Best indicator of a firm's financial health Forum

[objctnyrhnr]

Maybe an even simpler answer to OP’s question is that, now and over the next few weeks, this crisis is going to have the effect of stratifying biglaw firms in a way that’ll make them easier to differentiate.

Right now, you obviously have a group of market firms. But it’s conceivable that some portion of those firms will cut costs here. Those firms will likely have the mark going forward of being in a slightly lower “tier” than standard market firms, even if they remove the measures in the next couple months.

If a market firm can weather this without any measures, it’s a very very good/safe/powerful/profitable firm IMO.

But maybe what I stated above was so obvious it didn’t need to be stated.

[abcdoremi]

Maybe an even simpler answer to OP’s question is that, now and over the next few weeks, this crisis is going to have the effect of stratifying biglaw firms in a way that’ll make them easier to differentiate.

Right now, you obviously have a group of market firms. But it’s conceivable that some portion of those firms will cut costs here. Those firms will likely have the mark going forward of being in a slightly lower “tier” than standard market firms, even if they remove the measures in the next couple months.

If a market firm can weather this without any measures, it’s a very very good/safe/powerful/profitable firm IMO.

But maybe what I stated above was so obvious it didn’t need to be stated.

I think this is too simplistic--a litigation firm like Kasowitz likely won't have to cut costs while a transactional heavy firm like Simpson may. But this wouldn't mean Kasowitz is in better health than Simpson. This global pandemic is a black swan event, and I think temporary measures won't tell us much. If more permanent changes occur (mass partner defections or layoffs) then that would tell us something and stratify, but I think the most differentiation we will get from this crisis is which firms are heavily transactional and which are heavily lit focused.

[FedFan123]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

[abcdoremi]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

https://en.wikipedia.org/wiki/List_of_l ... er_partner
Note that these are two years out of date, and so could be out of wack by like +-5%. If you are really interested in a specific firms find numbers released in 2020 and do Profits/Revenue.

[Anonymous User]

May be a stupid question but can we assume that the firms that are making pay cuts to its associates, etc. at this time are not in the best financial health?

[Sackboy]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

[LBJ's Hair]

May be a stupid question but can we assume that the firms that are making pay cuts to its associates, etc. at this time are not in the best financial health?

Not sure if serious, but yes lol. Salary cuts are absolute last resort -- terrible for morale, firm reputation, even client relationships. Everyone who works at those firms is updating his or her resume, and the partners know it.

[FedFan123]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Thanks - milbank’s is actually quite a bit higher than many the 10 Firms in front of it. Anyone know why Weil’s is so much lower than all the rest of the top 14 firms? Do we think these 2018 numbers mostly hold true today?

[objctnyrhnr]

May be a stupid question but can we assume that the firms that are making pay cuts to its associates, etc. at this time are not in the best financial health?

Not sure if serious, but yes lol. Salary cuts are absolute last resort -- terrible for morale, firm reputation, even client relationships. Everyone who works at those firms is updating his or her resume, and the partners know it.

Agreed this is what I said before. So insofar as market firms make cuts, my opinion is that with some outliers they’ll basically be able to be seen as two tiers (or two sub tiers of the same tier), even when the firms that cut return to market pay.

[LBJ's Hair]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

[Anonymous User]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Former Milbank associate. Institutional clients or deals where lawyers get paid from drawn funds (project finance) + very high, white shoe rates + low overhead due to small physical footprint = $$$

Never really heard partners tripping about collection or bill slashing. I was never once told something was fee sensitive or to be careful what I bill. They had clients that didn’t care my rate as a third year was more than a 7th year at my current firm.

[Anonymous User]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Gibson has historically been known for lit but it's not a lit firm in the sense that Quinn is. Gibson's revenue in the recent past (10 years) has been fairly evenly split between lit and corporate. Firms with high margins are, by and large, firms that are extremely good at managing costs (or that are extremely stingy, depending on your perspective). Wachtell is different, I think, in that it focuses almost exclusively on M&A and that its billing model for deals makes it a very high margin practice.

[LBJ's Hair]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Gibson has historically been known for lit but it's not a lit firm in the sense that Quinn is. Gibson's revenue in the recent past (10 years) has been fairly evenly split between lit and corporate. Firms with high margins are, by and large, firms that are extremely good at managing costs (or that are extremely stingy, depending on your perspective). Wachtell is different, I think, in that it focuses almost exclusively on M&A and that its billing model for deals makes it a very high margin practice.

