dechert isn’t necessarily perceived in New York as a smaller Philadelphia firm coming into town. She said people are definitely taking a look at the firm and its success. Dechert, long thought of as a national firm, has been operating like one as well. Winokur said that while the Philadelphia office is a source of terrific lawyers and resources, it is not important from a marketing standpoint. He said lawyers in the office work on matters not related to Philadelphia and do not really compete in the local market. Morgan Lewis & Bockius Chairman Francis M. Milone said his firm is “very committed to the Philadelphia marketplace” with a significant number of attorneys doing work in this area. Morgan Lewis is often compared to Dechert. Most in the Philadelphia legal community have acknowledged for years that those firms are in a tier above other city firms in terms of financials and scope. Morgan Lewis’ gross revenue for 2005 was almost $230 million higher than Dechert’s, while its PPP was about $500,000 less. Milone said he feels no pressure to match Dechert after hearing the firm’s continual rise in PPP. He said his firm is focusing on strong relationships with clients. Sources in the legal community have said that one of Dechert’s client relationships might be in jeopardy after the firm implemented a rate increase recently. The speculation centers on Dechert’s relationship with Wyeth. In response to questions about whether the firm implemented an across-the-board rate increase of 20 percent, Winokur said the firm doesn’t deal with across-the-board increases. He said associates generally charge around the same rate as their colleagues of the same year, but partners can often be much different. Because of the rate increases, there has been some speculation that firm client Wyeth might decrease the amount of work it does with Dechert or drop the firm altogether. It’s unclear if negotiations are ongoing between the firm and Wyeth in an effort to come to a resolution on cost. While not specifying whether rate increases of any size were implemented for any specific practice area, Winokur said firms are dealing with pressures of rising salaries and costs. In looking at the latest push in first-year associate salaries by Simpson Thatcher & Bartlett to $160,000 – which was met by several other New York firms – Winokur said firms are looking at a 25 percent increase in salaries over two years. He based that percentage off of the long-standing $125,000 mark that was used by several large firms two years ago. When asked again whether rate increases were implemented resulting in the loss of Wyeth as a client, Winokur said he wouldn’t comment on the work handled for a specific client. He said the work the firm handles for clients changes all the time, and no matter where a firm’s rates are set, there will always be someone else lower. Winokur said Wyeth has been a “great client” and he hopes they will continue to be. Smith said that in talking to law firm clients, rates are only a part of the equation. For the sophisticated clients who are bringing in the high-end work, it is understood that the end result and the approach to handling the case in terms of staffing and use of technology are ultimately going to have a big effect on the overall cost. Levin said that if firms want to stay competitive in the New York market particularly, they will have to pay competitively and that may mean rate increases.

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