The strength of the Texas economy, and the rock-solid energy business specifically, resulted in a strong year for the finances of large Texas firms.
“We’re very fortunate to be in Texas,” says C. Wade Cooper, managing partner of Dallas-based Jackson Walker, which improved its gross revenue by 8.5 percent with $194 million in 2011 compared to $178.8 million in 2010.
While work for energy clients runs the gamut, including transactional, litigation, intellectual property and other practice areas, leaders of the firms on the Texas 25 consistently cited the energy business as one of the hottest areas in 2011, and one that provided a steady stream of work.
Other factors led to a healthy bottom line at the 25 Texas firms, including better collection of receivables, strong lateral hiring and unexpected business in practice areas such as tax, wealth management, corporate financings and public offerings.
In 2011, the 25 highest-grossing firms in Texas racked up a total gross income of $5.3 billion, which is up slightly from $5.2 billion in 2010 and in 2009. Nineteen of the 25 firms improved their gross revenue in 2011, compared to 2010, while six brought in less revenue in 2011 than in 2010. [See "Turning the Corner," Texas Lawyer, April 25, 2011, page 22.]
Porter Hedges of Houston posted one of the strongest across-the-board improvements in finances in 2011. The firm’s gross income improved 15.4 percent in 2011, reaching $77.2 million, and its net increased 20.1 percent to $40 million in 2011. Average revenue per lawyer improved 11.9 percent to $780,000 and the firm’s average profits per partner crossed the magic million-dollar mark, coming in at $1,061,000, up 8.4 percent. [See "The Millionaires' Club," below.]
* A Firm-By-Firm Analysis
* Charts: gross revenue, profits per partner, net income and revenue per lawyer and The Texas 100
* BigTex Roots: Some Large Firms See the Lone Star State as a Hot Hub for Economic Growth
Everything at the firm was kicking on all cylinders, managing partner Rob Reedy says.
“We had some big deals and some big cases that were big drivers for us. The energy business was extraordinary, but we had success throughout the firm, a lot of high quality work, stuff that’s really fun and important to our clients,” Reedy says.
He says the firm also benefited from the addition of an intellectual property section in 2011.
Many of the firms on the Texas 25 that are so-called regional firms — those with all or most of their lawyers in Texas — posted strong financials in 2011. That’s reflective of the strong Texas economy and the booming energy industry, but also of regional firms’ growth as they pick up lateral hires who want to work at a place with lower billing rates compared to international firms.
“Our firm does not have offices all over the world. We don’t even have offices all around the country. Because of that, we do have opportunity to be priced accordingly,” says Kevin Sullivan, chief executive officer of Winstead of Dallas, which brought on more lateral hires than any other large Texas firm in 2011.
An improved Texas economy not only means more work for lawyers, particularly in the deals area, but clients in better shape to pay their bills.
Dallas firm Kane Russell Coleman & Logan, which improved its gross revenue to $39 million, up 15.4 percent from $33.8 million, posted one of its strongest realization rates ever, says chairman Christopher Pappas of Houston. “The key was the attorneys focusing on their clients and their practices — send your bills out and collect your bills,” he says.
The list of 25 highest-grossing firms in 2011 is a bit different from last year’s list. Godwin Ronquillo of Dallas, which has appeared on the list before but not last year’s, grew significantly in 2011 and moved back onto the annual ranking. The firm’s gross revenue in 2011 was $50 million. Brown McCarroll of Austin slipped off the list.
Only firms based in Texas are included in Texas Lawyer ‘s Annual Report on Firm Finance.
While total gross revenue for the 25 firms improved a bit during 2011, net income slipped to a total of $2.1 billion, compared to a total of $2.2 billion in 2010 and in 2009.
Profits per partner averaged $924,000 in 2011, up 3.9 percent when compared to an average of $889,000 in 2010.
Revenue per lawyer averaged $668,000 in 2011, the same as in 2010.
