Hogan Lovells boasted record profits for its equity partners in 2020, thanks to cost savings and a lower number of the firm leaders.
Equity partners saw average profits jump 31% to nearly $2 million each, the firm told Bloomberg Law. At the same time, the number of those partners fell to 412 last year from 536 in 2019. Non-equity partners rose to 381 from 265.
Other top firms also improved results, even as the pandemic took root last year. McDermott Will & Emery, White & Case, Akin Gump Strauss Hauer & Feld, and Cooley showed gross revenue increases ranging from 6.5% to 17.9%. Each firm also reported an even higher partner profit boost, from 16% to 26%.
The “sharp uptick” in profitability is because of “decisive efforts” to curtail expenses that include salaries and partner draws, said Marcie Borgal Shunk, president and founder of law firm consultancy The Tilt Institute.
Strategic planning and training also played a role, as did pandemic-fostered cuts in travel, office overhead and healthcare, Borgal Shunk said in a statement.
The American Lawyer first reported the 2020 financial data from the firms.
Hogan’s profit increase is more than ten times the firm’s reported boost in gross revenues, which rose to $2.3 billion last year from $2.25 billion in 2019.
The firm’s revenue per lawyer increased by 4% during the same period, to $884,000 from $850,000.
The main driver of the results was financial discipline, including cost cuts and more timely and rigorous client billing, Hogan CEO Miguel Zaldivar told Bloomberg Law.
Hogan also reduced partner draws and pay for equity partners early in the pandemic—actions that have since been rescinded, he said.
The shifted number of equity and non-equity partners, which contributed to the reported figures, comes with an asterisk, Hogan CEO Miguel Zaldivar said.
The firm gave a “financial guarantee” to partners with small ownership shares, he said, which prevents them from being considered equity partners for external reporting purposes.
“We wanted to make sure we could bring stability to our workforce in unprecedented times,” he said.
More With Less
DLA Piper is among the other large firms that had significant success in cutting costs last year, Global Co-Chair Frank Ryan recently told Bloomberg Law.
“We did a really good job, as did other firms, in learning how we can be more efficient and what we can do with less,” Ryan said. “That was a big portion of the story for many law firms.”
DLA Piper, which is also among the country’s largest ten firms, has yet to report its revenue and profits for 2020.
Several recent surveys confirm that partner profits soared in 2020.
The sharpest increases were among the AmLaw 50, with net income increasing 13% on average, according to the Wells Fargo Private Bank Legal Specialty Group. Partner profits grew 11, the group found in its survey of more than 130 law firms, including 64 AmLaw 100 firms.
The bulk of the boost to partner profits “is coming from the deep decline in expenses,” Borgal Shunk said. “The math just works out that the percentage increases on say, $2 million, are much greater than on revenue over $1 billion.”
“Don’t get me wrong,” she said, “firms also had good years, with business picking up in both cyclical and countercyclical practices—a trend I expect to continue in 2021.”
Zaldivar said he believed 2021 will be “an equally solid year” for the firm. Equity partner profits, however, probably won’t rise at the same rate they did this year, he and Michael Davison, the firm’s London-based deputy CEO, said.
The pandemic has made it tougher to see what a “new normal” ultimately will look like, Zaldivar said. “We know we’ll need to keep our options open.”
—With assistance from Meghan Tribe.