The Score

February 17, 2010 11:01 AM

THE AM LAW 100: Latham's Profits Bounce Back

Posted by Richard Lloyd

Latham & Watkins today released its financials for fiscal year 2009 and the picture that's emerging is of a firm on the mend. While revenue was down 5 percent last year, profits inched up by the same percentage. The optimistic figures come after the firm's profits per equity partner (PPP) suffered one of the steepest falls among Am Law 100 firms in 2008.

Gross revenue was $1.821 billion in 2009, down from $1.923 the previous year. The 5 percent rise in PPP boosted that number to $1.902 million. The increase in PPP was off the back of a dramatic rise in net income, which increased from $786 million to $844 million.

Twelve months ago Latham announced that profits had fallen 20.5 percent while revenue fell below the $2 billion mark. Of the firms in The Am Law 100, just five others--Cadwalader, Cravath, Fried Frank, Orrick, and Ballard Spahr--saw steeper declines in profits. Then, in March, the firm announced that it was laying off 190 associates and 250 staff as it responded in dramatic fashion to the collapse in demand in the third quarter of 2008 and start of 2009. Latham’s total attorney head count now stands at 1,880 down from 2,102, but after it opted not to cut partner numbers the equity partnership grew from 436 to 444 (the number of nonequity partners also grew from 122 to 131).

Firm chairman Bob Dell points to improved market conditions throughout the second half of 2009 in explaining Latham's profitability. The firm's traditional investment bank clients saw an upturn in their fortunes, and markets around the world began to improve.

"We're pleased that we were able to improve our performance over 2008, especially as the recession continued to deepen in the first half of 2009," Dell says. "With the exception of a few geographic variations, demand for legal services started to fall in the summer of 2008, hit the bottom in the first quarter of 2009, began to improve in the middle part of the year, and then picked up quite a bit toward the end of 2009."

Notable transactions for the year included advising Oracle on its $7.4 billion bid for Sun Microsystems. Latham acted on a number of high-profile matters in the Middle East, including advising Qatar's Ministry of Economy and Finance on the country's $7 billion bond offering, the largest-ever bond issuance in the region.

The firm also opened an office in Beijing, and on the lateral front it added bankruptcy veteran Jan Baker from Skadden, Arps, Slate, Meagher & Flom in New York, an addition which Dell highlights as a boon to the debtor side of Latham's restructuring practice.

Given improved business conditions in the second half of 2009, expansion plans clearly are back on the firm's agenda. Latham launched an office in Houston at the start of 2010 with lateral hires from Akin, Gump, Strauss, Hauer & Feld and Baker Botts, boosting the firm's energy practice. In early February the Los Angeles-based firm made a spectacular raid on White & Case, picking up 13 partners in New York, London, and the Middle East.

This report is part of The Am Law Daily's ongoing Web coverage of The Am Law 100’s 2009 financials. Results are preliminary. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2010 issue and on The Am Law Second Hundred will be published in the June issue.

The final published results of last year's Am Law 100 rankings are available here.

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Latham management is really ruthless.

They hired a ton of people during the debt boom to earn as much money as possible in the bubble areas. As a result, profits and revenues reached record highs.

Then, when the inevitable contraction arrived, Latham laid off 190 associates publicly, and a lot more stealthily for a total that's probably over 400 [].

This number includes a ton of first years who had been at the firm for only four months. In NY, over half the first years were laid off only several months after they started.

Latham management knows that layoffs are really damaging for lawyers. For a first year associate, it can be a career ender.

All this in response to a 5% drop in revenues and to boost profits a mere 5%?

Law students and future laterals, when the economy recovers and hiring picks up, remember which firms needlessly massacred the baby lawyers.

I don't get it - how do you axe over 400 people and ruin many of their careers by blaming the economy, and then still

1) get a higher profit per partner
2) expand overseas offices
3) make more partners
4) raid other law firms???

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