Blank Rome saw a 3.4 percent dip in gross revenue in 2010 but managed a 6 percent rise in profits thanks in part to its prepayment of 2010 expenses out of 2009 profits, the firm said.
Blank Rome’s gross revenue dipped from $322 million in 2009 to $311 million in 2010. Co-chairman Alan Hoffman said the firm prepaid about $12 million of 2010′s expenses because it knew revenue would be hard to come by last year. The firm had a number of cases that were settling in the beginning of 2010 and a minimal amount of contingency fees expected for the year, he said.
Hoffman said the firm seems to go every other year when it comes to big contingency fee payouts, and he expects 2011 will be no different with many cases settling or going to trial with expected “significant recoveries.” He said the firm never budgets for contingency fees and has still budgeted for increased revenue in 2011.
“It seems every other year we get these fees,” Hoffman said of contingency fees. “It’s an odd year. We’re in great shape.”
Litigation was still strong for the firm in 2010, he said. Real estate was as well, particularly in New York. The bankruptcy practice was down after a banner 2009 and corporate mergers and acquisitions “were way down” along with maritime financing deals and other corporate work, Hoffman said. That, in turn, affects the tax and intellectual property practices, which aren’t kept as busy assisting on M&A deals, he said.
Blank Rome had to restate some of its 2009 financial reports, recalculating its net income, number of lawyers, number of equity partners, revenue per lawyer (RPL), profits per equity partner (PPP) and average compensation for all partners. The firm said it hadn’t finished its distributions last year before submitting its 2009 numbers. In its restatements, the net income for 2009 turned out to be $5 million less and the equity partner tier was actually five lawyers fewer, resulting in a larger-than-first-reported RPL, a lower PPP and average compensation for all partners than were first reported.
In comparing the restated numbers for 2009 to the firm’s reported numbers for 2010, Blank Rome increased its profit margin from 30.7 percent in 2009 to 33.1 percent in 2010.
The firm’s RPL dropped 3 percent from $665,000 in 2009 to $645,000 in 2010. The PPP grew 6.2 percent from $650,000 to $690,000 and the average compensation for all partners increased 4.3 percent from $513,000 to $535,000.
Blank Rome’s headcount dropped by less than 1 percent from 485 lawyers to 481. The firm’s equity partner tier decreased 2 percent from 152 equity partners to 149 and the non-equity tier grew 1.8 percent from 109 to 111. Total compensation for the non-equity lawyers increased by $1 million over 2009 to $36 million.
The firm’s billable hours dropped more than the headcount, falling 3.8 percent from 796,000 in 2009 to 766,000 in 2010.
Hoffman said the firm was able to increase profitability despite hour and revenue decreases because of prepayments of expenses, a full-year’s benefit of 2009 layoffs of lawyers and staff and a continued management of expenses. He said the firm was able to get better deals on employee benefits and save on office operations and general administration.
Hoffman said the firm continues to be debt free and has $44 million in capital. The firm requires its partners to contribute between 42 and 44 percent of their overall compensation as part of capital reserves.
Looking to the Lone Star State
Blank Rome didn’t hold off on making lateral additions in 2010, adding 37 partners, associates or of counsel throughout the year. The firm has already demonstrated plans to continue that mode, bringing on a group of seven consumer financial services attorneys from Dilworth Paxson in February and adding a few solo laterals across some other offices since the start of the year.
The firm has also been adding to Blank Rome Government Relations, a subsidiary Hoffman said has been a real “differentiator” for the firm.
Blank Rome unofficially started an office in Houston in April 2010 with the addition of a former associate general counsel of chemical company LyondellBasell, Joseph F. Speelman. Hoffman said the firm is in later-stage negotiations with a small, Houston-based firm. He said he hopes Blank Rome will have an official Houston office by July.
The firm will continue expansion efforts in New York, Washington and Los Angeles as well as in Hong Kong. Hoffman said Blank Rome hopes to get final approval to open in Shanghai within the next 60 days.
The firm, he said, has changed substantially in the last decade.
“In 2000, Blank Rome was a Philadelphia law firm. Period,” he said.
Now, he said, the firm is international and is still absorbing those changes and figuring out how to remain relevant to clients. In the 1990s, three of the firm’s top 20 clients had international offices and now 18 of them do.
“So if you are not at least in the U.S. where your clients need you, then you are no longer relevant,” Hoffman said.
He said the firm is looking to grow and remain relevant while not ignoring the local markets it began in considering “we are a middle-market law firm who grew with middle-market companies.”
In a change for Blank Rome this year, managing partner and CEO Carl Buchholz said he was stepping down from the position April 1 to go back to practicing law at the firm full-time. The news came as a bit of a surprise because Buchholz had, just six months earlier, been re-elected to another three-year term in that role. Moving forward, Hoffman will take over the managing partner and CEO roles along with maintaining his role as chairman. •