Many large New York law firms grew their revenue and profits last year, continuing to pull ahead of the national pack when it comes to financial indicators. Meanwhile, many of these firms reduced their New York head count.
The New York Law Journal compared financial indicators for the top 20 firms in the NYLJ 100, a ranking of law firms by their full-time equivalent lawyers in New York offices in 2013. The list is a glance of the largest private employers of lawyers in the state. The financial data was reported by the American Lawyer this week as part of the Am Law 100 report on 2013.
Financial figures for Wilson Elser Moskowitz Edelman & Dicker, with 330 lawyers in New York state, are not yet available.
All of the top New York firms saw growth in gross revenue and revenue per lawyer, except Weil Gotshal & Manges, where gross revenue fell by 7.4 percent, to $1.137 billion last year. About half of the top New York firms had growth of 5 percent or more in revenue.
Among the top 20, Latham & Watkins generated the most revenue last year, with $2.285 billion, followed by Skadden, Arps, Slate, Meagher & Flom at $2.235 billion and Kirkland & Ellis at $2.016 billion.
All firms in the top 20 raised their profits per equity partner, except Weil and Cravath Swaine & Moore, which dropped 7.4 percent and 4.2 percent, respectively.
More than half of the top 20 New York firms had profit per partner gains of more than 5 percent.
This group of firms is hardly representative. Thirteen of the top New York firms are among the so-called super rich—the category of 20 firms that American Lawyer described as outperforming the rest of the Am Law 100, with at least $2 million in PPP and RPL of at least $1 million.
“Many super rich firms are concentrated in New York because it is the financial capital of the world, and the highest performing firms in New York command very high rates relative to other markets,” said Kent Zimmermann, law firm consultant at Zeughauser Group.
Within the NYLJ 100′s top 20, firms had different growth strategies.
Simpson Thacher & Bartlett’s gross revenue soared 14.9 percent to $1.129 billion; Cahill Gordon & Reindel’s jumped 10.9 percent to $386.5 million; and Shearman & Sterling’s gross revenue grew by 9.1 percent to $820.5 million.
Meanwhile, Skadden’s revenue rose 1.1 percent to $2.235 billion; Cravath’s by 1.8 percent to $614 million; and Debevoise & Plimpton up 1.9 percent to $688 million.
Among the NYLJ 100′s top 20, Simpson Thacher also saw the largest gain in revenue per lawyer (RPL), up by 14.9 percent to $1.35 million. RPL places a dollar value on the average production of each attorney.
Several firms in this group had large profit per partner swings.
Davis Polk & Wardwell’s per-partner profits shot up by 22.5 percent, to $2.94 million; Simpson Thacher’s by 18.8 percent, to about $3.17 million; and Shearman’s by 18.4 percent, to $1.8 million.
Fried, Frank, Harris, Shriver & Jacobson’s 24.3 percent leap in profits per partner in 2013 was the highest among the top New York firms and in the Am Law 100. In contrast, the firm’s 16.8 percent fall in per-partner profits from 2011 to 2012 was the steepest dive of any Am Law 100 firm that year.
Some of Fried Frank’s gains came at a price—its New York office had 21 fewer lawyers in 2013.
Among the top New York firms, more than half reduced their New York attorney head count from 2012 to 2013. The largest cuts were at White & Case, where the New York office dipped by 8.5 percent, to 343 lawyers; and Proskauer Rose, dropping 8.1 percent, to 350 New York lawyers.
Many highly profitable firms value performance over size, Zimmermann said. “This has led some of them to make choices since 2008 to reduce head count in order to increase the quality of their financial performance.”
“When elite firms reduce their supply of talent and demand remains steady, it allows some firms to collect rates that are higher,” he said. “We see many high-performing firms adopting” that strategy.
Not all large New York offices are shrinking. Paul, Weiss, Rifkind, Wharton & Garrison is now at the top of the NYLJ 100 after increasing by 6.2 percent, to 716 New York lawyers. It beat Skadden, which has long been No. 1 in the rankings but has continued to trim its New York ranks. Last year, Skadden’s New York office fell by 6.8 percent to 629 lawyers.
Among the top New York firms, Sidley Austin’s 7.1 percent increase to 362 New York attorneys was the largest office expansion.
New to the top 20 this year is Cahill, where New York head count rose nearly 6 percent, to 312 lawyers. That rise bumped out Willkie Farr & Gallagher from the top 20 of the NYLJ 100.