The five full-service law firms in the Am Law 100 structured as Swiss vereins all grew their revenues in 2018, while also increasing their profitability.
While there is a threefold difference in size from Baker McKenzie to Squire Patton Boggs, the two firms—along with Hogan Lovells, DLA Piper, and Norton Rose Fulbright—all employ the same basic legal structure for integrating their operations around the globe.
Within this small grouping, financial performance was rosy, according to data collected for The American Lawyer’s upcoming Am Law 100 rankings. While the firms couldn’t match Norton Rose’s 16 percent revenue growth in 2017, they were all clustered around the industry average for 2018 as calculated by Citi Private Bank Law Firm Group.
The two largest firms in the category, Baker McKenzie and DLA Piper, both slightly outperformed the 6.4 percent average growth in revenue from Citi’s sample of 191 firms. Baker McKenzie grew at 8.6 percent, bringing total revenues to $2.9 billion, while DLA Piper, growing at 7.7 percent, was just behind at $2.84 billion.
Meanwhile, the three smaller firms were not far behind. Hogan Lovells increased revenues by 4.1 percent to $2.12 billion, Squire grew at 3.5 percent to $1.03 billion, and Norton Rose grew at 0.5 percent to $1.97 billion. That comparatively low figure can be attributed to the challenge of building on the whopping 16.2 percent growth from the previous year.
“Generally speaking, we’re seeing the strongest performance among the firms with a stronger international footprint than domestic,” said Gretta Rusanow, head of advisory services at Citi Private Bank.
That partially explains why when Citi broke out the Am Law 50 firms from the rest of its sample, they performed better on average in 2018, collectively growing at 7.7 percent. The lion’s share of the firms in that segment have an international presence, though none can match the reach of the largest vereins.
Compared with their Am Law 50 peers, Baker McKenzie was the sole verein whose growth exceeded their average. DLA Piper’s growth rate matched the average, while the other three firms trailed.
Rusanow noted that productivity levels tend to be higher within the United States, while discounting pressures are higher internationally. Furthermore, the international collections cycle is longer.
“All of that can play into top-line growth,” she said.
With regard to profitability, the five vereins’ performance closely tracked the Citi sample, with Baker McKenzie’s 11 percent profits per equity partner growth exceeding the Citi figure of 7.5 percent, which was essentially matched by Hogan Lovells’ 7.6 percent growth. The three other firms increased profitability at rates ranging from 4.1 percent to 6.7 percent.
The Am Law 50 firms in Citi’s sample, meanwhile, grew profits per equity partner by 8.4 percent on average.
Rusanow is optimistic about the prospects of these large global firms for 2019 and beyond, in spite of the challenges surrounding rates and productivity, pointing to the advantage of being able to go to market as a single unit to clients with operations spread around the globe.
“Having a global footprint serves as a driver of work back to the firm’s U.S. offices, so that becomes very beneficial for the U.S. market,” she added.
Below is a snapshot of the 2018 financial performance for each the five vereins:
Baker McKenzie: Profits per equity partner increased 11 percent to $1.44 million as the equity partnership dipped by 22 partners to 680. The firm’s revenue increased 8.6 percent to $2.9 billion. Revenue per lawyer increased 8.5 percent to $614,000, while the firm’s total head count remained steady. (See our previous report.)
DLA Piper: Revenues grew 7.7 percent to $2.84 billion, while profits per equity partner grew 6.7 percent to $1.87 million. Head count rose 2.6 percent to 3,702 and revenue per lawyer climbed almost 5 percent to $766,000. The size of the equity partnership was steady. (See our previous report.)
Hogan Lovells: The firm’s total global revenue grew 4 percent to $2.12 billion, while profits per equity partner climbed 7.6 percent to $1.38 million. Washington, D.C.-based CEO Steve Immelt said the firm was most focused on growing revenues per lawyer, a figure that rose 6 percent to $804,000. Head count dropped 2 percent to 2,357, while the equity parternship contracted by 5.9 percent to 523. (See our previous report.)
Norton Rose Fulbright: Coming off a dynamic 2017, which the firm attributed to recent investments along with two combinations, revenue growth slowed to 0.6 percent, hitting $1.97 billion.
Energy transactional work was a driver in 2018, as the firm advised Canadian natural gas company Enbridge in its $1.12 billion sale of Midcoast Operating to a private equity firm, and advised Cabot in its $765 million sale of assets in the Eagle Ford shale play.
On the litigation side, the firm scored a major win on behalf of New Jersey Sen. Robert Menendez, when the U.S. Department of Justice in January 2018 abandoned and moved to dismiss the corruption case against the Democratic politician. But that triumph was tempered when Menendez’s lawyer, co-head of the firm’s U.S. regulations, investigations, securities and compliance practice, Abbe Lowell, left for Winston & Strawn in May, pointing to conflicts in the sprawling firm.
Head count at the firm ticked upward by 1.1 percent to 3,376, while the number of equity partners dropped by 4.6 percent to 681. Profits per equity partner grew by 5.5 percent to $907,000, while revenues per lawyer were steady at $583,000.
In 2018 additions, the firm rebuilt its cybersecurity practice with leaders from Holland & Knight and Shearman & Sterling. It also made a series of hires in Australia, including restocking its office in that nation’s capital, Canberra.
Squire Patton Boggs: One year after the firm cracked the $1 billion mark, revenues continued to grow by 3.5 percent, hitting $1.03 billion. Profits per equity partner climbed 4.1 percent, crossing the $1 million threshold for the first time.
On the corporate side, the firm advised longtime client Ashland Global Holdings Inc., a specialty chemical company, in the $1.1 billion sale of its composites business to INEOS Enterprises, and also had a hand in two nine-figure deals in India.
The firm’s disputes lawyers successfully defended the Republic of Kosovo against a €380 million investment treaty claim brought by a German private investor, and in the U.S., they beat back a $500 million antitrust class action over alleged price-fixing of ramen noodles.
Squire’s total head count, 1,497, and number of equity partners, 169, both did not budge in 2018. But the firm did open a new Atlanta office with three former Dentons partners and also acquired a Silicon Valley intellectual property boutique.
The firm also launched an international public policy practice in China, while adding two former U.S. congressmen and a top aide to House Speaker John Boehner—already with the firm—to its U.S. public policy shop.