Quinn is 100% litigation revenue, Gibson is 50%, and basically every other large law firm is overwhelmingly corporate. Like, 80-20. Corporate practices are traditionally viewed as much more profitable than litigation; it's interesting that the first two firms on the list are the two most lit-centric large law firms.

[Anonymous User]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Former Milbank associate. Institutional clients or deals where lawyers get paid from drawn funds (project finance) + very high, white shoe rates + low overhead due to small physical footprint = $$$

Never really heard partners tripping about collection or bill slashing. I was never once told something was fee sensitive or to be careful what I bill. They had clients that didn’t care my rate as a third year was more than a 7th year at my current firm.

I can second this. I'm at Milbank and our 4th year associate billing rate is more than some partners at other big law firms. At least in my practice group our clients never flinch because the other side is footing the bill.

[Sackboy]

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

I don't think this should be that surprising. High profit margins can be obtained due to focusing on only expanding the most profitable work (Quinn w/ high-profile litigation), on maintaining few offices (WLRK + Cahill), on success with fee arrangements (WLRK), dominating a niche of the market (WLRK + Cahill + Kirkland), on spending little on in-firm tech, etc. In some instances, maintaining a high profit margin could come at the cost of profits per partner, so it's not always the best thing for firm-wide financials to push purely for profit margins. Some firms have likely opened offices or have done work in markets with much lower profit margins with the idea that it helps them sell their higher profit margin work in a holistic package or that the market has high projected future growth.

When you throw all of that together, I don't really struggle to see how any of these firms are in the top 10 profit margins.The only "surprising" one would be Barnes & Thornburg, but they could dominate the high end of mid law in terms of fees, be well managed, have far lower office costs due to being located in mostly tertiary cities, and just have much lower labor costs due to not being lockstep.

[aishling27]

I think this is too simplistic--a litigation firm like Kasowitz likely won't have to cut costs while a transactional heavy firm like Simpson may. But this wouldn't mean Kasowitz is in better health than Simpson. This global pandemic is a black swan event, and I think temporary measures won't tell us much. If more permanent changes occur (mass partner defections or layoffs) then that would tell us something and stratify, but I think the most differentiation we will get from this crisis is which firms are heavily transactional and which are heavily lit focused.

Not sure where the view that litigation is not impacted is coming from. In the near term, it is considerably more impacted than corporate -- courts are closed, trials are delayed, depositions are postponed -- work is likely down 50%. Corporate work will probably be impacted over a longer duration, but both are impacted.

[2013]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Former Milbank associate. Institutional clients or deals where lawyers get paid from drawn funds (project finance) + very high, white shoe rates + low overhead due to small physical footprint = $$$

Never really heard partners tripping about collection or bill slashing. I was never once told something was fee sensitive or to be careful what I bill. They had clients that didn’t care my rate as a third year was more than a 7th year at my current firm.

I can second this. I'm at Milbank and our 4th year associate billing rate is more than some partners at other big law firms. At least in my practice group our clients never flinch because the other side is footing the bill.

That’s insane. Does Milbank bill 4th years at $900+?

[ghostoftraynor]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Former Milbank associate. Institutional clients or deals where lawyers get paid from drawn funds (project finance) + very high, white shoe rates + low overhead due to small physical footprint = $$$

Never really heard partners tripping about collection or bill slashing. I was never once told something was fee sensitive or to be careful what I bill. They had clients that didn’t care my rate as a third year was more than a 7th year at my current firm.

I can second this. I'm at Milbank and our 4th year associate billing rate is more than some partners at other big law firms. At least in my practice group our clients never flinch because the other side is footing the bill.

That’s insane. Does Milbank bill 4th years at $900+?

No idea about Milbank, but at top firms (not really talking about vault), $900+ for fourth years is common.

[Anonymous User]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Former Milbank associate. Institutional clients or deals where lawyers get paid from drawn funds (project finance) + very high, white shoe rates + low overhead due to small physical footprint = $$$

Never really heard partners tripping about collection or bill slashing. I was never once told something was fee sensitive or to be careful what I bill. They had clients that didn’t care my rate as a third year was more than a 7th year at my current firm.

I can second this. I'm at Milbank and our 4th year associate billing rate is more than some partners at other big law firms. At least in my practice group our clients never flinch because the other side is footing the bill.

That’s insane. Does Milbank bill 4th years at $900+?

Former Milbank anon. Not sure what it is these days, but their hourly rate ramps up real quick. First and second years are “reasonable”, then it shoots up and is actually pretty compressed for 3rd+ years until partner. There’s the $995 ceiling for associates (which I assume is true for most firms) so the actual difference in rate between a 5th year and 8th year is small.

