Why are profits at Cravath consistently lower than peer firms? Forum

[Anonymous User]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

There are a number of reasons it should be anon, like if I work at one of the mentioned firms and am talking crap about it. And you still haven't given a reason why they aren't peers. I hope you're better at your day job lmao

Quality and consistency of lawyering, for one thing. Brand strength in the financial capital of the world (NYC), for another thing. Attractiveness to top law students at top law schools. Etc. money isn’t everything. Is Williams & Connolly a peer to Dechert?

I don’t think we need to turn this into another “K&E vs. the world” thread.

I’m pretty good at my day job (or else I’d simply lateral to K&E/Latham like everyone else…)

Your reason for going anon doesn’t make sense unless your username is tied to your IRL identity AND you’ve disclosed in your post history that you work at K&E/Latham, but go off I guess.

Lol there is so much nonsense in this post - it's hard to distinguish whether it's flame or people actually think like this.

1. Who cares if someone uses anonymous feature. Does having a made up screen name give that person more legitimacy? I've always seen this as a lame distraction to throw out there when you know the substance of your argument is weak.

2. Every firm has shitty and good lawyers and most of the times it has nothing to do with their actual, individual ability, but instead has to do with how overworked they are. Being overworked = shitty lawyering. I've worked across plenty of overworked lawyers at all of these firms (including Wachtell, in fact, Wachtell is pretty notorious for their shitty lawyering). Point being they all produce shitty work when they don't have time to focus on the job. I've also worked across lawyers at V50 that produce quality work equal to the associates at V5 when they have time to work on it. The truth is, our job just isn't that hard and pretty much everyone smart enough to get into a top law school and end up at a top firm can adequately do the job.

3. This isn't 1985 anymore - L&W and K&E have brand strength on par with the other firms mentioned here among the finance world. First of all, no one outside of legal gives a shit. They look at us like PwC vs. KPMG. You may have a personal preference, but no one gives a shit as long as the job gets done because there's no real discernable difference. Most people in finance prefer to work with the firm they've worked most with in the past. Also, I don't think anyone would argue that working at Goldman is more impressive than working at KKR. The world has changed and private equity work is hot - which K&E and L&W dominate.

4. Attractiveness to law students is probably the most laughable of this one. More than half of them leave the firm they started at by the time they become of any value. So, you're comparing law firms by the opinion of associates that won't be there for a meaningful time and won't do anything of consequence/ value while they're at there. I also am not even sure law students watch the vault rankings as closely as the posters on this board do, and most of us graduated a while ago considering no one really goes to this board anymore.

[Moneytrees]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

There are a number of reasons it should be anon, like if I work at one of the mentioned firms and am talking crap about it. And you still haven't given a reason why they aren't peers. I hope you're better at your day job lmao

Quality and consistency of lawyering, for one thing. Brand strength in the financial capital of the world (NYC), for another thing. Attractiveness to top law students at top law schools. Etc. money isn’t everything. Is Williams & Connolly a peer to Dechert?

I don’t think we need to turn this into another “K&E vs. the world” thread.

I’m pretty good at my day job (or else I’d simply lateral to K&E/Latham like everyone else…)

Your reason for going anon doesn’t make sense unless your username is tied to your IRL identity AND you’ve disclosed in your post history that you work at K&E/Latham, but go off I guess.

Lol there is so much nonsense in this post - it's hard to distinguish whether it's flame or people actually think like this.

1. Who cares if someone uses anonymous feature. Does having a made up screen name give that person more legitimacy? I've always seen this as a lame distraction to throw out there when you know the substance of your argument is weak.

2. Every firm has shitty and good lawyers and most of the times it has nothing to do with their actual, individual ability, but instead has to do with how overworked they are. Being overworked = shitty lawyering. I've worked across plenty of overworked lawyers at all of these firms (including Wachtell, in fact, Wachtell is pretty notorious for their shitty lawyering). Point being they all produce shitty work when they don't have time to focus on the job. I've also worked across lawyers at V50 that produce quality work equal to the associates at V5 when they have time to work on it. The truth is, our job just isn't that hard and pretty much everyone smart enough to get into a top law school and end up at a top firm can adequately do the job.

