FIRMS TOP $2 MILLION IN PROFITS-PER-PARTNER
When John Simpson and Thomas Thacher opened their law firm in 1884 at 9 Pine St. in Lower Manhattan — one block from the New York Stock Exchange — the Texas legal market was not part of their growth strategy.
Now, 136 years later, Simpson Thacher & Bartlett is one of the richest and most influential law firms in corporate America, and Texas is a big part of its plans going forward. The firm has 55 corporate lawyers who occupy the 53rd and 54th floors of the JPMorgan Chase Tower in downtown Houston and plans to add 10 more lawyers this fall.
Simpson Thacher, which counts Tesla, Microsoft and Alibaba as clients, reported $57 million in income in Texas last year. The firm’s profits per partner in Houston exceeded a whopping $4.4 million in 2019.
Simpson Thacher is the definition of an elite corporate law firm. So are Kirkland & Ellis, Latham & Watkins, Weil Gotshal, Gibson Dunn, Vinson & Elkins, Sidley and Akin Gump. Wealthy corporate clients with massive problems or bet-the-company matters seek out those law firms. Price is no obstacle.
“No question, there are law firms in Texas that their mere name means excellence,” said Robert Rabalais, managing partner of Simpson Thacher’s Houston operation. “These law firms are home to lawyers who have the best legal expertise and the most experience doing the most complex transactions or litigation.”
Industry analysts said there are three critical economic data points in determining a corporate law firm’s elite status: profits-perequity partner (PEP) of $2.5 million or more; revenues-per-lawyer (RPL) of $1.2 million or higher; and profits-per-lawyer (PPL) of $450,000 or more.
In Texas, a dozen law firms meet all three criteria.
“There are so many ways to judge or measure law firms — best brands, most lawyers, highest revenues, most offices — but PEP, RPL and PPL are statistics that can accurately, or at least more accurately, determine the true success of a law firm,” said law firm consultant Kent Zimmermann.
“The law firms that meet those three criteria are going to attract the best lawyers, and the best lawyers attract the best clients and the best clients pay the most money,” he said.
Only three of the Texas Lawbook Elite firms — Akin Gump, Susman Godfrey and Vinson & Elkins — have roots in Texas. Five of the law firms — Kirkland & Ellis, Latham & Watkins, Paul Hastings, Simpson Thacher and Willkie Farr — only opened offices in Texas during the past decade.
“The key to successfully opening and growing in Texas is developing and articulating a specific strategy and plan,” said Kirkland partner Andy Calder, who opened the firm’s office in Houston in 2014. “It takes a considerable investment for a new firm moving into a new market to move the needle. And the legal business is much like most other industries in that it helps to have some good luck.”
Kirkland’s profits-per-partner last year in Texas? A record-breaking $5.2 million. Not far behind Kirkland was Gibson Dunn, which reported $3.8 million in profitsper-partner.
For a longer version of this article, visit TexasLawbook.net.