[Anonymous User]

Where can we find profit margin on a firm by firm basis? Anyone know milbank’s figure?

Here you go.

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

Former Milbank associate. Institutional clients or deals where lawyers get paid from drawn funds (project finance) + very high, white shoe rates + low overhead due to small physical footprint = $$$

Never really heard partners tripping about collection or bill slashing. I was never once told something was fee sensitive or to be careful what I bill. They had clients that didn’t care my rate as a third year was more than a 7th year at my current firm.

I can second this. I'm at Milbank and our 4th year associate billing rate is more than some partners at other big law firms. At least in my practice group our clients never flinch because the other side is footing the bill.

That’s insane. Does Milbank bill 4th years at $900+?

Former Milbank anon. Not sure what it is these days, but their hourly rate ramps up real quick. First and second years are “reasonable”, then it shoots up and is actually pretty compressed for 3rd+ years until partner. There’s the $995 ceiling for associates (which I assume is true for most firms) so the actual difference in rate between a 5th year and 8th year is small.

Current Milbanker. Yes, 4th years are billed out at $900+. And the $995 ceiling for associates no longer exists.

[LBJ's Hair]

Interesting. First two (Quinn and Gibson) are *lit* firms. Then WLRK, no surprise it's near the top. I have no explanation for Cahill, Willkie, Milbank though. Not that they're "bad" firms or anything, just don't know what mechanism could make them near tops in margins. Could be just noise I guess

I don't think this should be that surprising. High profit margins can be obtained due to focusing on only expanding the most profitable work (Quinn w/ high-profile litigation), on maintaining few offices (WLRK + Cahill), on success with fee arrangements (WLRK), dominating a niche of the market (WLRK + Cahill + Kirkland), on spending little on in-firm tech, etc. In some instances, maintaining a high profit margin could come at the cost of profits per partner, so it's not always the best thing for firm-wide financials to push purely for profit margins. Some firms have likely opened offices or have done work in markets with much lower profit margins with the idea that it helps them sell their higher profit margin work in a holistic package or that the market has high projected future growth.

When you throw all of that together, I don't really struggle to see how any of these firms are in the top 10 profit margins.The only "surprising" one would be Barnes & Thornburg, but they could dominate the high end of mid law in terms of fees, be well managed, have far lower office costs due to being located in mostly tertiary cities, and just have much lower labor costs due to not being lockstep.

I think this a great explanation for like, how a firm can have high margins, but it doesn't explain why these these ten law firms, rather than another ten, are at the top of the margin list.

Like, you could write exactly what you wrote about Boies, WLRK + Cravath, WLRK + Weil + WSGR, etc?

Not trying to play gotcha, just think it's hard to come up with a satisfying explanation for why some law firms have great margins and others don't, outside-looking-in. (Other than "WLRK is WLRK.")

[Sackboy]

I think this a great explanation for like, how a firm can have high margins, but it doesn't explain why these these ten law firms, rather than another ten, are at the top of the margin list.

Like, you could write exactly what you wrote about Boies, WLRK + Cravath, WLRK + Weil + WSGR, etc?

Not trying to play gotcha, just think it's hard to come up with a satisfying explanation for why some law firms have great margins and others don't, outside-looking-in. (Other than "WLRK is WLRK.")

We're 100% on the same page.

I was only providing an explanation for how any of these firms could have landed in the top 10. It's impossible to know why specifically any of these firms did and others didn't without opening up the books of every single firm, which we just don't have access to on TLS. My post was more to calm the speculation on why X or Y firm is in the top 10 and what that ultimately means about that firm being the bestest firm in the country by pointing out that there really are an incredibly high number of factors that go into this equation.

[LBJ's Hair]

I think this a great explanation for like, how a firm can have high margins, but it doesn't explain why these these ten law firms, rather than another ten, are at the top of the margin list.

Like, you could write exactly what you wrote about Boies, WLRK + Cravath, WLRK + Weil + WSGR, etc?

Not trying to play gotcha, just think it's hard to come up with a satisfying explanation for why some law firms have great margins and others don't, outside-looking-in. (Other than "WLRK is WLRK.")

We're 100% on the same page.

I was only providing an explanation for how any of these firms could have landed in the top 10. It's impossible to know why specifically any of these firms did and others didn't without opening up the books of every single firm, which we just don't have access to on TLS. My post was more to calm the speculation on why X or Y firm is in the top 10 and what that ultimately means about that firm being the bestest firm in the country by pointing out that there really are an incredibly high number of factors that go into this equation.

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