Pennsylvania-born law firms in the top half of the Am Law 100 held their positions fairly steady in 2017. Things were more volatile for those vying against one another in the lower half of the country’s 100 highest-grossing firms.
The 2017 Am Law 100 featured 11 Pennsylvania firms—the same ones that appeared in last year’s rankings. The firms with the most change, but in opposite directions, were Blank Rome and Pepper Hamilton. Blank Rome rose 16 places in the rankings, while Pepper Hamilton dropped by 16 places.
Blank Rome increased revenue by 22 percent to reach 78th in the Am Law 100. Last year it was 94th. The firm brought on more than 100 lawyers from Dickstein Shapiro, allowing it to increase revenue through head count growth.
Managing partner Alan Hoffman said Blank Rome has “transformed” in recent years, thanks to a strategy focused on growth in tier-one cities like Los Angeles and New York.
“In terms of becoming a national law firm, which is our goal, we are continuing to move toward that,” Hoffman said. “Seventy percent of the attorneys of the firm weren’t here in January 2011.”
Fox Rothschild and Cozen O’Connor grew revenue and improved their Am Law 100 rankings through head count growth as well. Fox Rothschild landed at 80, up five places from last year, and Cozen O’Connor jumped six places to 89. Both firms brought on a number of lateral hires throughout 2016, and Fox Rothschild continued to integrate the lawyers from its merger with a Minneapolis-based firm, while Cozen O’Connor’s numbers were affected by its 2015 acquisition of 60 lawyers from a Chicago-based firm.
“The home market for all Philadelphia firms is not a major growth market,” said consultant Joe Altonji of LawVision Group. “Most of them have been pursuing a strategy for a number of years of growing outside their home market.”
Much of the revenue growth among Pennsylvania firms was driven by head count growth, as revenue per lawyer increased by 1.6 percent on average among Pennsylvania firms. RPL grew by less than 4 percent at all but one of the 11 Pennsylvania firms—K&L Gates saw RPL increase by 13 percent.
“It’s easy to add lawyers, and you can have 5,000 lawyers, but if you don’t have a whole bunch of clients and increasing revenue at the same time, your RPL is going to go down,” said Hoffman, whose firm grew RPL by 3.4 percent. “We look at that as a metric that is important, and to us more important than some of the other metrics.”
Three firms had RPL growth of less than 1 percent. Another three saw a decrease in RPL, including Pepper Hamilton, where RPL decreased by 8.9 percent. The firm attributed its financial results to a temporary drop in demand in the firm’s health effects practice, and said its financial trend lines are skewed by a particularly strong 2015.
Ballard Spahr, which dropped by three places to 99 in the Am Law rankings, saw RPL decline by 3 percent. The firm said it expected a challenging 2016, after its 2015 results were bolstered by two major contingency fees.
Firms outside the top 50 of the Am Law 100, and other firms that are unlikely to work on global transactions and bet-the-company litigation, are more affected by fluctuations in individual practices, Altonji said. To make up for that, they may look to adjust their practice mix or expand into other regions.
Largest Firms Hold Steady
Pennsylvania’s largest firms by revenue were relatively steady in the rankings, except for Reed Smith, which dropped by four places to 25th. The firm experienced a 4.3 percent decrease in revenue year-over-year, amid a head count decline, but its RPL held steady at $700,000 and profits per equity partner were flat at $1.11 million.
The other three Pennsylvania firms in the top 50—Morgan, Lewis & Bockius, K&L Gates and Dechert—stayed within one place of their 2016 ranking, as did Duane Morris and Drinker Biddle & Reath, landing at 71 and 75, respectively.
For the Pennsylvania firms in the top three quarters of the Am Law 100, even strong revenue growth may not have resulted in a huge jump in the ranks. K&L Gates, for instance, saw a 10.7 percent increase in revenue, but only jumped up one spot. Drinker Biddle stayed at the same ranking despite a 6.1 percent increase in revenue.
Looking across the whole Am Law 100, average results seemed impressive in 2016. The largest 100 firms saw a 4.3 percent increase in gross revenue, compared to 2.7 percent one year ago. But RPL growth slowed, increasing by just 1.5 percent—the lowest amount since 2011.
“What you’re looking at is some revenue increase driven by rates,” Altonji said. “The actual underlying business demand was down last year.”
When comparing the top 50 firms with the second 50, two different pictures emerged. RPL increased by 3.6 percent in the top 50, but actually declined by 1.3 percent among 51-100. Profits per equity partner increased by 6.1 percent at those firms, but decreased by 1.7 percent in the second 50.