The Score

February 9, 2009 5:30 AM

THE AM LAW 100: Latham Profits Drop 21 Percent, Off $470K per Partner

Posted by Richard Lloyd

Latham & Watkins saw its profits drop 21 percent last year, one of the biggest falls so far reported by an Am Law 100 firm. Profits per equity partner fell from $2.27 million in 2007 to $1.8 million in 2008.

The firm also saw a dip in revenues--a 4 percent decrease to $1.9 billion has knocked the firm back below the $2 billion mark. Last year, Latham and Skadden, Arps, Slate, Meagher & Flom became the first two firms of The Am Law 100 to break past the $2 billion level in gross revenue.

Latham chairman Robert Dell says, in light of the current economic conditions, "We're extremely proud of our performance in 2008," pointing out that it was the second best year in the firm's history.

Like many Am Law 100 firms, Latham profited wildly from the boom in the financial markets. Revenues grew from just over $1.4 billion in 2005 to $2.005 billion in 2007. Profits per partner also grew over the same period from $1.6 million to last year's height of $2.27 million.

Despite the worsening global economic conditions, the firm continued its international expansion in 2008 with new offices in Dubai and Qatar in the Middle East (it has secured a license to practice in Abu Dhabi). The firm has targeted the emerging sovereign wealth funds in the Middle East. In July and November of last year, Latham advised Qatar Holding LLC on its multibillion-dollar investment in the U.K.'s Barclays bank.

Other key mandates through the year include acting for pharmaceutical giant Eli Lilly on its $6.5 billion acquisition of ImClone. The firm is defending Fannie Mae and a number of its directors against shareholder class actions.

Latham also grew in Asia with a seven partner corporate team in Hong Kong, hired from Allen & Overy. In November the firm announced 30 partner promotions worldwide, one more than in 2007.

Given its exposure to the financial markets (Lehman Brothers and Bear Stearns both were regular Latham clients) and to the leveraged buyout sector, coupled with the December announcement that it would freeze associate salaries for 2009, Latham's declining profits don't come as a surprise. Still, the 20 percent drop is among the highest so far reported by The American Lawyer and our sibling publications.

Dell describes profits per partner of $1.8 million as "not too shabby." Latham, he insists, has "done a lot on the cost side" but will continue to invest in its international network. "We're in most of the markets we need to be and our global footprint was very helpful in 2008," Dell says.

Click here for The Am Law 100 - A Work In Progress, a chart tracking 2008 financials. Final published
results of last year's Am Law 100 ranking are available here.

This report is part of The Am Law Daily's ongoing Web coverage of The Am Law 100s 2008 financials, bringing you our own reports and those from our sibling publications at Incisive Media. Results are preliminary.

Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May issue and on The Am Law Second Hundred will be published in the June issue.

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If a 4% drop in revenues reduces your profits by 21%, you have a REAL problem with costs. Look for Latham to slash its cost base this year, by firing lots of non-equity partners, 'special counsel' and associates.

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