Foley & Lardner saw gross revenue and net income swell in 2018, as its merger with Dallas-based Gardere Wynne Sewell bore fruit.
Gross revenue hit $836.7 million for the Milwaukee-based Foley & Lardner, an increase of 21.9 percent, compared with $686.2 million in 2017. Net income was up 15.5 percent, at $195.3 million, compared with $169.1 million the year before.
And even with a much higher head count, revenue per lawyer (RPL) came in at $858,000 in 2018, up 2.9 percent from $834,000 in 2017.
Profits per equity partner (PEP) were $1.251 million, up 7.2 percent from $1.167 million the year before.
That’s a big change in metrics for the lawyers who came from Gardere Wynne—the combined firm’s 2018 RPL was 35.3 percent higher than Gardere Wynne’s 2017 RPL of $634,000, and 2018 PEP was 52 percent greater than Gardere Wynne’s $823,000 in 2017.
The two firms officially merged April 1, 2018.
“We were delighted in the growth this year, particularly with all of the expenses associated with the consolidation and, frankly, the effort,” said Jay Rothman, a partner in Milwaukee who is chairman and chief executive officer of the firm.
The merger created a 1,100-lawyer firm with offices in 24 cities in the United States, Mexico, Asia and Europe. The combined firm is known as Foley Gardere in Austin, Dallas, Denver and Houston, and Foley Gardere Arena in Mexico City.
Dallas partner Holland “Holly” O’Neil, a member of the firm’s management committee and chair of pre-merger Gardere Wynne, said the firms were well-prepared for the integration thanks to a lot of planning and meeting even before the deal closed.
A number of practice areas have already meshed well, Rothman said, pointing to corporate, litigation and intellectual property.
Rothman said the firm tracked what he calls “but for” revenue, which is work that resulted from cross-selling and cooperation between lawyers from both legacy firms. That work totaled at least $10 million, he said.
In the months between the merger and the end of the fiscal year on Jan. 31, the firm opened about 125 new matters which accounted for about 15,00 billable hours, Rothman said.
“In our corporate practice alone, we did 200 joint pitches,” he added.
Rothman said Gardere Wynne’s strength in Texas and Mexico was valuable, particularly because legacy Foley & Lardner clients were driving the firm to those markets. The firm now has broader capabilities, a deeper bench and more geographic dispersion, he said.
“It’s been very, very positive for the Gardere legacy lawyers as well,” O’Neil said.
There were nevertheless out-of-pocket expenses incurred with linking the firms, Rothman said, including the opportunity cost of having lawyers and professionals spend time together on meetings that were unrelated to client work.
“There were expenses, when you think about technology and getting people in front of each other,” Rothman said, estimating that those costs totaled between $8 million and $10 million.
But O’Neil said the number of planning conversations between the two firms pre-merger mitigated the integration costs post-combination.
“The sort of pre-closing process of integration planning and getting people together really turned out to be incredibly valuable for us, and was really an accelerator of the benefits,” she said.
Rothman said he is encouraged by the fact the firm boosted its revenue by 21.9 percent—outpacing the 18.6 percent increase in lawyer head count—despite the one-time integration costs.
In 2019, Rothman said, the firm has shifted its focus from integration to lateral hiring in areas including energy—Foley added an alternative energy practice to Texas firm Gardere Wynne’s oil and gas practice—corporate, high-stakes litigation, bankruptcy, False Claims Act litigation, tax, supply chain, health care, and technology including cybersecurity, technology transfers, patent prosecution and intellectual property defense.
“We view this as evolutionary. It is iterative. We will never be done,” he said.
Aside from the merger, the firm also made individual lateral hires in Texas last year. They included Craig Chick, who joined the Austin office in April 2018 as a director of public affairs in the government solutions practice, and counsel Neal Bakare in Houston, a former in-house lawyer for Macquarie Bank who joined Foley & Lardner to do energy and finance work.
But Foley & Lardner also lost some legacy Gardere Wynne lawyers in Texas immediately before and shortly after the merger, and the firm ended up with a head count of 975 on a full-time equivalent basis for 2018.
The departures include a 14-lawyer team that joined Husch Blackwell in Houston; three energy litigators who moved to Bradley Arant Boult Cummings in Houston; two IP litigators who left, due to a client conflict, to join Crowe & Dunlevy in Dallas; and six real estate lawyers who moved to Jackson Walker’s Dallas office.
Rothman said the firm is off to a good start in 2019, but he declines to make predictions.
“We have been exceeding our budget on productivity … We continue to remain busy, but it’s barely two months into the fiscal year,” he said.