Revenue and PEP hit new heights at Paul Hastings as US firm posts 25% London growth
O'Melveny breaks $2m PEP mark for first time as Baker Botts sees double-digit revenue dip
Paul Hastings has posted its sixth year of continuous growth, reaching new record highs for revenue and partner profits, with London revenues rising 25%.
Propelled by strong performances from its investigations and white-collar, intellectual property, financial services and private equity practices, firmwide revenues grew 4.1% to $1.12bn.
While headcount remained unchanged from 2016, revenue per lawyer (RPL) increased 4% to $1.21m, and profits per equity partner (PEP) jumped 11.5% from $2.61m to $2.91m.
“That’s a reflection, we think, of the success of the firm,” said Paul Hastings chairman Seth Zachary, who was recently elected to his seventh term. “We’re very proud of that result, especially as we believe it augurs for a much stronger year ahead.”
While the firm did not provide an exact revenue figure for London, Zachary said the the office had enjoyed a successful year.
“Our London office, which has been a priority focus for us, had a particularly successful year,” he said. “Our investments in finance, restructuring, and investigations in London, have paid off significantly, helping us to gain market share and attract top-tier talent.”
High-profile roles for the firm in London last year included advising bank noteholders on the Co-operative Bank’s £700m rescue deal.
The double-digit increase in profits, Zachary said, was a reflection of the work ethic of the firm and achieving a greater market share of high-value work with the same number of lawyers.
Client demand at the firm was up 3.2% in 2017, an increase that Zachary attributes to the firm’s strategy of adding value for clients by investing in fast-growing practices and industries.
“I think that adding value for clients increases the level of their trust and accelerates our practices,” Zachary said.
The firm’s white-collar and investigations group had roles on several global investigations last year, including advising Galena Biopharma on its $7.5m deal to settle an investigation by the US Justice Department into the biopharma company’s marketing and promotional practices for an opioid-based pain medication.
Its intellectual property group worked with German pharma company Boehringer Ingelheim International on its patent case against AbbVie, which invalidated the North Chicago-based company’s key patent for its top-selling drug Humira.
The firm also advised COSCO on its $6.3n acquisition of Hong Kong-based shipping company Orient Overseas International, and took a role for Goldman Sachs as financial adviser to Amazon on its $13.7bn mega-merger with Whole Foods Market.
While headcount and total equity partner count remained steady at 921 and 190 respectively, Paul Hastings did make some key lateral additions in 2017.
Early last year, the firm picked up the bulk of Boies Schiller Flexner’s corporate practice in New York, while in London it added DLA Piper corporate crime and investigations partner Simon Airey as well as Linklaters restructuring partner David Manson.
The firm did also see some notable departures. In Washington DC, a three-partner finance and securities team led by leveraged finance head Bill Schwitter decamped for Allen & Overy.
Elsewhere, O’Melveny & Myers has posted modest gains in revenue and partner profits for 2017, with PEP exceeding $2m for the first time.
Gross revenue at the Los Angeles-based firm increased 1.7%, reaching $738m in 2017. PEP saw a 3.1% increase from 2016, reaching $2.01m, while RPL was relatively flat at $1.12m, marginally below O’Melveny’s record year in 2016.
“We had some major litigation matters that we settled or tried to verdict at the end of 2016, and some corporate matters that either closed or didn’t proceed,” said Bradley Butwin, O’Melveny’s New York-based chair, explaining the moderate growth last year. “So the first three-and-a-half months was a period where we were replenishing the pipeline, and many new matters across the firm then kept us extremely busy for the rest of the year.”
O’Melveny expanded its total lawyer headcount last year from 648 to 660, including at least nine lateral partner hires. The firm, which says it is structured as a single-tier partnership, had three fewer partners overall in 2017. New partners are categorised as fixed income partners for their first year, Butwin said, which partly explains why non-equity compensation almost doubled from $5.66m in 2016 to $11m in 2017.
Other US firms to have recently revealed their 2017 financial results include Baker Botts, which saw gross revenue drop 13.5% and net income fall 24.3%, after last year posting record results boosted by big contingency fees.
“Last year, we had a once-in-a-blue-moon result,” said Andrew Baker, the firm’s managing partner. “This is strong, steady growth.”
In 2016, gross revenue improved by 20.2% on 2015, and net income jumped 44.5% compared with the prior year. Baker Botts said those results were due in part to a 2016 windfall from contingency fees. It did not reveal the source of the fees but multiple news outlets reported that it received a significant fee connected to a $755m Vivendi settlement with Liberty Media.
RPL was also down in 2017 to $1.02m – a drop of 14.6% on 2016, while PEP fell 25.4% from $2.5m to $1.8m.
Baker said the firm, traditionally known for its oil and gas practice, benefited in a big way in 2017 from the firm’s growing technology practice. He said 60% of the firm’s 25 largest clients in 2017 were in that sector, while the majority of the firm’s other top clients are in the oil and gas industry.
“This is good news. We have more business in a new area. It’s not that we have less business in another area,” Baker said. “That’s significant for a firm that has historically been known as an energy firm. Now we are known as an energy/technology firm.”
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