SNR Denton overcame a slight contraction in gross revenue to post a double-digit gain in average profits per partner in 2012, according to reporting by The American Lawyer.
In its second full fiscal year since its formative merger between Sonnenschein Nath & Rosenthal and U.K.–based Denton Wilde Sapte, the firm’s gross revenue and net income both fell 1.3 percent—to $710.5 million and $155 million, respectively. Profits, on the other hand, leapt 12 percent, to $785,000, thanks to an 11.6 percent reduction in equity partner head count, which fell from 224 to 198. Total attorney numbers also shrank, dipping 4 percent to 1,093. As a result, revenue per lawyer was up 3.2 percent, to $650,000. The firm’s profit margin remained static at 22 percent.
SNR global CEO Elliott Portnoy says the firm made a “conscious decision” to decrease its equity partner head count by shedding underperforming partners, with a view to boosting profits.
“Increasing our profitability is one of our main priorities, but that’s harder to do when market conditions are so challenging,” Portnoy says. “We’ve continued to invest and have grown quite substantially in a number of key sectors, practices, and offices, but at the same time we’ve looked hard at performance and overall profitability. Where there have been partners or associates whose performance does not meet our expectations, we’ve not been reluctant to transition them out of the firm.”
Portnoy says the firm’s energy, natural resources, and mining teams enjoyed “tremendous success” in 2012, with their collective revenue up about 8 percent compared to the previous year. (SNR recently advised French energy major Total on its $2.5 billion sale of a 20 percent stake in an offshore Nigerian oil field to China’s Sinopec.) SNR’s IP and technology group fared even better, posting an annual increase in revenue of 12 percent, he adds, while the firm’s large real estate practice had “another exceptionally strong year.”
SNR’s transactional practices, which, together with real estate, account for more than 50 percent of global revenue, endured a slow start to the year, however. The firm’s litigation practice also saw reduced activity levels in the first half of 2012 after a number of significant cases settled or closed, including several insurance-related class actions and a high-profile dispute between the National Football League’s St. Louis Rams, which SNR represented, and the team’s landlord. Despite this, Portnoy says the group ended the year on “a real uptick," and he expects that momentum to be maintained throughout 2013.
Like Baker & McKenzie, DLA Piper, Norton Rose, and most other firms involved in the recent spate of international mergers, SNR is structured as a verein—essentially a holding structure that allows participating members to retain their existing forms. As such, the U.S. and international arms—the legacy Sonnenschein and Dentons practices—remain distinct legal entities and are not financially integrated. (Click here for a feature in March 2013 issue of The American Lawyer that analyzes the use of vereins by international law firms.)
U.S. CEO Peter Wolfson says the firm’s American offices were “strong across the board” in 2012 and are already well ahead of their budget for 2013 after one of their “best ever starts” to a year. Further analysis of the firm’s combined financial results suggests that the international arm performed less well, however.
The legacy Denton business saw revenue fall almost 3 percent to $238 million in 2012, according to our reporting, and achieved average profits per partner of just $577,000—almost 60 percent below the U.S. arm’s $917,000. There was also disparity in profit margins: 23 percent for the U.S. practice; 19 percent for the international. (This gap has at least narrowed. The international arm’s profit margin in 2011 was just 14 percent—barely half that of the U.S. business’s 26 percent.)
Portnoy dismisses any suggestion that the firm’s international practice is dilutive, and stresses that SNR doesn’t track profitability by office or region.
“We genuinely don’t look at it as being dilutive—we look at the fact that together we have become more profitable,” he adds. “Neither the U.S. nor the [international] region is satisfied at where we are, notwithstanding the increases in 2012, and both believe that further heightening our profitability is a key priority.”
The SNR verein is, of course, soon to welcome two new members: European firm Salans and Canada’s Fraser Milner Casgrain. The three firms are set to officially combine as of April 1 to create a 2,500-lawyer giant with revenues of more than $1.3 billion. A spokesman for the firm, which is to be known as Dentons, said that almost 200 new matters have already resulted from the three-way tie-up. One example: SNR and FMC recently teamed up to advise the vendors of U.S. and Canadian properties purchased by the newly listed Agellan Commercial Real Estate Investment Trust.
“These combinations take time to develop—you don’t see the full benefits for years—but I’m surprised at how much we’ve achieved so quickly,” Wolfson says. “We’re very pleased with our progress.”
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.