Cozen O’Connor posted strong revenue gains again in 2018, though profit growth slowed as the firm spent on lateral hires and tech upgrades.
Gross revenue at the Philadelphia-based Am Law 100 firm increased 13.7 percent, reaching $473 million. Revenue per lawyer grew 4.4 percent, to $711,000.
“It was another terrific year for the firm,” said CEO Michael Heller. “We also had a big investment year where we continued to invest in people and technology.”
Profits per equity partner showed more incremental gains, rising 2.6 percent to $828,000 as the equity partnership grew. Net income was up 6.2 percent, to $152.8 million.
The firm raised rates by about 3 percent, Heller said.
Standout performance, Heller said, came from the state attorneys general practice and a life insurance and annuity practice group the firm added this year, as well as the subrogation, corporate, real estate and labor and employment groups.
Cozen O’Connor’s ancillary businesses, which include a lobbying arm and a campus safety consultancy, contributed about 6 percent of the firm’s revenue, Heller said.
In terms of significant matters, he said, Cozen O’Connor was lead counsel for Wells Fargo Bank in a $575 million resolution with attorneys general in all 50 states over consumer claims. The firm also represented cannabis company Acreage Holdings Inc. in its corporate transactions, including a $160 million acquisition of cannabis manufacturer Form Factory Inc. And on the litigation side, it was among the firms that represented Arista Networks Inc. in an antitrust action against Cisco Systems Inc., which settled in August for $400 million.
The firm continued to grow its head count, adding a net 54 lawyers throughout the year, to reach 665. The equity partnership grew by seven partners to 185, while the nonequity partner tier grew by 9.1 percent, to 155 lawyers.
Cozen O’Connor’s lateral additions in 2018 included 14 commercial litigators in Philadelphia who made a move from Drinker Biddle & Reath in April, bringing with them a practice focused on life insurance and annuities. The firm also brought on a pair of IP partners in the Pacific Northwest, and continued to add to its labor and employment practice.
Still, “it was a slower year for group acquisitions,” Heller said, compared to a 2017 in which the firm added about 100 lateral hires. In 2018, there was a greater focus on integrating those lawyers, he said.
That included building out office space to fit the firm’s growth, he said—requiring large construction projects in four cities and smaller projects in many of the other offices. That was one of the significant one-time expenses Cozen O’Connor experienced last year, Heller said.
“We always try to manage the firm expenses on a conservative basis, but we have never taken the approach that you can cut your way to prosperity,” Heller said. The firm is open to opportunities that may result in greater expenses, he said, “if they will drive revenue.”
Cozen O’Connor also provided new devices to all attorneys in 2018 and upgraded the operating systems on those devices, Heller added. Cybersecurity protocols continued to expand, he said, but that cost was no more meaningful than in previous years.
Also in the technology category, Heller said, “we continue to spend a lot of money on data analytics … improving our technology for purposes of evaluating profitability, and efficiency, and pricing.”
The firm saw a significant improvement in realization in 2017, which remained steady in 2018, he said, and he hopes to see more benefits of the analytics push in the next two to three years.
Looking to the future, Heller said Cozen O’Connor is aiming to further grow its ancillary businesses, with a goal of having 10 percent of revenue accounted for by those businesses. To that end, it’s planning to officially launch a family office business this year, which will work together with the law firm’s private client practice.
Heller said the firm is not expecting to slow its growth, even if the economy slows in the next two years. However, he noted, “We are always keeping an eye on making sure we are right-sized for all eventualities.”
“It’s not a coincidence that we’ve been making big investments in the past three to five years,” Heller said.