Growth slowed on average for Atlanta’s 10 top-grossing law firms last year, especially for firms in the middle of the group. But nearly all weathered flat demand in the legal industry to push revenues ever higher.

Revenue increased 4.5 percent on average for the group—a slowdown from the prior year’s 6.5 percent increase but still ahead of the Am Law 100′s average 4.3 percent revenue growth for 2016.

The group’s revenue growth also outpaced the average 3.8 percent revenue growth in 2016 for Citi Private Bank’s basket of 193 firms (77 Am Law 100, 53 Am Law 200 and 63 niche firms).

All 10 Atlanta firms are among the 200 highest-grossing U.S. firms, with half in the Am Law 100 and the rest falling in the Second Hundred. (The American Lawyer will publish the full Am Law 200 rankings in June.)

It’s a diverse group, ranging in size from King & Spalding (No. 27 on the Am Law 100), which reported gross revenue of $1.06 billion and 1,005 lawyers, to Arnall Golden Gregory, with $94 million in revenue and 145 lawyers.

It’s also a group that has become less static in recent years when it comes to their Am Law rankings. Sutherland Asbill & Brennan, the city’s fifth-largest general practice firm, was transformed by its Feb. 1 combination with U.K.-based Eversheds to form Eversheds Sutherland and will no longer be counted as Atlanta-based. That follows the departure of McKenna Long & Aldridge from the group in 2015, after its acquisition by global megafirm Dentons.

At the smaller end, Arnall Golden entered the Am Law 200 for the first time in 2015, following Smith Gambrell & Russell’s entry in 2014.

The other Atlanta firms, in descending revenue order, are Alston & Bird, Troutman Sanders, Ogletree Deakins Nash Smoak & Stewart, Kilpatrick Townsend and Stockton, Fisher & Phillips and Morris Manning & Martin. Ogletree and Fisher & Phillips are national labor and employment firms, while the other eight Atlanta-based firms are general practice.

Paralleling their 4.5 percent average revenue growth, the Atlanta firms averaged a 4.2 percent increase in head count last year—well above the 2.7 percent increase for the Am Law 100 and a 1.7 percent increase for the Citi Private Bank cohort.

The similar increases in revenue and head count meant a negligible (0.25 percent) increase in revenue per lawyer for the group.

K&S and Alston Beef Up

King & Spalding led the pack in head count growth, becoming the first Atlanta-based firm to break the 1,000-lawyer mark. As revenue increased 3.8 percent to $1.06 billion, the firm boosted head count 7.4 percent (69 lawyers) to 1,005 lawyers.

It also expanded its equity partner ranks by an unprecedented 10 percent (18 partners), for a total of 196 equity partners.

The firm’s chairman, Robert Hays, said in February that busy areas included white-collar matters, government investigations, international arbitration, trade law and litigation—and he forecast continued growth.

“After years of stagflation and some gloom, there seems to be more optimism from our clients about our economy going forward,” he said, despite the unexpected outcomes of the U.S. presidential election and the U.K.’s Brexit vote.

King & Spalding’s head count increase pushed down revenue per lawyer by 3.7 percent to $1,050,000. But an 8.2 percent spike in net income ($484 million) meant the record influx of equity partners pushed down profit per partner by only 2 percent, to $2,470,000—still well above any other Atlanta-based firm.

Hays was sanguine about the slight declines in RPL and PPP. “We were pleased with the growth,” he said, noting that the equity partner expansion was well above the average 0.2 percent equity partner head count increase for the Citi Private Bank basket of large firms. The goal is to get “the right people in the right markets and the right practices,” he said.

Each of the 10 Atlanta firms increased either its total lawyer or equity partner head count, but only one other general practice firm besides King & Spalding—Alston & Bird—markedly increased both.

At Alston & Bird, head count increased by 30 lawyers (4 percent) to 782, and the firm added five equity partners for a total of 147. The year before both lawyer head count and the number of equity partners had declined.

The head count expansion reflected healthy financials. Revenue increased 6.2 percent to $730.5 million, and net income increased 7.9 percent, for a 3.7 percent hike in PPP to $1,810,000.

