Despite market disruption in Texas, caused by out-of-state firms opening offices in the Lone Star State and a rash of lateral moves, the highest-grossing Texas firms collectively held their ground in 2017, even with the late-summer wallop from Hurricane Harvey.
Gross revenue for the 20 highest-grossing firms in Texas totaled $5,52 billion in 2017, the same as in 2016 for the 20 top firms. That stable revenue flow comes as most of the firms posted revenue not much different than in 2016. The variances were big increases at Vinson & Elkins, which posted a second record year, and at Gray Reed & McGraw, balanced by a decline at Baker Botts, largely because 2017 numbers are compared to 2016, when the firm generated record revenue due to large contingent-fee litigation fees.
For the gross revenue, V&E’s was up by 11.3 percent and Gray Reed posted a 14 percent increase. Baker Botts posted a 13.5 percent decline in revenue for the year.
Energy is king in Texas, and a number of managing partners of the 20 highest-grossing firms said work started slow in the oil and gas sector but gained speed as the year went on. Depending on the mix of practices at the firms, the firm leaders said many other practices were booming during 2017 including real estate, litigation, M&A, capital markets, technology and corporate.
But managing partners of several firms with operations in Houston and southeast Texas said their business was affected by Hurricane Harvey, which dumped 51 inches of rain in Houston and caused massive flooding throughout the region. Not only were clients in Texas affected by the storm, but some firm offices were closed for days and employees had difficulty commuting or were displaced by a flooded house.
Texas Lawyer’s Annual Report on Firm Finance includes financials from the 20 highest-grossing firms in Texas. All of the firms on the list this year appeared on the list last year, except for newcomer Patterson & Sheridan of Houston. Another Houston firm, Coats Rose, dropped off the list this year.
While total gross revenue held steady, net income [chart] for the 20 firms on the chart slipped slightly in 2017, with a cumulative total of $2.29 billion. That figure is down 1.3 percent when compared with the 2016 total of $2.32 billion. Net income at V&E improved by 13.5 percent in 2017, and by 12.6 percent and 10 percent respectively at Akin Gump Strauss Hauer & Feld and Gray Reed. Net dropped by 24.3 percent at Baker Botts and by 24.4 percent at Houston-based Andrews Kurth Kenyon, which merged in April 2018 with Hunton & Williams to form Hunton Andrews Kurth.
Andrews Kurth is not the only Texas firm that recently merged with an out-of-state firm and will not appear in Texas Lawyer’s report next year. Also this April, Gardere Wynne Sewell of Dallas merged with Foley & Lardner to form Foley Gardere, and Strasburger & Price of Dallas merged with Clark Hill to form Clark Hill Strasburger.
While gross revenue was flat on a year-to-year basis, revenue per lawyer [chart] and profits per partner [chart] improved overall for the firms. RPL averaged $781,000 in 2017 for the firms, a 1.8 percent increase when compared with an average of $767,000 in 2016. Profits per partner averaged $1.180 million in 2017 for lawyers at the 20 firms, up 1.3 percent when compared with an average of $1.165 million the prior year.
PPP hit $1 million or more at eight of the 20 firms.
Those four measures in the Texas Lawyer Annual Report on Firm Finance—gross revenue, net income, RPL and PPP—help describe each firm’s financial performance and provide a means for comparison. The gross revenue chart is the master list for the report. [chart]
As it has for several years, Akin Gump tops the gross revenue chart, with $1,039, 656,000 for the year, up 6.1 percent when compared with $979,956,000 in 2016. Fourteen of the firms posted an increase in gross revenue, while the revenue at five firms decline. Patterson + Sheridan is new to the chart and its 2016 financials are not reported.
Akin Gump also tops the net income chart with $464,439,000 in 2017, up 12.6 percent from 2016′s $412,545,000. Net income improved at 14 firms of the 20 firms in 2017 and declined at five.
