Heavyweights in Pennsylvania’s legal industry had their strongest years on record for revenue and profit gains, though in characteristic fashion, the commonwealth’s largest firms fell slightly behind national averages.
On Law 100 law firms originating in Pennsylvania increased gross revenue and revenue per lawyer each by an average of 11.6% and equity partner profits by 17.2%. Interviews with firm leaders indicate that 2020’s expense savings continued into 2021, although to a lesser extent, while corporate practices contributed the most to financial gains.
“Combining all the busy transactional practices with a big uptick in litigation in 2021 made for a great year,” said Matt Taylor, CEO and chairman of Philadelphia-based Duane Morris, whose revenue climbed to $596.5 million last yeara 13.4% increase over 2020.
Fox Rothschild’s firmwide managing partner Mark Morris said the firm’s litigation practice, its largest department, was “basically flat” in terms of revenue. The firm’s 7.3% revenue rise to nearly $650 million came from the firm’s corporate, real estate, tax and wealth planning practices, which all enjoyed double-digit revenue gains, Morris said.
However, gains realized by Pennsylvania’s Am Law 100, while outpacing 2020 figures, fell slightly below gains realized across the national Am Law 100 cohort.
Data released by The American Lawyer this week indicate the country’s largest firms collectively increased revenue 14.8%, with Kirkland & Ellis and Latham & Watkins far surpassing the rest of the pack. The Am Law 100 also boasted 12.5% growth in revenue per lawyer and a 19.4% spike in profits per equity partner, data show.
While corporate practices made the difference to many firms’ financial success, industry observers say it’s important not to discount the role of litigation practices.
“It is true that as this industry has moved more toward a dependence on corporate and transactional work: what happens in those practice areas does have a big impact on the overall performance of the firm,” said Gretta Rusanow, managing director and head of advisory services at Citi Private Bank Law Firm Group, in an interview earlier this year.
“But that being said, we’ve heard that across the industry that firms saw work on the litigation and investigation side pick up last year and that continues into this year,” she continued. “Real estate for a number of firms I’ve spoken to also picked up last year.”
While most Pennsylvania Big Law firms hovered above and below a 10% gross revenue increase, global law firm Dechert grew revenue more than any other firm in the commonwealth on a year-over-year basis, according to The American Lawyer report, growing gross revenue by 25%, from $1.07 billion to $1.34 billion. The mega-firm also outperformed national averages for revenue per lawyer, 29.6%, and profits per equity partner, 49.6%.
“2021 was one for the history books,” Dechert CEO Henry Nassau said in an interview with The American Lawyer this year.
K&L Gates, another global behemoth, followed with a 15% increase in revenue, from $1.01 billion to $1.17 billion. The Pittsburgh-founded firm increased revenue per lawyer and profits per equity partner at double digit rates, 10.5% and 20.1%, respectively.
“We as a global team are hitting our stride in a lot of positive ways,” said the firm’s global managing partner, Jim Segerdahl. “I don’t think of it as a one-year uptick. We’ve seen some really positive trends over a number of years now, especially with respect to profitability.”
Lawyer head count for Pennsylvania’s Am Law 100 firms straddled either side of flat growth, consistent with the findings of the Citi Private Bank Law Firm Group’s year-end survey that found a 1% decline in lawyer head count among surveyed firms in the commonwealth.
Meanwhile, as Rusanov pointed out, total billable hours logged, a measure of demand for legal services, was up 4.2%, according to the group’s survey.
With fewer lawyers and more demand, billable work per lawyer—a measure of lawyer productivity, according to the group’s findings—was up 6.1%.
“If you’re in a situation where your lawyers were at capacity, and you’re asking them to take on even more,” Rusanov said, “burnout” could become a concern for Pennsylvania’s lawyer community.
Pennsylvania Big Law lawyers may be working harder than ever but they’re also being compensated at higher rates, data shows.
In addition to equity partner profits jumping 17%, income partners received a 10.5% increase in compensation allocated to their tier, resulting in 16% higher average partner compensation.
Averages are based on the year-end financials for Morgan, Lewis & Bockius, Dechert, Reed Smith, Duane Morris, K&L Gates, Troutman Pepper Hamilton Sanders, Faegre Drinker Biddle & Reath, Ballard Spahr, Blank Rome, Fox Rothschild and Cozen O’ Connor.
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