NIP/TUCK IN THE PACIFIC, LAWBALL STYLE
With an apology up front to FX Networks, I should’ve guessed that when LawBall’s meandering journey through Legalritaville landed in the Pacific division, the concentration of firms in California in general (87%) and LA in particular (42%) combined with the 2006 financial operating performance of the division and its firms would make me think of something related to entertainment. So, pardon the admittedly poor pun and play on words (caused by an extended 4th of July visit to Margaritaville), but the 2006 competitive financial operating performance in the Pacific division was “nip and tuck.”
The division includes the 5 states of Alaska, California, Hawaii, Oregon, and Washington and consists of 31 firms from the 2007 AmLaw 200 (2006 operating information) – 13 based in Los Angeles; 9 in San Francisco; 3 in Seattle; 2 in Palo Alto; and, 1 each in Irvine, Mountain View, Portland, and, San Diego. Unlike the East North Central division and the South Atlantic division, no one firm in the Pacific division played LawBall in 2006 so much better than the others that it created a significant degree of separation. Instead, when measured by the sum of each firm’s individual ranking in the key financial operating performance metrics of margin, asset turnover (revenue per lawyer), return on assets (ROA or profit per lawyer), financial leverage, and return on equity (ROE or profit per partner), the difference between the firm ranked 1st (Quinn Emanuel Urquhart Oliver & Hedges) and the firm ranked 5th (O’Melveny & Myers) was only 18 points. By comparison, the difference between the 1st and 2nd ranked firms in the East North Central division was 15 points, and in the South Atlantic division the difference between the 1st and 2nd ranked firms was 22 points.
The AmLaw 200 firms in the Pacific division’s 5 states are:
• California (27): Allen Matkins Leck Gamble Mallory & Natsis; Cooley Godward Kronish; Fenwick & West; Gibson, Dunn & Crutcher; Gordon & Rees; Heller Ehrman; Irell & Manella; Jeffer, Mangels, Butler & Marmaro; Knobbe, Martens, Olson & Bear; Latham & Watkins; Lewis Brisbois Bisgaard & Smith; Littler Mendelson; Loeb & Loeb; Luce, Forward, Hamilton & Scripps; Manatt, Phelps & Phillips; Morrison & Foerster; Munger, Tolles & Olson; O’Melveny & Myers; Orrick, Herrington & Sutcliff (whose terminated merger with Dewey Ballantine was discussed in a prior posting – Mergers, Metrics, and Other Musings); Paul Hastings, Janofsky & Walker; Pillsbury Winthrop Shaw Pittman; Quinn Emanuel Urquhart Oliver & Hedges; Sedgwick, Detert, Moran & Arnold; Sheppard, Mullin, Richter & Hampton; Thelen Reid & Priest; Townsend and Townsend and Crew; and, Wilson Sonsini Goodrich & Rosati.
• Oregon (1): Stoel Rives.
• Washington (3): Davis Wright Tremaine; Perkins Coie; and, Preston Gates & Ellis (which merged with Pittsburg-based Kirkpatrick & Lockhart Nicholson Graham on January 1, 2007 and now is part of Kirkpatrick & Lockhart Preston Gates Ellis LLP, a merger that also was discussed in Mergers, Metrics, and Other Musings).
As has become the case during our Legalritaville tour, the number of firms in the Pacific division and the resulting size of the analytic tables has led me to place my observations before the tables and to place the tables at the end of this posting - a table that contains the 2006 financial operating performance metrics for each of the firms in the Pacific division, as well as a table that shows the firms’ relative ranking (1 – 31) 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 Pacific Division Metrics 2006.”
- When comparing the Pacific division’s performance in the key metric categories versus that of the aggregate AmLaw 200, the division did very well.
- In each of the key financial operating performance metric categories, the division’s aggregate performance exceeded the aggregate performance achieved by the aggregate AmLaw 200: margin (38.41% to 37.65%), asset turnover ($760,716 to $720,808), ROA ($292,201 to $271,403), leverage (3.9257 to 3.7302), and ROE ($1,147,105 to $1,012,375).
- Seventeen (17) firms (55%) in the division achieved an asset turnover greater than did the aggregate AmLaw 200.
- Fourteen (14) firms (45%) in the division achieved an ROA that exceeded the ROA achieved by the aggregate AmLaw 200.
- Sixteen (16) firms (52%) in the division achieved an ROE greater than did the aggregate AmLaw 200. A 17th firm in the division achieved an ROE of $1,000,000.
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