Susman Godfrey, the Houston-based litigation firm, had the highest RPL among the 20 firms, coming in with $1,533,000, down slightly from $1,540,000 in 2016. RPL improved at 14 firms and declined at five. V&E posted the highest percentage increase in RPL at 9.2 percent. and RPL dropped the most at Baker Botts, with a 14.6 percent decline.
Susman Godfrey also had the highest PPP in 2017 with $2,400,000, which is just off the $1,205,000 in 2016. PPP increased at nine of the firms and declined at nine. V&E had the biggest increase at 16.5 percent and the biggest drop, at 15.4 percent, was at Baker Botts.
The report also includes a firm-by-firm analysis that helps explain financial results at each of the 20 firms.
The fact that lawyers from the firms are quoted in this report is no indication of the firm’s cooperation with the preparation of the Annual Report on Firm Finance. Lawyers simply responded to questions about work and developments at their firms in 2016. Texas Lawyer does not identify which firms provide financial information to ALM and which do not.
All of the revenue figures in the charts are for the calendar year 2017, except for Gardere, which has a March 31, 2018 year end. All lawyer counts are full-time equivalent for the firm’s fiscal year. All numbers are rounded to the nearest 1,000.
Akin Gump Strauss Hauer & Feld (Dallas)
Firmwide Lawyer Head Count: 858
2017 Stats Gross Revenue: $1,039,656,000 Up 6.1% Net Income: $464,439,000 Up 12.6% Revenue Per Lawyer: $1,212,000 Up 6.0% Profits Per Partner: $2,386,000 Up 13.5%
Notable in 2017
According to Chair Kim Koopersmith:
Warming Up: Corporate practice “on fire” all year long, and firm dominated Washington, D.C. lobbying world.
Big Litigation: Victories include beating back class certification in a consumer class action against VIZIO and several wins in contested bankruptcy proceedings.
Across the Board: Measured in many ways, firm had successful year including a 13.5 percent increase in profits per partner.
Andrews Kurth Kenyon* (Houston)
Firmwide Lawyer Head Count: 301
2017 Stats Gross Revenue: $280,232,000 Down 3.0% Net Income: $69,589,000 -24.4% Revenue Per Lawyer: $931,000 Up 5.4% Profits Per Partner: $1,214,000 Down 3.6%
Notable in 2017 According to Bob Jewell, who was managing partner before the merger:
Energy Slump: Capital markets work down due to lower oil prices, which led to a decline in gross revenue and net income.
Stormy Weather: Hurricane Harvey, the late August storm that caused massive flooding throughout Houston, distracted the business community that sends work to the firm.
Busy Areas: Litigation, oil and gas, M&A, bankruptcy and intellectual property work were all busy throughout the year.
Baker Botts (Houston)
Firmwide Lawyer Head Count: 717
2017 Stats Gross Revenue: $731,827,000 Down 13.5% Net Income: $329,325,000 Down 24.3% Revenue Per Lawyer: $1,021,000 Down 14.6% Profits Per Partner $1,838,000 Down 25.4%
Notable in 2017 According to managing partner Andrew Baker:
No Windfall: Revenue and net income dropped substantially because the financials are compared to 2016, when the firm got a boost from a big contingency fee.
High on Tech: The firm benefited from its growing technology practice, and 60 percent of the firm’s 25 largest clients are in that sector.
Slight Growth: The firm added 24 lateral partners in 2017, but lost some including three Houston trial partners who formed boutique and a group of energy partner who moved to Gibson, Dunn & Crutcher in Houston.
Firmwide Lawyer Head Count: 369
2017 Stats Gross Revenue: $278,697,000 Up 0.7% Net Income: $90,055,000 Up 2.7% Revenue Per Lawyer: $756,000 Up 1.1% Profits Per Partner: $1,305,000 Up 1.2%
Notable in 2017 According to managing partner Gregory Bopp:
Big Year: The firm’s technology practice, including intellectual property litigation and patent prosecution had an “excellent year” as did the litigation practice.
Deals: Transactional lawyers worked on a number of large deals, including Great Plains Energy in merger with Westar Energy.
