Troutman Sanders continued to build on revenue and profit growth last year after a breakout 2015 and gains in 2016.
“We were very pleased with the year. We’re on a good path forward right now,” said Troutman’s managing partner, Stephen Lewis.
Troutman reported an $18 million (3.8 percent) increase in revenue in 2017, which pushed it past the half-billion mark to $508,731,000. (That followed a 4.6 percent revenue increase in 2016 and 11 percent increase in 2015.)
Troutman’s net income inched up 0.5 percent to $189,194,000 (after increases of 3.9 percent and 14 percent in the preceding years), but average profit per equity partner jumped $40,000 to $1,058,000. The firm had crossed the $1 million mark in PPP the prior year.
Troutman pared its equity partner ranks slightly, reporting 179 equity partners in 2017, a net of six fewer than in 2016. Total partner head count went down by a net of 11 partners, to 295.
Lewis said the decrease in partners was “primarily a function of retirements,” noting that 11 partners retired in 2017. Meanwhile, it added 18 lateral partners.
“We’ve been focusing the past couple of years on improving our leverage by hiring more younger associates,” Lewis said, adding that it hired almost 30 associates last year.
The “overwhelming majority” of the associates are on the partnership track, he said. “We have started hiring staff attorneys, but that is still a relatively new phenomenon here,” he added.
The firm increased its lawyer head count by a net of 17 lawyers to 672 lawyers on average in 2017. Average revenue per lawyer increased by $9,000 to $758,000.
Troutman continues to encourage alternative fee arrangements with its clients, which are often fixed fees or blended rates, Lewis said. “It’s critical to have younger lawyers with lower rates to do the junior part of that work.”
“Where we get real success is when we can tell our clients they’ll pay us less overall, but we actually make more,” he added. “That has proven to be a good path for us over the last few years, and it’s something we’re continuing to look at.”
Lewis said Troutman does not track alternative fee arrangements as a percentage of revenue, but estimated that they could make up as much as half.
One tactic that has worked well, he said, is for partners working with the firm’s financial analytics staff to “align incentives” with clients at the start of an engagement as to work outcomes and fees. “We’ll take a larger discount, if the deal does not close or a case is not successful—and premiums if we do win,” he said.
“Our clients like us to be proactive. Once we know what they are focused on, we can craft different things and give them some options,” Lewis said.
As far as future growth, Lewis said Texas is on the firm’s radar screen. “It’s a place where we’ve got multiple practice areas with lots of clients encouraging us to get to.”
Those practices include finance, financial services litigation, renewable energy, real estate and construction, he said, adding that corporate and intellectual property also are in the mix.
“We are willing to go quickly, if we find the right group, but we are willing to wait patiently until we do. We want a group that is a cultural fit and a good fit for our practice,” he said.
Troutman has 13 U.S. offices in locations including Atlanta, Washington, New York, Virginia, North Carolina, Chicago and the West Coast.
Like many firm leaders, Lewis said Troutman’s growth in terms of lateral partners and new offices is client-driven. The firm actually maps work on a grid by geography, client industries and practice skill set, he added, so it can “look at places where we need a deeper bench.”
The firm announced in January that it will be closing its three China offices in Hong Kong, Shanghai and Beijing by the end of May. At the time Lewis said that the decision was not financially driven, but based on strategy.
The China practice focuses on Hong Kong securities and M&A work, Lewis said in January, which is outside Troutman’s core strengths focusing on middle-market clients, particularly in banking and finance, energy, life sciences and insurance.
In Atlanta, Troutman added Halli Cohn, an experienced product liability litigator as a partner from King & Spalding, and an environmental and regulatory law team of partners from Hunton & Williams—Bob Hogfoss, Catherine Little and Annie Cook—who advise oil and gas pipeline owners and operators.
In July, it added three partners in Chicago from Lathrop & Gage: environmental partners Sue Charles and Russ Eggert and business litigator Trent Cornell.
Troutman recruited three construction law partners from San Francisco-based Sedgewick, which closed at the end of 2017—James Diwik in San Francisco and, in Washington, David Mancini and Barbara Werther, who’d headed Sedgwick’s construction and government contracts practice.
Multifamily housing finance continued to be a busy practice for the firm last year, which served as lender’s counsel for Walker & Dunlop in a $1.9 billion portfolio of Freddie Mac-backed acquisition loans for Greystar Growth and Income Fund. It advised longtime client Berkadia Commercial Mortgage in providing acquisition loans of almost $1 billion, backed by Freddie Mac, for Harbor Group International to acquire a multifamily portfolio from Lone Star Funds.
Another longtime client was Georgia Power, which faces ongoing litigation related to nuclear Plant Vogtle’s cost overruns. Troutman successfully defended Turner Broadcasting System and CNN, as well as Waffle House in employment disputes.
Troutman is lead outside environmental counsel for the proposed Atlantic Coast Pipeline, a $5 billion natural gas conduit backed by Dominion Energy, Duke Energy and Southern Company Gas.