The Pennsylvania-based Am Law 100 firms are playing in the same sandbox as last year, with those in the top 50 growing on average at a faster pace than those in the bottom 50. But none of the firms in Pennsylvania made it to Legal affiliate The American Lawyer’s list of the 20 “super rich” firms.
The same eight Pennsylvania firms that were ranked in the magazine’s Am Law 100 last year appeared this year for their 2013 financial performance. And, for the most part, they were in nearly identical positions in the rankings of firms by gross revenue. While Pennsylvania firms lag behind their national counterparts when it comes to average revenue per lawyer (RPL) and profits per equity partner (PPP), they far exceeded the country in the pace with which they grew those metrics.
Morgan, Lewis & Bockius ranked 12th for the second year in a row with a 5 percent increase in gross revenue in 2013 to nearly $1.3 billion. K&L Gates had the largest increase in gross revenue of the Pennsylvania firms, growing the top line 9.3 percent to $1.16 billion. For that, the firm moved up one spot to 17th place on the list.
Reed Smith and Dechert were the only two other firms in the state that could be found among the top 50 firms. Reed Smith fell two places to 21st despite a 6.1 percent rise in gross revenue to $1.08 billion. Dechert moved up four places to 34th with a 6.6 percent increase in gross revenue to $777 million.
In an effort to more fairly compare firms with similar strategies and competitive muscle, The American Lawyer split the Am Law 100 into three subgroups—the 20 Super Rich, the six “Giant Alternatives” that are the Swiss vereins and the 74 other firms affectionately categorized as “Everyone Else.” As it turns out, Pennsylvania firms are just like “everyone else,” all falling into that broadest category.
To be in the Super Rich category, firms had to achieve RPL of at least $1 million and PPP of at least $2 million.
According to the magazine, the 20 firms that met that criteria outperformed the financial averages by four or five percentage points while holding headcount growth to 1 percent. Those firms house 18 percent of the lawyers in the Am Law 100 and earn 26 percent of the fees, according to the magazine.
The Swiss vereins, which on average added 695 lawyers last year, lagged behind the overall market. According to The American Lawyer’s analysis, their average RPL fell by 4.7 percent and their PPP was off by 8.2 percent. At the same time, they increased their headcount by an average of 31 percent. Those six firms hold roughly 19 percent of the lawyers in the Am Law 100 and account for less than 14 percent of the revenue, the magazine noted.
For the rest of the firms—Pennsylvania firms included—2013 was, as predicted throughout the year, a pretty hard-fought, modest year. Gross revenue increased by 2.2 percent, to an average of $631.3 million, RPL was up by 1 percent, to an average of nearly $804,000, and PPP and headcount both increased by 1.2 percent to $1.2 million and 785, respectively, according to the magazine’s analysis.
While the Pennsylvania firms in the top half of the Am Law 100 saw notable increases in gross revenue, those in the bottom half, with the exception of Pepper Hamilton, had a relatively flat to down year.
Duane Morris rose two spots to 68th place with a 0.2 percent increase in revenue to $421.5 million. Drinker Biddle & Reath dropped two spots to 76th as the firm’s gross revenue dropped 1 percent to $388 million. Pepper Hamilton held steady at 81st place despite a 5.4 percent increase in revenue to $373.5 million. Blank Rome saw the biggest move up or down the chart of all the Pennsylvania firms, falling five places to 96th thanks to a 2.6 percent decrease in gross revenue to $320.5 million.
Improving at a Faster Clip
Pennsylvania firms may not be “super rich,” but they are beating the national average when it comes to increases in RPL and PPP. Pennsylvania firms, on average, still have lower RPL and PPP than their national counterparts, but they increased those metrics at a higher rate last year than firms did nationally.
Pennsylvania firms were less spread out among the top 100 firms when ranked by RPL and PPP, with some of the top firms in gross revenue falling far down the RPL and PPP rankings. Only Morgan Lewis and Dechert were in the top 50 of those two rankings.
But on the whole, Pennsylvania firms improved RPL while their national counterparts saw that category fall. And Pennsylvania firms exceeded the modest average increase in PPP seen nationally.
While the Am Law 100 on average saw a 0.4 percent decline in RPL, Pennsylvania firms saw that metric rise an average of 0.5 percent. The spread ranged from a high of a 2.7 percent increase in RPL at Morgan Lewis to $945,000 to a low of a 4.9 percent decrease at K&L Gates to $585,000. The RPL average nationally in 2013 was nearly $841,000 while the RPL average among Pennsylvania firms was about $744,000.
The average PPP nationally increased 0.2 percent to about $1.5 million. Pennsylvania firms saw PPP rise an average of 1.6 percent between 2012 and 2013 to an average of $1.1 million.
Blank Rome had the largest increase in PPP, growing the metric 9.3 percent to $820,000 while decreasing its equity partner tier by 16.4 percent. K&L Gates had the largest drop-off in PPP, seeing a 7.8 percent decrease to $830,000. Dechert continues to have the highest PPP of any Pennsylvania firm, with equity partners bringing home an average of $2.15 million in 2013—a 2.4 percent increase over 2012. That came even though the firm increased its equity tier nearly 8 percent.
Attorney headcount increased an average of 5.5 percent in 2013 among Pennsylvania firms. But that growth was exaggerated by K&L Gates, which grew headcount nearly 15 percent to 1,975 thanks to its merger with Australia-based Middletons. When excluding K&L Gates from the average, Pennsylvania firms grew at an average of 2.6 percent in 2013.
Only three Pennsylvania firms, Dechert, Morgan Lewis and K&L Gates, increased their equity partner tiers in 2013.
Pennsylvania firms were on par with their national counterparts, with both groups averaging around a 5 percent increase in gross revenue in 2013. The average gross revenue among Pennsylvania firms was about $725.7 million. The average among all the top 100 firms was $774 million.