3. This isn't 1985 anymore - L&W and K&E have brand strength on par with the other firms mentioned here among the finance world. First of all, no one outside of legal gives a shit. They look at us like PwC vs. KPMG. You may have a personal preference, but no one gives a shit as long as the job gets done because there's no real discernable difference. Most people in finance prefer to work with the firm they've worked most with in the past. Also, I don't think anyone would argue that working at Goldman is more impressive than working at KKR. The world has changed and private equity work is hot - which K&E and L&W dominate.

4. Attractiveness to law students is probably the most laughable of this one. More than half of them leave the firm they started at by the time they become of any value. So, you're comparing law firms by the opinion of associates that won't be there for a meaningful time and won't do anything of consequence/ value while they're at there. I also am not even sure law students watch the vault rankings as closely as the posters on this board do, and most of us graduated a while ago considering no one really goes to this board anymore.

Yeah, the notion that Cravath has a superior brand to firms like K&E is just laughable in this day and age. I live and work in NYC, so yes, I acknowledge that in New York, Cravath is still viewed as the top dog by many (along with Wachtell). But in virtually any other major market, it is likely that Kirkland and Latham are not only peers to Cravath, but more well known.

[Anonymous User]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

There are a number of reasons it should be anon, like if I work at one of the mentioned firms and am talking crap about it. And you still haven't given a reason why they aren't peers. I hope you're better at your day job lmao

Quality and consistency of lawyering, for one thing. Brand strength in the financial capital of the world (NYC), for another thing. Attractiveness to top law students at top law schools. Etc. money isn’t everything. Is Williams & Connolly a peer to Dechert?

I don’t think we need to turn this into another “K&E vs. the world” thread.

I’m pretty good at my day job (or else I’d simply lateral to K&E/Latham like everyone else…)

Your reason for going anon doesn’t make sense unless your username is tied to your IRL identity AND you’ve disclosed in your post history that you work at K&E/Latham, but go off I guess.

Lol there is so much nonsense in this post - it's hard to distinguish whether it's flame or people actually think like this.

1. Who cares if someone uses anonymous feature. Does having a made up screen name give that person more legitimacy? I've always seen this as a lame distraction to throw out there when you know the substance of your argument is weak.

2. Every firm has shitty and good lawyers and most of the times it has nothing to do with their actual, individual ability, but instead has to do with how overworked they are. Being overworked = shitty lawyering. I've worked across plenty of overworked lawyers at all of these firms (including Wachtell, in fact, Wachtell is pretty notorious for their shitty lawyering). Point being they all produce shitty work when they don't have time to focus on the job. I've also worked across lawyers at V50 that produce quality work equal to the associates at V5 when they have time to work on it. The truth is, our job just isn't that hard and pretty much everyone smart enough to get into a top law school and end up at a top firm can adequately do the job.

3. This isn't 1985 anymore - L&W and K&E have brand strength on par with the other firms mentioned here among the finance world. First of all, no one outside of legal gives a shit. They look at us like PwC vs. KPMG. You may have a personal preference, but no one gives a shit as long as the job gets done because there's no real discernable difference. Most people in finance prefer to work with the firm they've worked most with in the past. Also, I don't think anyone would argue that working at Goldman is more impressive than working at KKR. The world has changed and private equity work is hot - which K&E and L&W dominate.

4. Attractiveness to law students is probably the most laughable of this one. More than half of them leave the firm they started at by the time they become of any value. So, you're comparing law firms by the opinion of associates that won't be there for a meaningful time and won't do anything of consequence/ value while they're at there. I also am not even sure law students watch the vault rankings as closely as the posters on this board do, and most of us graduated a while ago considering no one really goes to this board anymore.

