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June 25, 2007

NEW ENGLAND’S OTHER GREEN MONSTER

If the truth be known, I’ve been a card-carrying member of the Red Sox Nation since I first started playing Little League baseball in Plainville, Massachusetts in the mid-1950s.  My Dad took me to Fenway for the first time in 1958, where (if memory serves me correctly) I saw Bill Monbouquette pitch his first game in the Majors and Frank Malzone hit a grand slam into the net above the Green Monster as the Sox beat Al Kaline and the Tigers.   And, when it comes to looking at how LawBall is played in the New England division of “Lawville,” there indeed is another “Green Monster” in Boston - 10 out of the division’s 11 firms are Boston-based; and, the top financial operating performances in the division in 2006 were turned in by Boston- based firms. 

The Boston-based firms are:  Bingham McCutchen; Ropes & Gray; Goodwin Procter; Edwards Angell Palmer & Dodge; Fish & Richardson; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo; Foley Hoag; Choate, Hall & Stewart; Brown Rudnick Berlack Israels; and Goulston & Storrs.  The only non-Boston-based firm in the New England division is Day, Berry & Howard, which is based in Hartford, Connecticut.  Below is a table that contains the 2006 financial operating performance metrics for each of the firms in the New England division, as well as a table that shows the firms’ relative ranking (1 – 11) within each performance metric.  By clicking on the tables you can open a larger version.  I’ve also attached the tables as a *.pdf document in the right-hand margin under the category “Posting Attachments” as “Legal Industry New England Division Metrics 2006.”

Several observations:

  • Goodwin Procter and Ropes & Gray were the clear financial operating performance leaders in the New England division in 2006.  Goodwin Procter ranked 1st in return on equity (ROE or profit per partner), it’s only 1st place ranking in any individual performance metric.  But, it also ranked 2nd in margin (it played good “defense”), which when combined with its 4th place ranking in asset turnover (revenue per lawyer – it played “offense” nearly as well) resulted in a 2nd place ranking in return on assets (ROA or profit per lawyer); and, its lowest ranking was 6th in costs per lawyer.  Ropes & Gray ranked 3rd in ROE, but had 1st place rankings in profit, asset turnover, and ROA.  However, it ranked 8th in costs per lawyer and 9th in leverage (while Goodwin Procter played better “special teams” with its leverage ranking 4th).  When summing up the firms’ rankings in all of the metric categories, Goodwin Procter used its consistent relative ranking in all categories to rank 1st with a score of 24, while Ropes & Gray ranked 2nd with a score of 29 (those totals are not included in the above table for space reasons but are included for all of the firms in the *.pdf attachment).  Bingham McCutchen ranked 3rd with a score of 40.  When looking at the firms’ rankings only in the key metric categories of margin, asset turnover, ROA, leverage, and ROE, Goodwin Procter again ranked 1st with a score of 13, while Ropes & Gray was 2nd with a score of 18.   Choate, Hall & Stewart parlayed its advantages in margin and ROA to ease past Bingham McCutchen into a 3rd place ranking with a score of 21 to Bingham’s 25 (again those scores are included only in the *.pdf attachment).
  • Those 4 firms (Goodwin Procter; Ropes & Gray; Bingham McCutchen; and, Choate, Hall & Stewart) each had a ROE that exceeded both $1 million and the ROE of the aggregate AmLaw 200.
  • Three (3) of those 4 firms, plus Goulston & Storrs, achieved an ROA that exceeded the ROA achieved by the aggregate AmLaw 200.  Bingham McCutchen's 11th place ranking (last) in margin hurt it, and the firm finished 8th in ROA.
  • Five (5) of the New England division’s 11 firms achieved a financial leverage higher than the aggregate AmLaw 200 leverage; and, leader Bingham McCutchen’s 5.9783 leverage, when multiplied times its ROA of $204,242 (8th place ranking), catapulted it to a ROE of $1,221,014 – good for a 2nd place ranking in ROE.

The *.pdf attachment also has easy to view individual tables that reflect the firms’ individual rankings in margin, asset turnover, ROA, financial leverage, and ROE versus both the New England division in the aggregate and the AmLaw 200 in the aggregate.

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Comments

I'm waiting for you do a post on "The Next Big Train Wreck," about the law firm most likely to fail. I suppose you'd have to worry about litigation, although truth is an absolute defense to libel.

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