Expansion: Firm added 11 lateral partners, and two new practices: governments contracts and international disputes.
Chamberlain, Hrdlicka, White, Williams & Aughtry (Houston)
Firmwide Lawyer Head Count: 117
2017 Stats Gross Revenue: $76,578,000 Up 5.3% Net Income: $27,812,000 Up 3.3% Revenue Per Lawyer: $$649,000 Up 4.5% Profits Per Partner: $818,000 Up 3.3%
Notable in 2017 According to managing shareholder Wayne Risoli:
Looking Up: Business improved in corporate, construction, energy, intellectual property, tax controversy, estate planning and tax, while litigation was flat.
Bringing it Home: Best year ever for collections with 97.5 percent of billings collected, because all lawyers worked at it.
Adding Strength: Firm doubled size of IP section, which does patent prosecution, to eight lawyers.
Gardere Wynne Sewell* (Dallas)
Firmwide Lawyer Head Count: 227
2017 Stats Gross Revenue: $144,000,000 Down 4.8% Net Income: $51,840,000 Down 4.0% Revenue Per Lawyer: $634,000 Down 11.2% Profits Per Partner: $823,000 Down 4.3%
Notable in 2017 South of the Border: Firm expands in Mexico City by acquiring five-lawyer commercial arbitration and litigation boutique.
Talks: Firm engages in merger negotiations with Foley & Lardner, which ends in a deal in 2018
Growth: Firm added laterals and grew by 7.1 percent in 2017.
Gray Reed & McGraw (Houston)
Firmwide Lawyer Head Count: 140
2017 Stats Gross Revenue: $65,688,000 Up 14.0% Net Income: $26,510,000 Up 10.0% Revenue Per Lawyer: $469,000 Up 0.2% Profits Per Partner: $947,000 Down 1.8%
Notable in 2017 According to managing partner J. Cary Gray:
Positive Side: The firm posted its best year ever in terms of hourly work, due to development of transactional practice.
Good Fit: Firm gaining private equity and portfolio company clients in part because it offers of regional rates and experienced senior partners on the files.
Farming Work: Firm is growing practice in agriculture and agribusiness, including tax and estate planning work for farms, and also work as a class counsel in nationwide suit over genetically modified seed corn.
Haynes and Boone (Dallas)
Firmwide Lawyer Head Count: 545
2017 Stats Gross Revenue: $397,500,000 Up 6% Net Income: $127,245,000 Up 4.1% Revenue Per Lawyer: $730,000 Up 6.6% Profits Per Partner: $957,000 Up 3.1%
Notable in 2017 According to managing partner Tim Powers:
Up, Up and Away: Firm brings in record revenue due to robust demand in corporate, M&A and capital markets practices, along with energy, finance and real estate.
Growth: Litigation practice grew significantly, including work on an IP suit that resulted in a $500 million verdict.
Investment: Firm moved to cloud-based document management system.
Jackson Walker (Dallas)
Firmwide Lawyer Head Count: 359
2017 Stats Gross Revenue: $249,429,000 Up 1.1% Net Income: $94,651,000 Down 10.6% Revenue Per Lawyer: $694,000 Down 2.5% Profits Per Partner: $942,000 Down 13.7%
Notable in 2017 According to managing partner Wade Cooper:
Moving Forward: Although net income dropped by 10.6 percent in comparison with extraordinary results in 2016, firm stepped up another notch with small improvement in gross revenue.
Deals: Transactional areas fueled financials, while litigators reloaded during 2017 with large litigation matters.
Expansion: Firm hired 16 lateral partners in 2017, in part because the Texas regional firm offers a good environment for lawyers looking for a lower-cost firm.
Kane Russell Coleman Logan (Dallas)
Firmwide Lawyer Head Count: 87
2017 Stats Gross Revenue: $49,895,000 Up 0.3% Net Income: $17,878,000 Up 0.2% Revenue Per Lawyer: $574,000 Up 4.9% Profits Per Partner: $851,000 Up 0.1%
Notable in 2017 According to founding director Ray Kane:
Good Year: All groups “superbusy,” including transactions, real estate, corporate, tax and some areas of litigation including insurance defense, commercial litigation and bankruptcy.
