Last year at Dechert was “fine,” CEO Henry Nassau said, with a 2.4 percent increase in revenue and 1.6 percent increase in profits per equity partner (PPP).
Gross revenue for the year was $911.5 million, up from $890 million in 2015. Net income was down 2.2 percent, at $400.5 million, and revenue per lawyer was down 1 percent to $995,000. Equity partner profits saw a very modest bump, with PPP rising to $2.55 million from $2.51 million in 2015.
Nassau said the firm was on solid ground despite a 2016 that came with revenue challenges and geopolitical surprises. The U.K.’s vote to leave the European Union and the U.S. presidential election marked a “populist sweep” he said, and “I was worried about whether that was going to interfere with being a global business.”
Even with Brexit, however, he said Dechert’s London office grew the most.
Dechert’s internal investigations practice experienced a “huge uptick” thanks to a particular client, Nassau said, and the funds practice was “a pleasant surprise,” growing by $29 million. Intellectual property had a good year as well, he said, and real estate securitization, while quiet in the middle of the year, was strong otherwise.
Litigation was soft, Nassau said, as the firm wrapped up its work on behalf of air bag manufacturer Takata, which had encountered civil cases, criminal inquiries and regulatory issues. Getting the Takata work was a surprise for the firm, and caused a 17 percent boost in the firm’s 2015 litigation revenue, he said.
The United States was relatively flat overall, Nassau said, and the firm’s greatest growth was in London, followed by Paris. While the long-term implications of Brexit remain unknown, he said, the London office will be busy in the near term. The London office made a significant addition in late in 2016, he noted, with the hire of a global finance team.
Currency fluctuations had an $8 million negative impact on revenue in 2016, he said.
Demand, Expense Pressures
Overall demand was flat for Dechert, in line with the industry trend, as the firm’s total hours billed were down 0.7 percent in 2016 from 2015. Hourly rates increased by 3 to 5 percent.
The firm’s equity partnership ranks shrank slightly, with 157 equity partners in 2016, down from 163 in 2015. Nassau said there were a number of retirements, but they were mostly balanced out by lateral hires. In the fourth quarter alone, the firm added a dozen lateral partners.
The nonequity partner tier grew by 10.7 percent, from 122 in 2015 to 135 in 2016. Average compensation for all partners was $1.66 million, a 2 percent decrease from nearly $1.7 million in 2015.
The firm’s total lawyer head count grew from 884 in 2015 to 916 in 2016.
One expense that grew unexpectedly in 2016 was associate salaries. Dechert raised its starting salary for associates to $180,000 over the summer, matching increases first announced by Cravath, Swaine and Moore. The raises affected only the second half of the year and had an impact of $5 million to $6 million, Nassau said.
Nassau said Dechert prepaid about $5 million in expenses for 2017. He said the firm waited to prepay the expenses until it hit a certain level of profitability in order to “let people know we were still breathing and functioning.” A year ago, it prepaid about $2.5 million of its 2016 expenses, he said.
In order to maintain profitability, Dechert will have to grow revenue by at least 5 percent in 2017, Nassau said. The firm has a path toward that goal, he said, as long as demand remains.
Nassau predicted the firm would grow significantly outside the United States in 2017. That includes growth plans in Asia, even though some firms are closing there.
“If you have a global footprint, you have a global footprint,” he said.
He said Shanghai is likely the next market Dechert will enter, but the firm is in no rush.
Nassau said he expects the firm will continue head count growth overall, particularly in New York and Washington, D.C.
Lizzy McLellan can be contacted at 215-557-2493 or firstname.lastname@example.org. Follow her on Twitter @LizzyMcLellTLI.