William P. Gelnaw Jr., left, and Charles A. Cheever ()
Choate Hall & Stewart reported record-high revenue and profit in 2016, and its revenue per lawyer is now among the highest of any law firm based in the U.S.
The Boston firm’s revenue increased 7.9 percent last year to $218.5 million, its fifth consecutive year of growth.
A very slight reduction in head count, a decline of just 4 attorneys to 156, meant the firm’s average revenue per lawyer rose even more steeply, leaping 11.1 percent, to $1.41 million. That would have ranked Choate in the top 10 by that metric in last year’s Am Law 100, alongside such firms as Cravath, Swaine & Moore and Kirkland & Ellis, and ahead of several elite practices, including Davis Polk & Wardwell and Simpson Thacher & Bartlett.
Choate’s net income in 2016 inched up by $500,000, to $113 million. As with revenue per lawyer, a reduction in head count—equity partner numbers fell 8.6 percent, to 54—helped drive a sizable increase in average profits per partner. That figure passed $2 million for the first time in the firm’s history, rising 9.7 percent, to $2.095 million.
Despite falling 4 percentage points, Choate’s profit margin remained above the 50 percent mark, a feat only achieved by 12 firms in last year’s Am Law 100—, at 52 percent.
Choate co-managing partner Bill Gelnaw said the results reflect “another strong year” for the firm. “We exceeded what was an aggressive plan for growth,” he said.
Fellow co-managing partner Charles Cheever said the firm had “high demand” across all of its core practice areas: private equity and M&A; finance and restructuring; life sciences and technology; litigation, including IP and insurance; and wealth management.
Choate represented Hewlett Packard as trial counsel in a successful $3 billion lawsuit against Oracle Corp., and also handled high-profile disputes for Dell EMC and Cambridge, Massachusetts-based Alnylam Pharmaceuticals Inc. The firm also saw “significant growth” in finance and restructuring, particularly in retail finance, acquisition finance and sports lending, and in its middle-market-focused private equity practice, which was boosted by the arrival of a three-partner team from Locke Lord.
For the third year running, Choate topped The American Lawyer’s summer associate rankings, which sees more than 4,000 students rate their placements based on such areas as the level of training and guidance they received, how interesting and “real” the work was, how often they interacted with partners and associates, how accurately the firm portrayed itself, and whether the firm is a good place to work overall.
Gelnaw attributed Choate’s success in this area—the firm received a maximum score in every category in this year’s survey—to the fact that summer associates have high levels of partner interaction and opportunities to do hands-on work. “We approach the summer program as an opportunity to prepare our summer associates to hit the ground running when they return to us full time,” he said. “They receive significant training [and have] the chance to work on real client matters.”
The firm’s 2016 financial results demonstrate that Choate has continued its strong post-recession recovery. The firm’s revenue has increased by 64 percent since 2009, while its net income has more than doubled over the same period, rising 128 percent.
Cheever attributes this growth to three factors: the firm’s diverse client base (no single client accounts for more than 5 percent of Choate’s total revenue); the quality of its lawyers; and its single-office, low-leverage business model. (Choate only has one office, which is in Boston, and has just 1.89 lawyers for every equity partner, well below the average Am Law 100 leverage of 3.73.) “This increasingly unique model leads to a special client experience, one that is very different from the experience delivered by larger, less-focused and less-collaborative institutional law firms,” he said.
Despite the legal market becoming “increasingly competitive and challenging,” Gelnaw said he is optimistic about Choate’s prospects for further growth. The firm has once again budgeted aggressively for 2017. It is “off to a very strong start” in the first two months of the year, but is generally more focused on lawyering and client service than its financial results, he said.
“Although we are pleased with our financial performance, our focus is on getting better, deeper and stronger each year in order to help our clients succeed,” Gelnaw said. “If we do that, the finances will take care of themselves.”