Planning for Future: Making progress on legacy plan to pave the way for the next generation of leadership.
Structural: Firm’s large real estate practice benefited from building boom in Dallas and Houston.
Kelly Hart & Hallman (Fort Worth)
Firmwide Lawyer Head Count: 161
2017 Stats Gross Revenue: $79,800,000 Up 0.4% Net Income: $47,000,000 no change Revenue Per Lawyer: $495,000 Down 2.9% Profits Per Partner: $886,000 Up 3.7%
Notable in 2017 According to managing partner Marianne Auld:
New Era: Auld is the third managing partner for the firm and the first woman, but she considers that somewhat unremarkable. “Women have always been at the center of what we are doing,” she said, noting that two of the first associates to work at the firm were female.
Solid Practice Growth: Litigation and energy practices — two mainstays for the firm — both performed well, with big trials, big appeals, big energy transactions, and environmental law and government relations practices were also busy.
Merger Averse: Other North Texas law firms have merged recently, that isn’t in the cards for Kelly Hart.
Locke Lord (Dallas)
Firmwide Lawyer Head Count: 664
2017 Stats Gross Revenue: $504,302,00 Net Income $163,985,000 Down 6.2% Revenue Per Lawyer $759,000 Up 1.6% Profits Per Partner $936,000 -1.7%
Notable in 2017 According to chairman David Taylor:
Busy Practices: Energy and private equity practices were very busy throughout the year, and other strong areas were intellectual property, insurance, health care, pharmaceuticals and lobbying.
Growth: Cybersecurity and privacy practice grew as client face issues in connection with information and data.
The Bright Side: While gross revenue dropped by 9.8 percent, an 11.4 percent dip in total lawyer head count means the firm’s lawyers worked hard.
Munsch Hardt Kopf & Harr (Dallas)
Firmwide Lawyer Head Count: 117
2017 Stats Gross Revenue: $66,660,000 Up 2.0% Net Income: $22,500,000 Down 6.9% Revenue Per Lawyer: $569,000 Down 5.0% Profits Per Partner: $608,000 Down 6.9%
Notable in 2017 According to chief executive officer Phil Appenzeller:
Growth Mode: Firm added five construction law laterals.
Triple Whammy: Firm invested in future with a cybersecurity audit and upgrade, and purchase of a new accounting system and a new document management system.
Busy Practices: Real estate and litigation practices were cranked to full speed in 2017.
Patterson + Sheridan (Houston)
Firmwide Lawyer Head Count: 69
2017 Stats Gross Revenue: $51,000,000 Net Income: $13,000,000 Revenue Per Lawyer: $739,000 Profits Per Partner: $1,000,000
Notable in 2017 According to founding partner Todd Patterson:
High on Tech: Firm’s IP, M&A and risk assessment practices got a lot of work from telecom, electronics, semiconductor, cloud storage and cloud computing industry clients.
Sunny Skies: Firm opened office in San Diego, due to clients in Southern California.
Patents: Firm’s lawyers handled more work before U.S. Patent and Trademark Office.
Porter Hedges (Houston)
Firmwide Lawyer Head Count: 103
2017 Stats Gross Revenue: $76,500,000 Up 1.3% Net Income $30,340,000 Up 0.9% Revenue Per Lawyer: $746,000 Up 2.8% Profits Per Partner: $843,000 Down 7.5%
Notable in 2017 According to managing partner Rob Reedy:
Tropical Storm: Firm posted its second-best ever, despite impact of Hurricane Harvey on clients and firm’s business.
Wide Range of Work: Bankruptcy/reorganization team had an incredible year and energy, transactional, real estate and construction practices were also busy. Finance and litigation benefited from a big uptick in business the second half of the year.
