The Score

February 18, 2011 2:56 PM

The Am Law 100: At Cahill, Profits and Revenues Hit Record Highs

Posted by Nate Raymond

Cahill, Gordon & Reindel, which fell off The Am Law 100 two years ago, appears to be staging a comeback.

Riding high thanks to a strong year in its finance and litigation practices, the Wall Street law firm saw gross revenue climb by 20 percent in 2010 to $323.6 million, an all-time high. Profits per partner, meanwhile, surged 27 percent to a record $3.23 million--a huge leap over 2009's $2.5 million.

"We had a really good year across the board in all of our practices," says Jonathan Schaffzin, Cahill's co-administrative partner. "You can't do this unless you're busy across the board."

For Cahill, 2010 marked the second consecutive year that both revenues and profits rose. And last year's record-setting sums could help the firm make its way back onto The Am Law 100, from which it slipped in 2009 as a result of an 11.8 percent drop in 2008 revenues.

Cahill, which remained among the most profitable firms even after falling off The Am Law 100, compares favorably to competitors. Of firms' results that have been publicly released so far, only Quinn Emanuel Urquhart & Sullivan's $3.62 million in average partner profits beat Cahill's.

Improvement in the capital markets helps explain Cahill's success, Schaffzin says. Since its days serving as counsel to Drexel Burnham Lambert, the firm has played a dominant role in the area of high-yield debt, or junk bonds. And 2010 was a record-setting year in the sector: High-yield issuance hit $252.4 billion in 2010, up 66 percent from the already record-setting numbers in 2009, according to Fitch Inc.

Cahill was manager-adviser on 192 U.S. high-yield transactions representing $95 billion in volume, according to league table data from Bloomberg, giving the firm a 36.3 percent market share and a No. 1 ranking. Even on European high-yield the firm ranked No. 1, despite having just four lawyers based in London.

The firm also was busy on leveraged loans, serving as counsel to the lead arrangers of 76 leveraged loan deals representing $72 billion in volume, again worth a No. 1 ranking, according to Thomson Reuters Loan Pricing Corp.

Outside of the corporate practices, Cahill also kept busy with litigation, Schaffzin says. For example, the firm continues to represent The McGraw-Hill Companies, Inc.'s Standard & Poor's rating agency in litigation stemming from the financial crisis.

The firm has also been active on corporate governance and investigation matters, says Schaffzin, pointing to last month's hiring of Anirudh Bansal--former cochief of the complex frauds unit at the Manhattan U.S. attorney's office--as counsel as a sign of how that practice is growing.

The surge in Cahill's profitability had little to do with head count, as the firm actually added, rather than trimmed, lawyers. The 61-partner Cahill had 273 lawyers in 2010, up from 263 a year earlier. Equity partner head count increased by two, while the number of nonequity partners was halved to six, which Schaffzin attributes largely to retirements.

Throughout the year, partners shared their wealth with associates. The firm, which typically is a market follower when it comes to associate compensation, in December awarded bonuses for the year that exceeded New York market rates set a month earlier by Cravath, Swaine & Moore.

At the time, partners told associates that they would receive an initial $10,000 to $25,000 bonus and then a year-end bonus matching Cravath's of $7,500 to $35,000. The end-of-the-year payments came on top of an earlier off-season bonus in July 2010 of $2,500 to $15,000.

"We are extremely grateful for the extra effort of our lawyers and staff in the past year, and our compensation policies have reflected that," Schaffzin says.

The question is whether Cahill can achieve the same kind of growth this year. In announcing the year-end high-yield volumes, Fitch Inc. said in January that it believes "it will be difficult for the market to equal 2010's record high-yield volume." That suggests that matching this year's performance could be a challenge for Cahill. Schaffzin says it's not possible to predict what is ahead, "but we’re off to a good start this year that’s comparable to last year."


Click here for all our ongoing coverage.

This report is part of The Am Law Daily's ongoing Web coverage of 2010 financial results of The Am Law 100/200. Results are preliminary. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2011 issue and on The Am Law Second Hundred will be published in the June issue.

Results for the 2010 fiscal year reflect a change in the survey methodology. Per-lawyer and per-partner results for 2010 are based on a full calendar year average FTE head count, while published results for previous years were, in most cases, based on an August 31 FTE head count. When possible, we have recalculated fiscal year 2009 numbers to reflect the change in head count and based percentages on those adjusted numbers.

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

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