It was a milestone expansion year in 2018 for Nelson, Mullins, Riley & Scarborough, which acquired 150-lawyer Florida firm Broad and Cassel on Aug. 1 after launching a Baltimore office with an 11-partner team from Miles & Stockbridge.
Those additions extended the South Carolina-based firm’s footprint along the Eastern Seaboard from Boston all the way to Miami and increased its size by almost one-third, to more than 700 lawyers.
“I think the year will be as significant in the future as when we opened the Atlanta office in 1992,” said Nelson Mullins’ managing partner, Jim Lehman.
The Atlanta office was Nelson Mullins’ first foray outside of its South Carolina base when it opened with five lawyers from an established local firm of the era, Trotter, Smith & Jacobs. Now with about 150 lawyers, Atlanta is largest of the super-regional firm’s 25 offices.
With the additions in 2018, lawyer head count jumped by 32 percent to 707 lawyers, and revenue went up 27.5 percent to $517 million. Revenue per lawyer dipped by 3.6 percent ($27,000) to $732,000, which Lehman attributed to time spent on integration and differences in economics for Nelson Mullins and Broad and Cassel. He described the firms as “very compatible but not exactly the same.”
“It takes a while as you integrate to get everyone moving together,” he said. “When you grow by 30 percent, it’s a lot for everyone to process. It’s been very positive, but it’s also a lot of work.”
Nelson Mullins increased its equity partner head count by 25 percent, adding a net of 36 equity partners to 181. It increased its total partner head count by 27 percent, with a net addition of 86 partners, rising to 404.
Net income grew at a lesser rate, by 14.1 percent, to $180.51 million. As a result, profits per equity partner dropped 9 percent to $996,000—slightly below the $1 million PEP threshold that Nelson Mullins crossed in 2017 with PEP of $1.094 million.
When the merger was announced, Lehman told The Daily Report that Nelson Mullins’ PEP was higher than Broad and Cassel’s, but RPL and rates were compatible. While the combination pushed down PEP, average partner compensation—a metric that provides a snapshot of compensation to partners, both equity and nonequity—did not change much, declining by only 1 percent from $677,000 to $670,000.
“We decided this is a good long-term investment,” Lehman said, noting that the dip in PEP generally didn’t affect partners’ actual income. He said he expects RPL and PEP to increase as the firms integrate.
Nelson Mullins raised rates modestly, Lehman said, between the industry norm of three and 4 percent. “We continue to believe that our cost structure gives us a competitive advantage when setting rates,” he said.
On the expense side, overall overhead was about the same, Lehman said, but he acknowledged that the associate salary increase that started in New York last June caused extra expense for Nelson Mullins, as for many firms. “The cost for talent is going up, but we do not see it eroding the margins significantly at this point,” he said.
Like many in the legal industry, Lehman said he and his partners consider a recession to be likely this year or in 2020. “But we have not seen any signs of that yet,” he said.
“We’re planning for us to have some slowdown in the next 24 months, so we’re being cautious about our lateral hiring and expenditures,” he added. “We anticipate that there will be a bump in the road. It’s inevitable at some point—the economy is a lot bigger than we are.”
The Broad and Cassel combination deepened Nelson Mullins’ real estate, health care and white-collar defense practices while extending its reach into Florida, where Broad and Cassel had 10 offices with a concentration in South Florida.
“The new reach in the real estate and health care worlds with Broad and Cassel is coming about how I had hoped,” Lehman said.
The deal was motivated, he said, by “broader reach and better service” for clients—those from Nelson Mullins who do work in Florida and those from Broad and Cassel who have expanded nationally.
In particular, Broad and Cassel had a national health care compliance practice that represents providers and payers, while Nelson Mullins had an extensive health care transactional practice. Combined, the firms have 50 lawyers in the group.
Separately from the Broad and Cassel combination, Nelson Mullins added 30 lateral partners, of whom 13 were in Baltimore. (The Baltimore team, led by trial lawyer Michael Brown and corporate partner Timothy Hodge Jr., its local managing partner, now totals 24 lawyers.)
The other 17 new lateral partners were across the platform, Lehman said, including a Los Angeles office that opened in 2017 and another in Denver that launched in 2016.
The firm added two lateral partners in Atlanta: former federal prosecutor Nekia Hackworth Jones in its white-collar defense practice and corporate attorney Larry Shackelford, who has a community bank and financial services practice.
On the corporate side, Lehman said Nelson Mullins lawyers advised on 95 deals totaling more than $4.5 billion in 2018.
The firm handled four of the 20 largest bank mergers in the U.S., totaling $6.3 billion in equity transaction value, according to S&P Global Market Intelligence and Sandler O’Neill + Partners. For instance, with Wachtell, Lipton, Rosen & Katz, the firm represented Chemical Financial Corp. in its $3.5 billion merger with TCF Financial Corp. and it represented Florida community bank CenterState Bank in its $850.4 million acquisition of Alabama’s National Commerce Corp.
Nelson Mullins advised Entertainment Studios on its $300 million purchase of The Weather Channel’s parent company The Weather Group, as well as Snap TV in its sale of a 75 percent equity interest to Miami-based Hemisphere Media Group.
On the litigation front, Nelson Mullins handled major products liability matters for several clients. Michael Brown’s defense of Johnson & Johnson in talc cases resulted in a hung jury in May in South Carolina, and he is currently handling a talc trial for J&J in Alameda, California, that started Jan. 7.
Nelson Mullins is national trial counsel for Bard in its IVC blood filter litigation. Richard North won a defense verdict in a bellwether case for multidistrict litigation consolidated in Phoenix. He tried cases resulting in a $3.6 million verdict in March and a defense win in June for the medical device maker.