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A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
Shit, didn't realize Wachtell had a low PPP or non-equity partners.dead head wrote:A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
Leverage is mostly about the nature of the work and the clients. Premium matters are amenable to more leverage, cost-sensitive matters less. Financial matters are amenable to more leverage, other sorts of matters less. Litigation is amenable to more leverage, corporate is less amenable, and regulatory is a lot less amenable.dead head wrote:A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
I wasn't aware that the existence of outliers invalidates arguments. Would me posting a firm with low leverage that went belly-up invalidate your argument?zweitbester wrote:Shit, didn't realize Wachtell had a low PPP or non-equity partners.dead head wrote:A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
Your comments are interesting, but hogan lovells US has a lot of non-equity partners in addition to their designated of counsel. NALP indicates only 265 equity partners in the US, against 933 total US lawyers, giving 2.5:1 leverage.rayiner wrote:Compare a firm like Cleary (5.5:1) to Hogan Lovells US (1.1:1)
You weren't aware that a counter example invalidates arguments?I wasn't aware that the existence of outliers invalidates arguments. Would me posting a firm with low leverage that went belly-up invalidate your argument?
The equity/non-equity distinction isn't all that relevant here (associate experience/firm stability), unless we're talking about a firm like Kirkland where they're essentially senior associates on an "up or out" track. Even single tier partnerships these days vest most operational power in a management committee. Also, non-equity partners usually receive some substantial portion of their compensation based on firm profits. So equity versus non-equity ends up being an accounting device for compensation purposes. E.g. I don't think there is a functional difference between being a newly-minted non-equity partner at Hogan versus being a newly-minted equity partner at a single-tier firm with a big spread, like W&C or DLA. As for counsel, I tend to exclude them from the calculation because depending on context, they can function either as junior partners or senior associates.dead head wrote:I wasn't aware that the existence of outliers invalidates arguments. Would me posting a firm with low leverage that went belly-up invalidate your argument?zweitbester wrote:Shit, didn't realize Wachtell had a low PPP or non-equity partners.dead head wrote:A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
Your comments are interesting, but Hogan Lovells US has a lot of non-equity partners in addition to their designated of counsel. NALP indicates only 265 equity partners in the US, against 933 total US lawyers, giving 2.5:1 leverage.rayiner wrote:Compare a firm like Cleary (5.5:1) to Hogan Lovells US (1.1:1)
When almost 150 of Hogan's 400 US "partners" are non-equity, it doesn't make a lot of sense to use newly-minted partners are your basis of comparison. And in the historical context, of counsel are more like semi-retired partners, and not Kirkland 9th years.rayiner wrote: E.g. I don't think there is a functional difference between being a newly-minted non-equity partner at Hogan versus being a newly-minted equity partner at a single-tier firm with a big spread, like W&C or DLA. As for counsel, I tend to exclude them from the calculation because depending on context, they can function either as junior partners or senior associates.
I didn't know we were doing formal logic (or that I ever said anything about all anything). But since single counterexamples apparently invalidate these kind of general argument, let me point you in the direction of Paton Boggs, with its super low leverage. Your argument is invalidated. Glad we're all more aware now.zweitbester wrote:You weren't aware that a counter example invalidates arguments?
All a are b
All b are c
Therefore all a are c
Me: not all a are b
Argument invalidated
I'm glad I could make you aware now.
I didn't know we were doing formal logic (or that I ever said anything about all anything). But since single counterexamples apparently invalidate these kind of general argument, let me point you in the direction of Paton Boggs, with its super low leverage. Your argument is invalidated. Glad we're all more aware now.
Argument states that it's a benefit, not the end all of be all.It's a benefit for firm stability reasons moreso than the experience argument.
You state an either/or with no qualification as to "most" or "some," which would have saved your ass.dead head wrote:A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
Conversation with humans must be difficult for you.zweitbester wrote:
You state an either/or with no qualification as to "most" or "some," which would have saved your ass.
I'm glad I could provide this lesson to you.
Yet you're the one who hurled the first insult ITT. I actually do pretty well for myself on human interaction.dead head wrote:Conversation with humans must be difficult for you.zweitbester wrote:
You state an either/or with no qualification as to "most" or "some," which would have saved your ass.
I'm glad I could provide this lesson to you.
I'm not really keen to circle jerk with pretend know-it-alls about law firm economics. That aside, it's really irrelevant that their PPP "is low compared to what it could be," especially since your argument stated: "comparatively low PPP," which implies that the comparison is not to some hypothetical law firm, but to other law firms. Since we are talking comparatively in the latter respect, Wachtell has the highest PPP.Do you think the Wachtell could have higher PPP if they increased leverage? If so, their PPP is low compared to what it could be.
I haven't responded to this, but mostly because I don't have time. I think the conclusions are not correctly drawn because they're based on bad generalizations. To each their own, I guess. It's not worthwhile debating because there's no real way to prove who's right.rayiner wrote:Leverage is mostly about the nature of the work and the clients. Premium matters are amenable to more leverage, cost-sensitive matters less. Financial matters are amenable to more leverage, other sorts of matters less. Litigation is amenable to more leverage, corporate is less amenable, and regulatory is a lot less amenable.dead head wrote:A firm with lower apparent leverage either has a lot of non-equity partners or comparatively low PPP. Maybe their low PPP reflects priorities other than profit at any cost, with less profit-induced partner churn, but I'm not sure lower PPP is a great indicator of firm stability. Associate stability, maybe, but not firm stability.zweitbester wrote:It's a benefit for firm stability reasons moreso than the experience argument.
