K&L Gates has flat year but expects to rebound
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K&L Gates had a relatively flat year when it came to gross revenue and revenue per lawyer, growing each by less than 1 percent.
The Pittsburgh firm saw a 4.3 percent decrease in profits per partner in what chairman Peter J. Kalis said was a year of expenses growing at a faster rate than revenue.
K&L Gates' gross revenue increased 0.6 percent from $1.055 billion in 2010 to $1.061 billion in 2011. The firm's revenue per lawyer (RPL) grew by nearly 0.7 percent, from just under $599,000 in 2010 to nearly $603,000 in 2011. Profits per equity partner (PPP) dropped from about $930,000 in 2010 to around $890,000 last year, according to preliminary reports from the firm.
The law firm's headcount remained almost unchanged, decreasing by one lawyer to 1,762 in 2011.
"While a solid performance, it was a sobering reminder of the power of the marketplace," Mr. Kalis said.
Mergers and acquisitions, capital markets and real estate were more subdued last year, Mr. Kalis said, adding that his firm has more exposure in those areas than some other firms.
With such minute changes in revenues per lawyer and gross revenue, Mr. Kalis said, it would be splitting hairs to guess what caused the change. With offices in smaller venues such as Spokane, Wash., or Harrisburg, the firm will always have lower revenue per lawyer, he said.
As for the dip in the firm's profits per equity partner, Mr. Kalis said that, for the first time in memory, the firm saw expenses outpace revenue gains. He said the firm is resolved in 2012 to attack that problem from both angles.
They need to challenge every expense item and negotiate with their vendors, he said.
K&L Gates made some investments last year, opening offices in Brussels, Belgium; Doha, Qatar; Sao Paulo, Brazil; and Charleston, S.C. It also added a Milan, Italy, office.
Closer to home, K&L Gates has handled Marcellus Shale natural gas deals as well as litigation and regulatory work related to the booming energy space. It worked on the $1.7 billion deal to sell the Phillips Cos. to Exxon.
On the litigation front, the law firm represented one of five banks in settlement discussions with the Department of Justice and other governmental agencies over residential mortgage loan default servicing practices. Those talks resulted in a $25 billion settlement.
K&L Gates was also able to secure in mid-2011 the role of U.S. litigation counsel for Alcoa after finalizing an alternative fee arrangement.
The firm's expansion abroad has also proven beneficial, Mr. Kalis said. K&L Gates is starting to get more pan-European work involving more than one of its offices on the continent. The firm now has more than 300 attorneys across Europe.
Mr. Kalis said 2012 will be a challenging year for firms if the current economic conditions continue. He said his firm will look to overcome those challenges by focusing on that inter-office work, with a particular focus on cross-border matters. Mr. Kalis said K&L Gates' strength in regulatory work and intellectual property litigation, areas not affected by deal flow, will help it weather the year.