Baker Botts Shuns Merger, Fights New Rivals in ‘Renewal’ Push

Baker Botts achieved “pronounced success” in the year’s first half by focusing growth on profitable areas, said the firm’s chair, who is not seeking a merger.

Two large practices—energy and technology—are converging to drive demand, Danny David, the firm’s leader for a year, said in an interview. Tech companies are contracting with energy providers to power massive data centers, he said.

“We are laser-focused on this,” David said. “We are here at this white-hot center of what is happening both in technology and energy, and as a function of that in the legal industry.”

The comments show David is optimistic his approach works, though he declined to share financial data for this year. Baker Botts over the past decade has been hit with a surge of Big Law firms growing in its Texas base, often by hiring its partners. Fiscal 2023 revenue of $733 million was about $20 million lower than five years ago.

“For a period we may have been a little beset in trying to define and divine who we are,” he said. “And now we have such clarity of vision” along with “a clear expression of what we do best.”

Danny David of Baker Botts

Baker Botts

John Martin, who led Baker Botts for more than four years, stepped down last year after reaching the mandatory retirement age of 65. Most of the five who vied to replace Martin pledged to seek a merger to obtain scale and ward off poachers, Bloomberg Law reported, citing people familiar with the matter.

David, a Harvard Law-trained litigator who has spent his entire 22-year career at the firm, said he does not want to pursue a merger.

“Our growth strategy is to pursue scale, and profitable scale as it applies to key practices and geographies,” he said. “Merger is not part of that strategy. That’s always been my position.”

Texas Roots

Baker Botts traces its roots in Houston back to 1840 and is long known as a leader in the energy industry. Last year, the firm represented renewable energy company EDPR NA Distributed Generation LLC in an agreement with Google to deliver distributed solar power to residential areas, including in areas where the tech giant operates such as its data centers in Columbus, Ohio.

New York and international firms have moved in to the Houston area in the past decade, boosting competition for those such as Baker Botts that have deep roots in the region. Kirkland & Ellis, Gibson Dunn & Crutcher and Latham & Watkins are among those who built a presence in the city.

While many leaders bemoan the increasingly competitive legal market, where top firms can splash paydays of more than $20 million for a partner, David said the competition has been a good thing—forcing his firm to hone its strategy and modernize its operations.

“We are not your grandfather’s Baker Botts,” David said. “We’ve taken efforts to modernize the firm and to think aggressively about our value proposition relative to new market entrants and some of the competition we’ve had for years. We’ve come through on the other side of that process in a position of excellence.”

Baker Botts got smaller as newcomers poached its attorneys—it went from nearly 750 lawyers in 2019 to 625 last year, according to American Lawyer data. Meanwhile, the firm branched into growth practices such as technology and intellectual property.

While its revenue in 2023 fell from five years earlier, Baker Botts’ profits per equity partner grew by more than 50% to nearly $2.5 million last year, according to American Lawyer data. That was accomplished in large part by a reduction in the number of equity partners—from 197 five years ago to 98 last year.

This year, David said the firm has seen spikes in energy-related work, litigation, antitrust, intellectual property, capital markets, M&A, and environmental issues. The market for Big Law firms has been strong in 2024, with the 50 largest notching revenue gains of more than 10% through six months, Citibank’s Law Firm Group reported.

David said he’s looking to grow the firm across its offices in Texas, London, on the US coasts, Brussels, and Singapore, where Baker Botts opened an office last year.

The firm’s Singapore office came after Baker Botts pulled out of Hong Kong around late 2021. The Singapore office has grown to 13 lawyers from the seven who founded it, David said, and the firm will continue to add lawyers there.

David said he’s optimistic about the firm’s path forward, crediting his partners for working toward a vision of profitable growth.

“This process of renewal was particularly important to me and to my cohort of partners who bristled at the old way,” David said. “I’m proud that our partnership has delivered on that promise.”