The Score

February 23, 2012 6:26 PM

The Am Law 100, the Early Numbers: Sluggish Second Half Helps Slow Cahill's Growth

Posted by Nate Raymond

For Cahill Gordon & Reindel, a slowdown in deal work and an uptick in expenses in 2011 helped end a two-year boom in revenue and profits, according to reporting by The American Lawyer.

Though the firm saw its gross revenue hit a record $326 million, the figure represented just a 0.8 percent increase over 2010. Profits per partner, meanwhile, slipped 0.6 percent to $3.2 million after two consecutive years of double-digit growth.

Cahill Gordon's 2011, like many firms', was divided into two markedly different segments.

"The first half of the year was in the busiest I've ever seen," says Jonathan Schaffzin, a Cahill Gordon executive committee member. "And the second half slowed down."

Known since the 1980s boom days of Drexel Burnham Lambert as one of the go-to firms for high-yield debt, Cahill Gordon saw its leveraged finance practice experience a "very quiet" fourth quarter, Schaffzin says. The drop in deal work was offset in part by efforts of the firm's litigation department, which Schaffzin says was "significantly busier than in 2010."

"That was a big part of last year's story," he says.

Among other matters, the firm continued to defend The McGraw-Hill Companies and its Standard & Poor's subsidiary in litigation stemming from the financial crisis. Without discussing specific matters, Schaffzin says the white-collar practice headed by former Manhattan U.S. attorney David Kelley was "well at capacity," making it another bright spot.

While Cahill Gordon remains one of the Am Law 100's most prosperous members, its profits were hampered last year by rising expenses, most of them connected to increases in associate compensation and head count, as well as in spending on technology. Schaffzin says, for instance, that the firm awarded higher bonuses to associates in recognition of the heavy workloads they shouldered in 2011.

"We know our associates are working harder than their peers on average," he says.

Those bonuses included a $5,000 to $25,000 spring bonus announced in June, a source familiar with the situation said at the time. Six months later, the firm topped other New York firms by informing associates it would both match the $7,500 to $42,500 bonus scale established by Sullivan & Cromwell and pay an across-the-board $10,000 special bonus, a source says. On top of the typical $160,000 starting salary for associates, the bonuses have made Cahill's junior lawyers among the highest paid in New York.

"The bonuses we view as a investment in people," Schaffzin says.

The firm's head count, meanwhile, grew to 280, up from 273 in 2010. The additional lawyers helped the firm both grow its practices and "alleviate the burden a bit," Schaffzin says. One downside: The increased head count meant that the firm's revenue per lawyer slipped 1.7 percent to $1.17 million.

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 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.

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