The Score

February 11, 2009 12:23 PM

THE AM LAW 100: Revenue Flat, Profits Down at Skadden, S&C, Davis Polk, and Dewey

Posted by Alison Frankel

With new reports on gross revenue and profits at three New York-based powerhouse firms--Skadden, Arps, Slate, Meagher & Flom; Sullivan & Cromwell; and Davis Polk & Wardwell--a pattern is beginning to emerge: Firms that traditionally relied on a high-flying Wall Street client base are feeling the effects of 2008's upheaval more acutely on the bottom line than the top.

Skadden managed to remain the highest-grossing firm on the Am Law 100 list to date, eking out a 1.4 percent increase in gross revenue for a 2008 total of $2.2 billion. In a dreadful year for M&A, Skadden's corporate practice was relatively strong, particularly in representing takeover targets.

Gross revenue at Sullivan and Davis Polk, both of which logged thousands of hours in hectic bailout-related work in the last quarter of 2008, was flat, according to our reporting. Sullivan grossed $985 million and Davis Polk $789 million--both exactly matching their 2008 grosses.

All three firms, however, posted declines in profits per partner. Sullivan, which was involved in almost every major bank deal in the industry's radical makeover last year, suffered the least severe downturn: Net was down 2 percent from 2007, leading to a decline in profits per partner of 3.7 percent to $2.94 million. At Skadden, net profits declined 5.4 percent. Profits per partner were down 9.5 percent to $2.06 million.

Davis Polk's profitability suffered more severely. The firm's net declined by almost 13 percent and profits per partner fell 17 percent to $1.90 million. That decline in PPP is one of the steepest so far reported in The Am Law 100. By comparison, profits per partner at Latham dropped 21 percent and PPP at Cadwalader fell 30 percent. Davis Polk has stated publicly that it prepaid some 2009 expenses, such as January rent and associate bonuses, in 2008 in anticipation of a continued downturn. Such payments depressed 2008 profits.

Dewey & LeBoeuf's 2008 results followed the same trend as those of the traditionally more profitable firms. Dewey saw a 2.1 percent uptick in gross revenue, staying just over the $1 billion mark. The firm's net was down 4.63 percent. Profits per partner were flat at $1.57 million, but that was because Dewey's nonequity partner ranks swelled by more than 30 percent. Average compensation for all partners at the firm was down 5.8 percent to $1.15 million.

Revenue per lawyer, long considered the most reliable measure of a firm's financial health, declined at all four New York firms. Skadden's RPL fell 5.5 percent to $1.10 million. Sullivan's was down 7.5 percent to $1.48 million; Davis Polk's declined by just about 10 percent to $1.23 million. Dewey lost 2.24 percent to post RPL of $812,000.

These firms felt the capital markets decline more acutely than such New York counterparts as Cleary, Gottlieb, Steen & Hamilton, which saw a 12 percent rise in profits per partner; Weil, Gotshal & Manges, which rode the strength of its restructuring practice to a 7.5 percent rise in PPP; and Paul, Weiss, Rifkind, Wharton & Garrison, where profits per partner rose 2.3 percent to $2.65 million.

Additional reporting by Ben Hallman and Julie Triedman

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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