After making a brief return to topline growth in 2011, Mayer Brown’s financial performance slipped back into decline in 2012, according to The American Lawyer‘s reporting.
Mayer Brown had seen revenue bounce back in 2011 to reverse two consecutive years of negative growth, but the firm suffered a fresh slump in 2012, with gross revenue dropping 3.7 percent to a six-year low of $1.09 billion. Net income fell even more steeply, tumbling 6.2 percent to $304 million, which resulted in a 2.5 percent slide in profits per partner, to $1.15 million. Revenue per lawyer actually inched up 0.7 percent to $750,000, however, thanks to a reduction in total attorney head count of more than 4 percent, from 1,523 to 1,457—the smallest the firm has been since 2007. Mayer Brown’s profit margin, meanwhile, dipped 1 percentage point, to 28 percent—a full 5 percentage points below its 2007 level, but still 2 percentage points higher than the firm achieved in 2010.
New Mayer Brown chair Paul Theiss blames the firm’s financial struggles last year on a slow first quarter and a significant drop in activity levels across both Europe and Asia—a malaise that he says wiped out an “extremely strong” performance by the firm domestically. Indeed, each of the firm’s seven U.S. offices improved upon an “already strong 2011” last year, he adds, but those gains were “counteracted” by a slowdown across all of the firm’s practice areas internationally.
“Almost half of our lawyers are now located outside the [United States],” says Theiss, who replaced the outgoing Bert Krueger last June. “That’s great for our ability to service our clients, but in 2012 meant [our financial performance] was more affected by some extremely challenging economic conditions in Europe and Asia.”
Theiss says Mayer Brown reacted to the decline in revenue by placing a “renewed focus on expense control," reducing its overhead expenses, including occupancy costs, by close to 5 percent in 2012, and trimming its total costs by about 3 percent. The cuts included some “rightsizing” of the firm’s fee-earner head count, which fell by 66 lawyers in 2012, although Theiss insists that this was entirely the product of natural attrition and reduced hiring activity, rather than layoffs. (The firm did lay off some support staffers in its London office, he confirms.) Theiss says that the firm expects to continue cutting costs in 2013.
Last year wasn’t all about cost-savings, however, as Mayer Brown continued with its program of strategic investments. The firm boosted its fledgling Singapore office, launched in late 2011, with the hire of Linklaters counsel Nathan Dodd, who now leads Mayer Brown’s local finance practice. Five new equity partners have joined the firm in Houston since the second quarter of 2012, while the Beijing office saw the arrival of two corporate partners in July: Dechert’s Beijing managing partner Henry Wang and Billy Au, an of counsel from the Hong Kong office of Orrick, Herrington & Sutcliffe. (Mayer Brown practices in Asia as Mayer Brown JSM.)
Although 2012 will surely go down as a year to forget for Mayer Brown—thanks, in part, to its former chief information officer being charged with fraud in connection with a scheme that allegedly saw the firm bilked out of nearly $5 million—Theiss says its recent performance gives him cause for optimism. The firm’s revenue and net income increased in each quarter throughout 2012, Theiss adds, to the point that it generated almost twice as much profit in the fourth quarter as it did in the first.
“We had a very strong end to 2012 and have carried that into the new year,” he says. “I have enormous amounts of confidence in the abilities of our lawyers and feel very optimistic that we can maintain our momentum into 2013 and beyond.”
This report is part of The Am Law Daily’s early coverage of 2012 financial results of The Am Law 100/200. Click here to see an interactive chart comparing this firm’s 2012 finances to those of other Am Law 100 and Second Hundred firms that The Am Law Daily and its sibling publications have reported on to date. Final rankings and full results for The Am Law 100 will be published in The American Lawyer’s 2013 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.