Those four measures in the Annual Report on Firm Finance — gross revenue, net income, PPP and RPL — help describe each firm’s financial performance and provide a means to compare them. The gross revenue chart is the master list for the report.
This year is the 26th year Texas Lawyer has published the Annual Report on Firm Finance. The first was published in 1987, when it included the 10 highest-grossing firms in Texas in 1986.
As it has for the past 14 years, Akin Gump Strauss Hauer & Feld is the highest-grossing firm on the list in 2011, with gross revenue of $770 million, up 4.5 percent from $736.5 million in 2010. The next four firms on the list are Houston firms Vinson & Elkins, Fulbright & Jaworski and Baker Botts and Dallas-based Locke Lord. Godwin Ronquillo’s gross revenue improved the most, with its $50 million gross revenue up 119.2 percent compared to $22.8 million in 2010. Houston firms Porter Hedges and Looper Reed & McGraw, along with Kane Russell Coleman & Logan of Dallas, posted double-digit increases in gross revenue in 2011 compared to 2010. Houston-based Susman Godfrey’s gross declined the most, dropping 27.3 percent to $125 million in 2011 compared to $172 million in 2010.
Nineteen of the firms improved their gross revenue in 2011, while gross revenue declined at six of the firms.
Akin Gump also topped the net income chart with $278 million, up 1.8 percent when compared to $273.1 million in 2010, followed by V&E, Baker Botts, Fulbright and Locke Lord. Godwin Ronquillo posted the largest increase in net income with $23 million, up 191.1 percent compared to $7.9 million the year before. Porter Hedges, Kane Russell and Jackson Walker also rang up double-digit increases in net income. Susman Godfrey had the largest decline of 33.3 percent dropping to $90 million last year compared to $135 million in 2010.
Fifteen of the firms improved their net income in 2011, while net income declined at the other 10 firms.
Godwin Ronquillo topped the PPP chart with an average of $1,917,000, up 215.3 percent when compared to $608,000 in 2010. PPP at a number of firms improved by more than 10 percent: Kane Russell, Jackson Walker, Fort Worth firm Kelly Hart & Hallman, and Dallas firms Winstead and Carrington, Coleman, Sloman & Blumenthal. The largest decline in PPP was at Susman Godfrey, down 38.9 percent to $1,500,000 in 2011 from $2,455,000 in 2010.
Average PPP improved at 17 of the firms, declined at seven, and was flat at Bracewell & Giuliani of Houston.
Even though its RPL declined by 28.1 percent, Susman Godfrey tops the RPL chart with average of $1,359,000 in 2011, compared to $1,890,000 in 2010. Four firms posted double-digit increases in RPL: Porter Hedges, Godwin Ronquillo, Thompson & Knight and Looper Reed.
Nineteen of the firms posted an increase in RPL in 2011, and the other six had declines.
The Annual Report on Firm Finance also includes a Profitability Index that shows whether equity partners in a firm are taking home more or less than average RPL. [See "Profitability Index," below.]
The report also includes a firm-by-firm analysis that gives some insight to help explain financial results from each of the 25 firms. [ See related charts, pages 20-23. ] The fact that lawyers from the firms are quoted in these articles is no indication of a firm’s cooperation with the preparation of the Annual Report in Firm Finance. Lawyers simply responded to questions about work and developments at their firms in 2011. Texas Lawyer does not identify the firms that cooperate with our reporting by providing financial information or those that do not.
Those individual firm reports also include graphs that illustrate the trend line for each firm’s revenue over the past several years. The gross revenue numbers were collected from previous Texas Lawyer Firm Finance reports. For a few firms, numbers go back to the first Firm Finance report in 1987, while other firms are newer to the charts. The graphs are not on the same scale, so they should not be compared side-by-side.
All the revenue figures in the charts are for calendar year 2011, except for Gardere, whose most recent fiscal year ended March 31, 2012. All lawyer counts are full-time equivalent for the firm’s fiscal year.
