Cozen O’Connor boosted revenue by more than 10 percent in 2016, as the firm continued to reap the benefits of acquisitions and lateral hires, as well as demand that bucked industry trends.
The firm posted $376 million in gross revenue in 2016, up from $341.5 million in 2015. Revenue per lawyer was at $665,000, an increase of 3.9 percent from 2015. Profits per equity partner (PPP) grew by 3.4 percent, to $770,000.
“Demand continues to increase year over year at a greater pace than lawyer growth, so our revenue growth was not just a product of more lawyers, it was a product of greater demand and more productivity,” CEO Michael Heller said.
Heller acknowledged that Cozen O’Connor’s increase in demand ran counter to the industrywide trend. He said investments in lateral growth and marketing have kept demand high, and that commercial litigation, corporate, real estate, IP and labor and employment practices performed especially well in 2016.
The firm grew net income by 11.6 percent, to $129.5 million. Its profit margin was 34 percent, showing no change from 2015. Cozen O’Connor prepaid some expenses, as it does annually, Heller said.
The firm’s equity partner tier grew by 8.3 percent, to 169 partners, while the nonequity tier shrank by 7.2 percent to 129. Nonequity compensation totalled $44 million, an increase of 1.1 percent from 2015.
The firm’s total head count grew by 5.6 percent, or 30 lawyers, to 563.
Cozen O’Connor faced some increase in expenses, specifically on associate salaries, which the firm raised at the beginning of 2016 and the beginning of 2017. First-year associates now make $150,000 in Philadelphia and $160,000 in New York and Washington, D.C.
In terms of partner compensation, Heller said there was a smaller range than last year. The highest paid partner made 8.8 times more than the lowest paid partner in 2016, compared to 11.9 times more in 2015.
Heller said he expects another good year in 2017. While collections were successful at the end of 2016, he said the firm now has a larger inventory than it did a year ago.
Room to Grow
Heller said the Washington, D.C., New York and Miami markets have been especially active, and that the firm expects to continue growth there. It will also seek to grow in the Midwest and areas further west, he said.
“They are great middle-market cities,” Heller said, referring to Midwestern markets and Miami. “Those markets continue to see a growth in not only middle-market companies, but Fortune 1000 companies.”
Cozen O’Connor’s growth in Miami has been “on an exponential basis,” Heller said. In June, the firm brought on most of the attorneys from Miami-based IP boutique Feldman Gale, which also had lawyers in California and New York. Later in the year it brought in a group of Florida immigration lawyers from Fox Rothschild.
The firm also grew by acquisition in mid-2015, when it brought on 60-lawyer Chicago litigation boutique Meckler Bulger Tilson Marick & Pearson.
Heller said Cozen O’Connor is willing to explore similar opportunities again, involving firms of 20 to 100 lawyers, but is not engaged in any talks currently. Still, he noted, the goal is not to grow the head count quickly, but to acquire groups with leading practices in key areas of the law.
For instance, he said, the firm recently launched a practice group that focuses on institutional response to sexual misconduct, bringing on five lawyers, including four from Pepper Hamilton. As another example, he said, the Washington, D.C., group it hired in mid-2015 represents clients facing investigations and litigation brought by state attorneys general.
“You’re seeing in the marketplace a race to size,” Heller said. “We’re probably in a much more tempered growth mode. I don’t necessarily see the strategic value to automatic growth, or doubling the size up of the firm.”
Lizzy McLellan can be contacted at 215-557-2493 or firstname.lastname@example.org. Follow her on Twitter @LizzyMcLellTLI.