Miles & Stockbridge suffered a dip in revenue and a big ding to partner profits in 2018 in the aftermath of a lateral raid by a new Big Law rival in its hometown.
Gross revenue dropped 1.7 percent last year to little more than $114.6 million, and profits per equity partner sank 14.2 percent to $411,000. Net income declined 13.3 percent to $30.96 million last year.
Joseph Hovermill, president and CEO of Miles & Stockbridge, said the Baltimore-based firm’s revenue dip was largely attributable to Nelson Mullins Riley & Scarborough taking 11 partners in February to start its own Baltimore operation and noted a few more lawyers joined the departing group than expected.
Hovermill noted that some senior lawyers had also left the firm or were taking a step back in their workload. “There’s always going to be some inherent revenue bleed from those transitions—if for nothing else just the rate differences between the folks doing the same work,” he said. Overall, rates at Miles & Stockbridge rose little more than 3 percent in 2018, according to Hovermill.
Despite the departures, Miles & Stockbridge reported its total lawyer head count declining by just one lawyer year-over-year. The size of the equity partnership remained unchanged at 75 partners, and the firm last year added a nine-lawyer affordable housing and tax credit team from Bryan Cave Leighton Paisner in D.C.
Hovermill said he was “happy on how the year ended up.”
“I’d say that the revenue being down a little and the partner comp being down more from our standpoint is actually, from our standpoint, sort of a positive sign of the minimal long-term impact those departures had on us,” Hovermill said.
Miles & Stockbridge’s expansion in D.C. foreshadowed its strategy to lean into the nation’s capital in 2019. The firm is moving offices in April, and Hovermill described the difference between its current space on K Street and its future office on Pennsylvania Avenue as “night and day.”
Miles & Stockbridge announced news of its Washington upgrade last November and said it wanted to double its Washington head count in the process. Hovermill said the firm’s goal remains to “aggressively grow” its D.C. office so that its Baltimore and D.C.-area head count are roughly the same.
The lateral hiring competition that bedeviled Miles & Stockbridge in 2018 was another sign of the pressures that the Mid-Atlantic’s Second Hundred firms are facing. Big national and international firms remained largely unaffected by the challenges in the D.C. market, while their somewhat smaller counterparts suffered encroachments by larger competitors for work and talent.
Still, Hovermill sounded an optimistic note, especially about D.C.
“We think we have a real value proposition for some folks that are getting priced out of representing their clients at some of the international firms,” Hovermill said. “We can bring a practice in that would be kind of above our Baltimore rates, but way less than maybe a principal is being asked to charge his clients in an international law firm—and that’s a win for us. We’re already realizing that.”