Legal News

Let the Sun Shine! Firms Cautiously Optimistic Heading Into 2010

By Ashby Jones

Fourth quarter Intel earnings were big. So were JP Morgan’s. The stock market, while seriously slagging Friday, hit 15-month highs on Thursday.

It all bodes pretty well for BigLaw. But how well? Will 2010 be the year starting salaries across the board zoom back to $160k? The year bonuses return to 2007 levels? The year that banishes the word “deferral” to the dustbin?

It’s not likely the recovery will be that strong. Still, the country’s largest law firms, after an awful 2009, are seeing some signs of an uptick in litigation, Wall Street deal-making and regulatory work. That’s the word Friday from the WSJ’s Nathan Koppel.

Here’s one thing that’s not in dispute: 2009 was awful for firms. A survey by Citi Private Bank’s Law Firm Group of 50 of the country’s 100 largest firms, as measured by revenue, found last year’s revenue at the firms was down an average 4% from 2008. These same firms, according to Citi, averaged 7% revenue growth in 2008, and 12% growth from 2001 to 2007. And the profit picture would have been worse had firms not aggressively cut expenses, by an average of 7% in 2009, says Dan DiPietro, the Citi’s Law Firm Group advisory head.

And 2010? Folks seem cautiously optimistic.

“We are now beginning to see traditional financial-institution clients return to the market,” says Elliott Portnoy, chairman of Sonnenschein Nath & Rosenthal, which last year generated about $500 million in revenue, roughly the same as 2008. The firm’s average partner earnings declined in 2009, although it hasn’t yet determined the precise decrease.

Orrick, Herrington & Sutcliffe saw increased fourth-quarter deal flow in China and Silicon Valley, among other sectors, says Chairman Ralph Baxter. “We don’t see signs of the market making a U-turn and going backward again, so we are projecting better results” for 2010, Mr. Baxter says.

Still, we’re not back to 2007 quite yet, says DiPietro. And corporations, lawyers say, remain in a strong bargaining position when it comes to negotiating favorable billing rates with firms. “Pricing pressures will continue this year,” says Seth Zachary, chairman of Paul Hastings. “Clients will continue to focus on getting top value even as the economy improves.”

Full post as published by Law Blog - WSJ.com on January 15, 2010 (boomark / email).