Yeah, the notion that Cravath has a superior brand to firms like K&E is just laughable in this day and age. I live and work in NYC, so yes, I acknowledge that in New York, Cravath is still viewed as the top dog by many (along with Wachtell). But in virtually any other major market, it is likely that Kirkland and Latham are not only peers to Cravath, but more well known.

Honestly, not really. Nobody considers Cravath as “the top dog.” Wachtell is the clear top dog, and cravath/s&c/dpw, and then the rest.

[Buglaw]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

There are a number of reasons it should be anon, like if I work at one of the mentioned firms and am talking crap about it. And you still haven't given a reason why they aren't peers. I hope you're better at your day job lmao

Quality and consistency of lawyering, for one thing. Brand strength in the financial capital of the world (NYC), for another thing. Attractiveness to top law students at top law schools. Etc. money isn’t everything. Is Williams & Connolly a peer to Dechert?

I don’t think we need to turn this into another “K&E vs. the world” thread.

I’m pretty good at my day job (or else I’d simply lateral to K&E/Latham like everyone else…)

Your reason for going anon doesn’t make sense unless your username is tied to your IRL identity AND you’ve disclosed in your post history that you work at K&E/Latham, but go off I guess.

Edit.

[parkslope]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

I’ve never heard of particularly generous perks at Cravath. Versus a place like S&C that is reputed to have good perks (though apparently not so good as to materially hurt PPEP).

Cravath has lower RPL (revenue per lawyer) versus some of its peers — $1.5M per lawyer at Cravath vs. >$1.8M at DPW/S&C/STB. When you combine that with a similar cost profile (about $800K per lawyer at Cravath and at DPW/S&C/STB) and similar leverage, it’s a recipe for lower profitability. Not sure why Cravath’s RPL is lower … I have a hard time believing that Cravath associates are billing less time than peer associates.

I agree with the anons who’ve pointed out this is still just a 1-2 year phenomenon right now. It’s too early to tell whether it’s a momentary blip or the beginning of some trend/actual divergence.

Cravath's RPL being lower than comparable firms is interesting. Is it because those firms take laterals so the average seniority of their associates is higher (and therefore higher average billing rates and revenues)?

[Anonymous User]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

I’ve never heard of particularly generous perks at Cravath. Versus a place like S&C that is reputed to have good perks (though apparently not so good as to materially hurt PPEP).

Cravath has lower RPL (revenue per lawyer) versus some of its peers — $1.5M per lawyer at Cravath vs. >$1.8M at DPW/S&C/STB. When you combine that with a similar cost profile (about $800K per lawyer at Cravath and at DPW/S&C/STB) and similar leverage, it’s a recipe for lower profitability. Not sure why Cravath’s RPL is lower … I have a hard time believing that Cravath associates are billing less time than peer associates.

I agree with the anons who’ve pointed out this is still just a 1-2 year phenomenon right now. It’s too early to tell whether it’s a momentary blip or the beginning of some trend/actual divergence.

Cravath's RPL being lower than comparable firms is interesting. Is it because those firms take laterals so the average seniority of their associates is higher (and therefore higher average billing rates and revenues)?

I'd suspect that Cravath's low RPL has to do with a bunch of senior partners not generating much revenue. It certainly isn't because the associates aren't working hard enough.

[enibs]

It’s pretty hard to sustain a lockstep system. Cravath has lost a bunch of rainmakers to firms that are willing to pay disproportionately for a book of business. That hurts Cravath’s profitability.

[Sackboy]

The obvious answers here are that Cravath (1), for whatever reason, maintains a Trusts & Estates practice, which has a few equity partners and certainly associates that likely isn't charging the same rates/getting the same collections as their corporate group, and (2) no/little lateral talent and its one-tier partnership has just created some economics that aren't as good as a firm that can be more efficient. Obviously, WLRK achieves the best financial results with a somewhat similar model, but their fee structure is completely different.