Alston & Bird’s managing partner, Richard Hays, noted in February that 2016 was “another year of modest growth for law firms generally,” thanks to the political and economic climate. He said issues in the political spotlight, such as tax reform, trade, cybersecurity and data privacy, intersected with busy practice areas for the firm.

Flattened Middle

The American Lawyer in May described the growing stratification of the Am Law 100, with the highest-grossing firms breaking away from the pack in both revenue and profit growth as they capture the most high-value legal work. The same phenomenon has been charted for the Am Law 100 relative to the Am Law 200 firms.

However, the 4.6 percent average revenue increase for the Atlanta group’s five Am Law 100 firms—King & Spalding, Alston & Bird, Troutman Sanders, Ogletree and Kilpatrick—is only fractionally higher than the 4.1 percent average revenue increase for the five Second Hundred firms: Sutherland, Fisher & Phillips, Morris Manning, Smith Gambrell, and Arnall Golden.

The Atlanta-based general practice firms show more of a “barbell” pattern, with higher revenue growth for the largest and smallest firms in the list, and flat growth for those toward the middle of the pack.

For instance, Atlanta’s second-highest-grossing firm, Alston & Bird, reported a 6.2 percent revenue increase to $730.5 million, similar to Arnall Golden at the tail end of the Second Hundred, with a 6.8 percent increase to $94 million. Arnall Golden’s growth was fueled by its national real estate and health care practices, along with other specialty areas such as fending off health care fraud claims.

Similarly, the third-highest-grossing firm, Troutman Sanders, increased revenue 4.6 percent to $188 million, while at the other end of the list Smith Gambrell increased it 4.8 percent to $97.5 million.

The firms in the middle reported flat revenue growth: 1.2 percent at Kilpatrick (No. 80 in the Am Law 100 rankings), compared with 1.3 percent at Sutherland (near the top of the Second Hundred).

(Morris Manning, near the lower end of the Am Law 200, was the only one of Atlanta’s Top 10 firms to show negative revenue growth. The firm reported a slight revenue decline of 1.6 percent to $119.5 million, but that followed a blockbuster 2015. Revenue spiked 7 percent that year, even though the firm netted only three additional lawyers, due to the conclusion of some big matters.)

Contrasting Profitability

The largest and smallest firms also had higher profit margins. The juggernaut of the group, King & Spalding, had the highest profit margin at 46 percent. But Arnall Golden, the smallest and most local firm of the 10, had the second-highest margin at 42 percent. (Arnall Golden’s only location outside of Atlanta is a 15-lawyer Washington office.)

Also at opposite ends of the Am Law 200 spectrum, Alston & Bird, with $730.5 million in revenue, had a 37 percent margin, the same as Morris Manning, with $119.5 million in revenue.

Kilpatrick, in the middle of the group, had the lowest margin at 25 percent.

In profits per partner, King & Spalding was way in front with PPP of $2,470,000. That’s followed by Alston & Bird with PPP of $1,810,000.

Another three of the eight general practice firms in the group also have PPP of more than $1 million: Morris Manning ($1,065,000), Sutherland ($1,045,000) and Troutman Sanders ($1,020,000).

Right behind those firms were Arnall Golden with PPP of $925,000 and Kilpatrick with PPP of $915,000.

Troutman Sanders broke the $1 million mark in PPP for the first time last year, thanks to a 4.6 percent revenue increase to $490 million and a 3.9 percent increase in net income, with a decrease of only one equity partner.

“In 2015 we had a massive increase [in revenue and profit] over 2014, and we always want to make sure we can sustain that and grow on it. We did,” said Troutman Sanders’ managing partner, Stephen Lewis.

Multifamily finance, financial services litigation and intellectual property litigation were some of the practices driving the gains, Lewis said.

The American Lawyer has introduced a newer metric, profit per lawyer, to control for variations in equity partner vs. nonequity partner ratios.

Assessing the 10 firms by PPL, King & Spalding is still in its own class with PPL of $480,000, followed by Alston & Bird with PPL of $340,000. But the differences in profit become less apparent among the other firms on the list. The No. 3-grossing firm, Troutman Sanders, had PPL of $285,000, just a hair higher than No. 10-grossing Arnall Golden’s PPL of $275,000, followed by Morris Manning at $270,000 and Sutherland at $255,000.