Ed Deutsch
Ed Deutsch ()

McElroy, Deutsch, Mulvaney & Carpenter saw revenue and attorney population stay essentially flat in fiscal 2016, though fewer equity partners meant a jump in profits per equity partner.

Revenue increased 0.4 percent to $119 million from $118.5 million.

With two fewer attorneys, the Morristown-based firm’s head count decreased 0.8 percent, to 249. Head count has decreased 4.2 percent over three years (from 260), and 12.9 percent over five years (from 286).

There have been some departures already in 2017: Six lawyers—five partners and one of counsel—left to join newly formed O’Toole Scrivo. That firm bears the name of Thomas Scrivo, a former McElroy Deutsch partner who just left his post as Gov. Chris Christie’s chief counsel.

McElroy Deutsch, however, appears in line to do some growing through acquisition. The firm presently is in merger negotiations with three firms—each of about 20 to 30 lawyers, according to managing partner Edward Deutsch, who said one of the firms is based in state, while the other two are based out of state, in markets where the firm already has a presence.

He declined to name the potential merger partners, and said at least one of those deals is likely to be finalized, though not before the third quarter.

A net loss of five equity partners meant a 16.1 percent decrease in that category. In addition to the departure of Scrivo, Deutsch pointed to former partner Walter Timpone, who became a New Jersey Supreme Court justice last year, and Kevin Galvin, a lawyer representing financial services clients who left to join Schiller & Pittenger in Scotch Plains.

“Would we rather have Walt Timpone here? Yes. But we’re very happy for him, and he has mandatory retirement in about three years—he’ll be back,” Deutsch said. “Everybody has to step up a little bit. Fortunately things worked out well in all those areas.”

As for the 2016 financials, Deutsch said, “I think everybody in terms of work was pretty much on budget.”

He noted that a few million dollars were in play at year’s end, but wound up getting paid after Dec. 31.

The flat revenue “was really more accounts receivable than work,” he said.

Collections “is a problem everywhere,” according to Deutsch.

“Different clients have different methodologies. Some don’t pay anything for 60 days or 90 days,” he said, noting that billing-review vendors working with the firm’s insurance industry clients greatly affect billing cycles.

“It takes weeks and weeks and weeks for them to do it, and for us to respond,” Deutsch said. “Even if you get 100 cents on the dollar, it takes four weeks to get paid.”

Revenue per lawyer improved, to $480,000 from $470,000 (2.1 percent). Using fiscal 2015 financials as a reference, McElroy Deutsch’s RPL puts it in company with Chiesa Shahinian & Giantomasi ($486,000 RPL), Riker Danzig Scherer Hyland & Perretti ($490,000), and Greenbaum Rowe Smith & Davis ($472,000).

The decrease in equity partners did make for a healthy increase in profits per equity partner (PPP): by 11.2 percent, to $1.09 million from $980,000.

With a fairly high-leverage model, McElroy Deutsch had one of the highest PPP figures in last year’s New Jersey Top 20, behind only Lowenstein Sandler ($1.45 million PPP), and Greenberg Traurig’s New Jersey office ($1.47 million).

Deutsch shrugged off the significance of PPP.

“I don’t think the more senior people even look at that,” he said. “I think it’s more the young people who don’t have a lot of experience in law firm management.”

With a one point decrease in profitability, to 24 percent, and a net gain of nine nonequity partners, net income decreased 3.3 percent, to $29 million from $30 million.

Deutsch said the market for legal services remains a difficult one.

“It’s very competitive, very tough,” he said. “But I think we’re positioned to have a good year. The flow of work coming in has been very good.”

Deutsch added: “We look at every aspect of the firm all the time to see if we can get better. I think that keeps us competitive and keeps people interested.”