Ballard Spahr offices in Washington, D.C. March 24, 2015. Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL. (Diego M. Radzinschi)
Ballard Spahr experienced slight revenue growth and flat profits in 2016, making the best of what the firm said it knew would be a challenging year.
Gross revenue was $341.5 million in 2016, up 1.2 percent from $337.5 million in 2015. Profits per equity partner were up very slightly, by 0.8 percent, increasing from $600,000 to $605,000.
But revenue per lawyer fell as the firm grew its head count. RPL was $645,000, a decrease of 3 percent from 2015.
Total lawyers increased by 4.4 percent to 529, while the equity partnership tier shrank 3 percent from 238 to 231. Ballard Spahr does not have a nonequity partner tier.
The firm expected 2016 to be a flat year, chairman Mark Stewart said, after notable growth the year before. In 2015, its 8.2 percent increase in gross revenue was boosted by two major contingency fees. Stewart acknowledged last year that it would be a challenge to maintain the same revenue in 2016.
“Given all that was going on, it was a good year,” Stewart said of the 2016 results.
Stewart said the firm’s revenue per lawyer is down because demand is down. And with demand down, he said, significant rate increases were basically off the table in 2016. Firmwide, he said, rates increased by a standard amount on average, but some practices actually lowered rates.
Real estate was the most profitable practice, he said, and litigation was strong in 2016. The business and finance practices also performed well, he said.
One area that was weaker than usual was IP litigation, Stewart said, and the firm is working on turning that around.
Net income was down 2.4 percent, at $139.5 million, and the firm’s profit margin was 41 percent, a decrease of one point from 2015.
The firm experienced an increase in expenses in 2016, Stewart said, including the full impact of a mid-2015 raise in associate salaries to $150,000 for first-years in some markets. The salary expense was “well managed,” Stewart said, so it wouldn’t have a severe impact. Ballard Spahr chose not to bump its associate pay again in 2016, after Cravath, Swaine & Moore started a wave of raises by setting first-year salaries at $180,000.
A greater emphasis on providing case management data to clients has also helped the firm monitor expenses, Stewart said, although the dynamic between clients and the firm has changed in terms of rates and payment. Ballard Spahr has increased its use of project management professionals and budgeting tools as part of its client value program.
The firm added to its total head count, even as its partnership ranks shrank slightly. Stewart attributed the decrease in partners to some retirements and management of the partner tier, noting that 12 lawyers made partner last year. Most firms are dealing with an overcapacity problem in their partnerships, he said, so partners are expected to meet certain expectations.
“We have to be businesslike,” he said.
As for 2017, Stewart said he is expecting to expand into new cities, although he would not say where. He said he is open to the idea of joining with another firm but is not actively courting a merger. The firm has declined a number of merger opportunities in the past, he added, and he is not interested in a “merger of equals.”
Stewart predicted that the firm’s real estate practice would remain strong, particularly in Philadelphia and Baltimore. And he said he plans to emphasize the finance practice, which includes real estate finance.
“I want [finance] to become something the firm is known for,” Stewart said.
The firm is also looking to continue its focus on emerging companies. Ballard Spahr’s emerging growth practice involves pro bono work for the startups involved, but some of the businesses grow into paying clients. The firm will continue to develop the practice, Stewart said, and is planning some additions in the near future.
“It is important for a firm like ours to be able to represent a client at all phases,” Stewart said. “We know we’re going to lose a lot, and we’re going to win.”
Lizzy McLellan can be contacted at 215-557-2493 or email@example.com. Follow her on Twitter @LizzyMcLellTLI.
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