March 8, 2012 6:01 PM
The Am Law 100, the Early Numbers: Pre-Merger, Baker & Daniels's Revenue Rose and Faegre's Fell
Posted by Claire Zillman
On January 1, Minneapolis-based Faegre & Benson and Indianapolis-based Baker & Daniels merged to create 700-lawyer Faegre Baker Daniels. In the year ahead of the tie-up, the two firms showed mixed financial results, with Baker's gross revenue climbing 3.8 percent and Faegre's dipping 0.8 percent, according to The American Lawyer's reporting.
Baker took in $175.5 million in gross revenue in 2011, up from $169 million in 2010. As for other key financial metrics, the firm's overall attorney head count decreased by 1.8 percent, or five lawyers, its revenue per lawyer jumped 5.8 percent to $640,000, and its profits per partner rose 3.8 percent to $680,000.
Former Baker & Daniels chair and chief executive partner Thomas Froehle, Jr., who serves as the newly merged firm's chief operating partner, attributes the rise in revenue in the firm's final year as a stand-alone entity to such core practices as intellectual property, health care, and life sciences. "And our corporate practice has not been as adversely affected as other firms," he says.
Baker's merger partner Faegre & Benson, meanwhile, saw its gross revenue inch down from $256.5 million in 2010 to $254.5 million last year. It also lost 21 lawyers, or 4.7 percent of its overall attorney head count. Many of the losses were the result of 11 health care lawyers—including practice group chair Ann McCullough—leaving for Polsinelli Shughart last April, according to Andrew Humphrey, managing partner of Faegre Baker Daniels and former chair of Faegre & Benson's management committee. The firm's profits per partner rose 1.9 percent, from $530,000 in 2010 to $540,000 in 2011.
All told, the two firms brought in $430 million in gross revenue last year, which would have been good for a spot in the lower third of The Am Law 100. Standing on their own, Faegre ranked at number 111 and Baker & Daniels ranked at number 160 on last year's Am Law 200.
The two firms announced that they were in merger talks in August, and their respective partnerships approved the tie-up in October. It was one of several mergers with ties to the Indianapolis market announced last summer, as detailed by The American Lawyer in October's "Divide and Conquer."
While Froehle says the process of syncing operations and practice began after that vote, the merged firm has allotted additional money this year to continue the integration. In announcing the tie-up, the firms touted geographic synergy—none of the combined entity's 13 offices present any duplication—as one of the many benefits clients would reap from a combination designed to provide them with more breadth and depth in representation, along with a better value proposition. Two months in, Humphrey says, the merged firm is making good on those goals.
For example, he says, one significant client had in the past used Faegre lawyers for M&A work and Baker & Daniels lawyers for consulting work. Humphrey says this client called the merger a "marriage made in heaven," because both services can now be provided by a single firm. (Baker & Daniels had a 45-person consulting arm in Washington, D.C., that has been renamed Faegre BD Consulting.)
One area where the individual firms weren't in sync was partnership structure. Baker & Daniels relied on a classic two-tier system, with 106 equity partners in 2011 and 48 nonequity partners. Faegre used a one-tier structure, with all 199 of its partners holding equity status. The joint firm has opted for a hybrid of the two: a single-tier system that allows for partners to confidentially customize their compensation arrangement, allowing some to choose fixed compensation.
Says Froehle: "There are going to be some different, more flexible systems for people who have different career ambitions."
This report is part of The Am Law Daily's early coverage of 2011 financial results of The Am Law 100/200. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2012 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue. An interactive chart of the financial results reported so far is available here. The chart will be updated as additional data is reported.Make a comment