The Millionaires’ Club
|Profits per partner topped $1 million in 2011 at these nine Texas-based firms.|
|Akin Gump Strauss Hauer & Feld||$1,685,000|
|Vinson & Elkins||$1,354,000|
|Bracewell & Giuliani||$1,018,000|
|3||Akin Gump Strauss Hauer & Feld||1.73|
|5||Kane Russell Coleman & Logan||1.66|
|6||Vinson & Elkins||1.61|
|7||Bracewell & Giuliani||1.58|
|8||Kelly Hart & Hallman||1.5|
|9 (tie)||Thompson & Knight||1.35|
|9 (tie)||Locke Lord||1.35|
|9 (tie)||Porter Hedges||1.35|
|12 (tie)||Andrews Kurth||1.34|
|12 (tie)||Jackson Walker||1.34|
|14 (tie)||Beirne, Maynard & Parsons||1.3|
|16 (tie)||Looper Reed & McGraw||1.29|
|16 (tie)||Gardere Wynne Sewell||1.29|
|18||Haynes and Boone||1.23|
|19||Munsch, Hardt, Kopf & Harr||1.16|
|20||Chamberlain, Hrdlicka, White, Williams & Aughtry||1.11|
|21 (tie)||Thompson, Coe, Cousins & Irons||1.09|
|21 (tie)||Fulbright & Jaworski||1.09|
|23||Carrington, Coleman, Sloman & Blumenthal||0.94|
|24||Cox Smith Matthews||0.91|
|25||Strasburger & Price||0.87|
To calculate a firm’s profitability Texas Lawyer used the profitability index, a mathematical formula. The formula, developed by our affiliate The American Lawyer, is :
Profitability = Profits Per Partner / Revenue Per Lawyer
The formula takes some of the variables — although not all — out of gross revenue, net profits, leverage or even profit-margin comparisons. It shows whether the equity partners in a particular firm are taking home more or less than the average revenue their respective lawyers are bringing into the firm.
Essentially, if the profits per partner are more than the revenue per lawyer, the firm is producing profits for its partners. If not, the firm may need to take a hard look at its expenses or its leverage.
Using the profitability index as a measure, 22 of the firms were profitable in 2011, compared to 21 in 2010. Three firms were unprofitable in 2011, compared to four in 2010. Godwin Ronquillo of Dallas was the most profitable firm in 2011 with a profitability index of 2.68, while Strasburger & Price of Dallas, with a profitability index of .87 in 2011, was the least profitable among the 25 highest-grossing Texas-based firms.
— BRENDA SAPINO JEFFREYS
|Texas Lawyer, April 2012|
Some of these figures are official; some of them are not. We’re not telling which is which.
By official, we mean that the numbers were provided by management. By unofficial, they were pieced together through our reporting, and firm leaders were informed of the results of that reporting and given the opportunity to respond.
We don’t tell which numbers are official and which ones are informed estimates for a simple reason: We promise the firms that do cooperate that they will not be identified.
Thus we can assure our readers that every number on these charts is an informed estimate with which we feel confident, based on research and numerous interviews with a variety of knowledgeable people associated with the firms.
This is the only project for which we use this method of reporting without attribution. We do this because comprehensive financial data is a cornerstone of our business-of-law coverage. Firms are privately owned and are under no obligation to report their financial data, and so we use every bit of information we can find about a firm’s finances to come up with results in which we are confident.
To arrive at the 25 highest-grossing firms, we surveyed 29 firms that, based on the number of attorneys and reputation, appeared to generate enough revenue to be included. Only firms based in Texas are included.
Profits per partner are based on equity partnership. Retired partners and of counsel are not counted as partners, but rather as salaried employees, like associates.
We use average FTE (full-time equivalent) in 2011 for the lawyer counts. The financial information is for the year 2011, except for Gardere Wynne Sewell, which has a fiscal year ending March 31, 2012.
Gross revenue and net income figures are rounded to the nearest $100,000. Figures for revenue per lawyer and for profits per partner are rounded to the nearest $1,000.