Compare a firm like Cleary (5.5:1) to Hogan Lovells US (1.1:1). Cleary is a lockstep firm with PPP a little under $3m. Hogan is not a lockstep firm, and has PPP a little over $1m. The dominant factor that drives those leverage ratios is the work. Cleary does large-scale defense work for NYC banks--matters the nature of which require, and for which clients will pay, to have 10 associates staffed on a matter with two partners and maybe one counsel. On the corporate side, there is less leverage, but still several associates per partner when taken across all the deal teams.
The kind of work Hogan does just doesn't lend itself to that model. There's not enough lower-level work in a regulatory matter to keep ten, or even several associates busy. Those matters tend to involve a couple of partners and one associate. Litigation will be more leveraged, but the kinds of litigation Hogan works on, say regulatory litigation, is much less document intensive and requires less associate manpower. Plus, it's more cost-sensitive and clients are more likely to want to see things like document review contracted-out.
PPP at a place like Hogan is lower, but partners also have a lot less leverage to demand a lot of money. It's not like a top FDA practitioner is going to lateral to Cravath and take $15 million in business with him. He doesn't bring in $15 million in business, because his matters don't lend themselves to requiring large teams of associates to handle. Plus, to the extent it's necessary, rainmakers can be compensated appropriately because the firm isn't lock-step. Cleary's compensation spread is 3:1, which means that a just-minted partner probably makes over $1m and a senior partner makes over $3m. The spread at Hogan over all partners is probably more like 10:1, with newly minted junior non-equity partners making ~$300k. And this isn't just a phenomenon for firms with two-tier partnerships. Williams and Connolly has a single-tier partnership with a high compensation spread.
In all, I don't think leverage or PPP have anything to do with firm stability. There are low-leverage, low-PPP firms that are very stable (e.g. W&C), high-leverage, high-PPP firms that are very stable (Cravath, etc), low-leverage, high-PPP firms that are stable (WLRK).
Thought a little more about this while taking a shit. I'm not sure what the answer to this is. My intuition is to say yes, but I do remember people saying that WLRK bills for deals differently than most other firms (as a percentage of deal value as opposed to hours billed), so I'm actually not 100% sure that WLRK would have a higher PPP if they increased leverage (unless the associates themselves were able to pull in more deals as a result, which is very rare).Do you think the Wachtell could have higher PPP if they increased leverage?
Massey Energy Company isn't a financial institution.Cleary: The firm's gross revenue rose 5.2 percent, to $1.19 billion. Its profits per partner increased 7.1 percent, to $2.876 million. While overall head count was up 2.8 percent, to 1,192, the firm added just one partner—an increase of 0.5 percent—to bring its total in that category to 194. Cleary's litigators were especially busy in 2013, helping to resolve a class action against client Massey Energy Company and defending the Russian Federation against claims asserted by former OJSC Yukos Oil Company majority shareholders seeking more than $100 billion in damages related to the expropriation of oil assets. On the transactional front, the firm ranked second in terms of the number of financial industry deals handled last year, according to Thomson Reuters legal advisory league tables. M&A highlights included the firm's representation of retailer Neiman Marcus Group Inc. on its $6 billion buyout by a consortium made up of Texas Pacific Group and Warburg Pincus and America Movil SAB de CV in its $22.7 billion acquisition of Koninklijke KPN NV.
I have to agree with this. It's really stupid not to include non-equity partners on the associate side of the coin for leverage purposes. Very relevant.When almost 150 of Hogan's 400 US "partners" are non-equity, it doesn't make a lot of sense to use newly-minted partners are your basis of comparison. And in the historical context, of counsel are more like semi-retired partners, and not Kirkland 9th years.
You don't think the tone of any of your comments was insulting, or is condescension not insulting in your view?zweitbester wrote:Yet you're the one who hurled the first insult ITT. I actually do pretty well for myself on human interaction.dead head wrote:Conversation with humans must be difficult for you.zweitbester wrote:
You state an either/or with no qualification as to "most" or "some," which would have saved your ass.
I'm glad I could provide this lesson to you.
Does Wachtell really have peer firms that they can really be compared to? And I suspect that even if Wachtell can't effectively add leverage by adding associates, they could add leverage by making equity harder to obtain and/or de-equitizing some partners. I suspect this would have a negligible affect on the business brought in, since business comes to them because of who they are, and not because of partner connections.zweitbester wrote:I'm not really keen to circle jerk with pretend know-it-alls about law firm economics. That aside, it's really irrelevant that their PPP "is low compared to what it could be," especially since your argument stated: "comparatively low PPP," which implies that the comparison is not to some hypothetical law firm, but to other law firms. Since we are talking comparatively in the latter respect, Wachtell has the highest PPP.Do you think the Wachtell could have higher PPP if they increased leverage? If so, their PPP is low compared to what it could be.
You're more than welcome to revise and/or retract your argument. I mean, you'll look like a moron in the process. But it's good to concede that you were wrong every once in a while and move on, than to be a little shit when someone calls you out.
This seems oddly similar to what I said.zweitbester wrote:That said, as far as my job security is concerned, I'd much rather be a low-leveraged firm than a high one.