Redo: Firm redid its office lease and started remodel.
Strasburger & Price (Dallas)
Firmwide Lawyer Head Count: 188
2017 Stats Gross Revenue: $93,756,000 Up 0.1% Net Income: $29,487,000 Up 9.0% Revenue Per Lawyer: $500,000 Up 4.0% Profits Per Partner $421,000 Up 2.7%
Notable in 2017 According to Dan Butcher, managing partner before the merger this year:
Weathering the Storm: Hurricane Harvey impacted the firm’s financials because it affected clients and shuttered the firm’s offices for several days.
Strong Areas: Practice areas that were busy in 2017 include tax, fiduciary and surety, and real estate, in addition to litigation, intellectual property and transportation.
Windfall: The firm benefited from a number of contingency-fee matters, which the firm calls success fee-based matters.
Susman Godfrey (Houston)
Firmwide Lawyer Head Count: 122
2017 Stats Gross Revenue: $187,000,000 Up 9.4% Net Income: $156,000,000 Up 20% Revenue Per Lawyer:$1,533,000 Down 0.5% Profits Per Partner: $2,400,000 Down 0.2%
Notable in 2017 According to co-managing partner Neal Manne:
Money Coming In: Biggest sources of fee revenue were General Electric and Walmart.
Big Suits: Negotiated settlement in Waymo v. Uber, in which the firm defended the ride-hailing company in a trademark dispute.
Bucking Popular Trend: Firm hasn’t hired a lateral partner in many years and has no plans to do so.
Thompson & Knight (Dallas)
Firmwide Lawyer Head Count: 280
2017 Stats Gross Revenue: $212,022,000 Down 0.7% Net Income: $92,748,000 Up 3.5% Revenue Per Lawyer: $758,000 Down 2.8% Profits Per Partner: $956,000 Down 2.9%
Notable in 2017 According to managing partner Mark Sloan:
Building to the End: The year started slow on the transactional side, but work picked up during the second half in that area, along with corporate and real estate. The firm’s trial practice stayed busy.
Reloading Year: After finishing up the Life Partners Holdings Chapter 11, which kept many lawyers busy in 2015 and 2016, the firm’s bankruptcy/restructuring lawyers focused on reloading its pipeline of bankruptcy work.
Other Busy Areas: IP litigation improved during the year and tax controversy and government/regulatory were also among strong practices in 2017.
Vinson & Elkins (Houston)
Firmwide Lawyer Head Count: 615
2017 Stats Gross Revenue: $727,475,000 Up 11.3% Net Income: $327,261,000 Up 13.5% Revenue Per Lawyer: $1,183,000 Up 9.2% Profits Per Partner: $2,361,9000 Up 16.5%
Notable in 2017 According to chairman Mark Kelly:
Record-Setting: For the firm’s 100th anniversary year, the firm posted record revenue and net income.
Big Areas: Busy practices include private equity and capital markets, along with arbitrations and shareholder litigation. Energy work across the board was a big contributor.
Growth: Firm brought on 18 lateral partners in 2017.
Firmwide Lawyer Head Count: 321
2017 Stats Gross Revenue: $216,766,000 Up 1.5% Net Income: $110,550,000 Down 1.3% Revenue Per Lawyer: $675,000 Up 3.2% Profits Per Partner: $1,117,000 Up 5.2%
Notable in 2017 According to chairman and chief executive officer David Dawson:
One for the Books: Firm posts record revenue, because of strong contributions from diverse group of practices, including real estate, real estate finance, corporate, commercial litigation and energy transactions, among many.
Hiring Up: The firm added about 50 laterals, and because of push to recruit, added a chief recruiting officer.
Strategy: Firm sticking with market strategy of providing lawyers with flexibility in billing rates and attracting laterals with positive culture.
*Following mergers in April 2018, Andrews Kurth Kenyon is now Hunton Andrews Kurth, Gardere Wynne Sewell is now Foley Gardere, and Strasburger & Price is now Clark Hill Strasburger