Lowenstein Sandler saw incremental increases in gross revenue and average equity partner compensation in 2016, while attorney head count stayed essentially flat.
The Roseland-based firm’s $256.5 million gross revenue last year was a 1.8 percent increase over the $252 million total from 2015.
With a 0.6 percent reduction in attorney head count (to 274 from 276), the uptick comes because of an improvement in revenue per lawyer (RPL), which rose 2.2 percent, to $935,000 from $915,000.
Over a five-year period, Lowenstein’s gross revenue has grown about 14 percent, according to historical data.
Last year, net income declined 7.4 percent, to $75 million from $81 million, which managing partner Gary Wingens chalked up to partner compensation changes and investment in contingency matters, as opposed to a true shift in profitability.
He said many partners are compensated through a mix of base pay and profit, affecting whether the pay is considered an expense or a share of net income. Also, Lowenstein’s use of alternative fee arrangements in transactional and litigation matters for clients over the past five or six years, such as contingency fees and modified contingency fees, “does make our profitability a bit volatile,” he added.
“[You] need to view it on a portfolio basis,” Wingens said. “We’ve now built a significant portfolio of matters that we’re handling on that basis. Certainly there are some that are not doing as well as others, but overall … it is a profitable business for our partners.”
Wingens attributed revenue growth to the litigation practice’s representation of investment managers, among them Appaloosa Management, in connection with a dispute flowing from its attempt to acquire alternative energy company Terraform Power.
Wingens also credited the mergers and acquisitions practice—Lowenstein represents Estee Lauder in its $1.5 billion acquisition of the “Too Faced” makeup brand—and said there was “double-digit” revenue growth in Lowenstein’s life sciences practice.
Litigation generally, though, presents challenges, Wingens said: “I think we’re continuing to see pressure in the litigation space with the level of demand, and we’re continuing to have to work even harder.”
Profits per equity partner (PPP) ticked up 1 percent, to $1.575 million from $1.56 million.
It’s a metric that potential laterals do watch, at least insofar as it tends to create tiers, Wingens said: “I think the neighborhood matters, and the firms are viewed as being in different neighborhoods.”
In fiscal 2016, according to the Law Journal’s Top 40 survey, Lowenstein’s PPP put it in the same neighborhood as Greenberg Traurig’s Florham Park office ($1.47 million) and Morgan, Lewis & Bockius’ Princeton office ($1.53 million).
Wingens noted that, with Lowenstein’s tailoring of compensation packages, partner pay ranges more widely than the PPP metric would indicate.
As for firm head count, Wingens said a general growth trajectory is the goal, and year-over-year changes are less noteworthy.
Lowenstein is “very happy with the offices we have now,” and, aside from endeavoring to bulk up its Washington, D.C., branch, is not envisioning to significantly change its geographic footprint or dramatically expand its practice offerings, he said.
Wingens said 2017 is “shaping up to be a volatile year,” due in large part to the changeover to the Trump administration in Washington, D.C.
Clients are predicting that tax reform and a changed regulatory landscape could significantly boost deal flow, but the ultimate effect on the legal industry is difficult to predict, he said.
“Some very good things can happen to the business of law, and some very bad things too,” Wingens said.
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