(Photo: Diego M. Radzinschi/ALM)
DLA Piper had a mixed year financially in 2016, with significant currency fluctuations resulting in a rare drop in revenue. But profits still rose, thanks to a drive to cut costs, improve productivity and target higher-value work.
The firm’s revenue fell 2.9 percent in the last fiscal year, to $2.47 billion. Despite this, a 140-lawyer reduction in total head count—to 3,616 attorneys—meant that average revenue per lawyer inched up 1.5 percent, to $685,000.
DLA’s net income rose 6.3 percent, to $643.5 million—the second-highest in the firm’s history, behind a 2014 peak of $667 million. This fueled a 5.4 percent increase in average profits per equity partner, which hit a record high of $1.655 million. The firm’s profit margin climbed 2 percentage points, to 26 percent.
DLA co-chair Roger Meltzer told The American Lawyer that the decline in revenue was caused entirely by currency exchange rates and did not accurately reflect what was a “very solid” year for the firm. DLA’s international arm compiles its accounts in British pounds and the numbers are then converted to U.S. dollars to produce the firm’s global figures.
In fact, according to a DLA spokesman, the firm’s total revenue actually would have increased 1.1 percent without the currency effect. The pound sterling has weakened from $1.50 to around $1.24 since the Brexit vote last June.
“We’ve been fortunate that our clients have continued to drive additional market share to us,” Meltzer said. “We’re continuing on an upward trajectory.”
DLA’s revenue per lawyer and profits per partner have steadily increased every year since 2010, when The American Lawyer first started treating the firm as a single global entity for the purposes of our Am Law 100 survey. (DLA’s U.S. RPL previously topped $850,000.)
Global co-CEO Jay Rains said the firm’s increased profitability is a reward for its strategic efforts to focus on quality, efficiency and costs. “When you go through a period of rapid growth, as we have over the past 10 years, it’s important to take a breath and reassess,” he said. “We’ve made a conscious effort to be more exacting and improve the overall financial profile of the firm. It’s more than a topline business these days.”
DLA made significant cuts to its U.K. support staff last year and closed a small office in the Yukon territory, which it inherited as a result of its 2015 combination with the Vancouver-based Canadian firm Davis. Meltzer said that this continued “reshaping” has also resulted in some lawyers leaving the firm if they “can’t meet that exacting standard or [if they] reach the conclusion that this is no longer the same firm they joined,” although he stressed that no attorneys were laid off.
The firm’s U.S. business was “strong across the board” in 2016, Rains added—with the exception of general business litigation, which he said has become “very rate constrained” and was “an area of weakness from a financial standpoint.” DLA’s U.S. corporate practice had a standout year, Rains said, with the firm topping Mergermarket’s legal adviser rankings in terms of number of M&A deals globally for the seventh consecutive year. “We’re still doing a lot of deals, but we’re also competing head-to-head with the elite firms [for big-ticket transactions], which we wouldn’t necessarily have been doing 10 years ago,” Meltzer added.
Internationally, London-based global co-CEO Simon Levine said that all of the firm’s European offices performed well in 2016 and that the Middle East, where DLA has nine offices, delivered a third consecutive year of increased revenue and profits as part of a continued recovery in the region. DLA’s U.K. business and its transactional practices across the region “softened” in the second half of the year due to Brexit-related uncertainty, he added, although the drop-off was “nowhere near as bad as we might have feared, frankly.” This was “more than made up for” by high levels of client demand across regulatory and disputes practices, Levine said.
DLA, which was among 20 firms named by clients in a Legal Week survey as providing the best levels of overall service, continued to invest heavily in expanding its already extensive network in 2016.
The firm’s international arm opened an office in South Africa and subsequently hired partner Johannes Gouws from Linklaters ally Webber Wentzel to manage and build its practice in the country; integrated its Swedish arm; and combined with Finnish firm Peltonen LMR and Sweden’s Grönberg as part of a new Nordic verein.
In the Americas, meanwhile, the firm bolstered its presence in Canada by combining with Toronto IP boutique Dimock Stratton; became the first full-service Am Law 100 firm to open an office in Puerto Rico; and signed a cooperation agreement with Chile firm Bahamondez, Alvarez & Zegers.
Other notable developments saw DLA join the ranks of firms utilizing machine learning technology by signing a deal with artificial intelligence software provider KIRA Systems Inc.; expand its collaboration with flexible lawyering provider LOD to Australia; and launch a new online tool that provides clients with information on patent laws globally.
Rains said that the firm is currently busier than at the start of any other year in the past decade. Meltzer, however, remains cautious about the underlying market conditions for global law firms in 2017.
“How can you be anything but cautious about 2017, with the uncertainties on both sides of the pond?” he said, adding that the disruption “presents an opportunity” for the firm.
“Everything about the firm is infinitely stronger than it was five years ago,” Meltzer said. “There are places where we still need to do better, but we’re determined to drive the firm to the highest possible level.”
Last week, DLA Piper announced that it had combined with its Portuguese alliance firm ABBC. It is now targeting a tie-up with a firm in Peru, and is seeking to establish a new office in Denmark. The firm previously had an office in Copenhagen, but the practice spun off in 2007 citing client conflicts. In addition, DLA is looking to open an office in the Republic of Ireland. Several firms have registered lawyers in Ireland following the Brexit vote so they can retain European Union practice rights. Pinsent Masons has also investigated opening an office in Dublin.
DLA’s results mean that Latham & Watkins retains its position as the world’s largest law firm by revenue. Latham had another outstanding year in 2016, increasing its revenue by 6.5 percent, to over $2.8 billion. The firm has added more than $1 billion to its annual revenue since the recession in 2009.
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