Paul Hastings Sees Profits Rise, Despite Tightening Market

Profits were up at Paul Hastings last year, even as an economic downturn slowed work and prompted major law firms to cut costs.

“We expect to exceed our record 2021 financial results,” Paul Hastings chairman Frank Lopez, who became the law firm’s leader in October, said in an interview.

The firm, like several of its competitors, saw revenue and profits soar amid a spike in demand for legal services in 2021. Paul Hastings reported gross revenue of $1.57 billion and profits per equity partner of $4.7 million during fiscal 2021.

Several major firms are expected to report profit dips for 2022, as corporate transactions ticked back to pre-pandemic levels. Profits per equity partner at large law firms fell by nearly 4% overall last year, according to a February Wells Fargo & Co. report.

Lopez, who replaced longtime leader Seth Zachary, declined to provide specific profit and revenue numbers for 2022. He said Paul Hastings “gained market share” last year by making lateral hires across a variety of practices, including restructuring and infrastructure.

“Our diverse portfolio of practices enabled us to enjoy demand in 2022 that was on par with 2021, despite economic headwinds,” he said.
Other firms have also managed to weather the storm.

Vinson & Elkins’ chair Keith Fullenweider and vice-chair Jim Fox told Bloomberg Law in November that the firm’s financial performance was “trending positive” for the year. Baker Botts recently said it beat its 2021 gross revenue figures by 4%, according to the American Lawyer.

Paul Hastings has been on a lateral recruitment tear since Lopez was tapped to replace Zachary. Last year, the firm brought on more than 30 new partners across its offices in California, London, New York, and Washington, according to Leopard Solutions data.

‘Entrepreneurial Spirit’

Lopez officially took over as leader of the firm in October, after a year as chair-elect, alongside managing partner Sherrese Smith.

The pair are “practice builders ourselves,” Lopez said. They’re “taking that energy and entrepreneurial spirit that we brought to our own practices and using it as a vision for continuing to build the firm,” he said.

Lopez joined Paul Hastings in 2019, after 15 years at Proskauer Rose, as co-leader of the firm’s securities and capital markets group. The practice’s revenue jumped 85% over the last three years, according to Paul Hastings.

Smith, who previously was general counsel of Washington Post Digital and chief counsel to former Federal Communications Commission chairman Julius Genachowski, joined Paul Hastings in 2013. She is credited with maintaining the firm’s relationship with Live Nation, a major client, and was vice chair of Paul Hastings’ data privacy and cybersecurity practice before taking on her firm leadership role.

Paul Hastings scored a big addition last year, bringing on a 43-lawyer restructuring team from Stroock & Stroock & Lavan.

“Frank and the leadership at Paul Hastings had long saw the wisdom of taking a finance practice, like theirs, and matching up with an even bigger restructuring practice than they already had,” said Jayme Goldstein, one of the architects of the Stroock group, along with Kristopher Hansen. “We like to call it completing the circle.”

Hansen, who now co-chairs the firm’s financial restructuring group is leading Paul Hastings’ representation of the creditors committee in the bankruptcy of crypto company FTX. The firm beat out multiple competitors vying for the role in December.

Stroock is reportedly in merger talks with several Big Law firms, including Squire Patton Boggs, McGuireWoods, and Steptoe & Johnson. Paul Hastings also picked up lawyers from boutique firm Buckley, which merged with Orrick, Herrington & Sutcliffe late last month.

“A tried-and-true strategy many firms follow with success is to hire strong teams from firms with uncertain futures,” said law firm management consultant Kent Zimmermann.

More recently, the firm has added partners from rivals Kirkland & Ellis; Latham & Watkins; and Weil, Gotshal & Manges.

Mergers on Mind

Paul Hastings’ lateral strategy isn’t concentrated on a singular practice, according to Lopez. The firm picked up laterals in 12 of its 20 practice groups last year, he said.

“We have very specific strategies as a firm and in every practice area,” Lopez said. “If profiles arise that fit those strategies, then we’re going to be opportunistic.”

Eduardo Gallardo, the global co-chair of Gibson, Dunn & Crutcher’s mergers and acquisitions group, was among the notable hires. He who now co-chairs the M&A group at Paul Hastings.

While at Gibson Dunn, he advised AT&T on its $1.4 billion sale of Warner Bros Games’ Playdemic to Electronic Arts and represented Barnes & Noble Education in its successful defense against an unsolicited takeover bid by Bay Capital Finance in 2019.

Paul Hastings has set its sights on becoming a destination firm in the lucrative mergers and acquisition market, Gallardo said.

“There’s a lot of complacency in the M&A space right now,” Gallardo said. “Some of the historical players are losing ground to new entrants. I think there is an incredible opportunity for a firm like Paul Hastings to build, grow, and consolidate their positions.”

The firm still has some work to do to catch up with Big Law’s elite dealmakers.

Paul Hastings advised on $23.7 billion worth of deals in 2022. That’s a fraction of the $424 billion in deals handled by Wall Street’s Simpson Thacher & Bartlett, which topped the Bloomberg league tables.