Sidley Austin saw across-the-board gains in several financial metrics and head count last year, pushing it over the $2 billion gross revenue mark for the first time since the Am Law 100 firm was founded in Chicago in 1866.
Gross revenue jumped to $2.036 billion, up 5.6 percent from a year prior, while profits per equity partner rose 6 percent, to $2.26 million. Head count rose by 2 percent, to 1,873 lawyers, and revenue per lawyer increased by 3.5 percent, to $1.087 million.
Last year marked the seventh consecutive year that Sidley saw increases in both gross revenue and profits per partner in The American Lawyer’s annual Am Law 100 survey, making it one of the more consistent firms coming out of the recession a decade ago.
“It just is another good year, where we were kind of hitting on all fronts,” said Larry Barden, chair of Sidley’s management committee since 2014. “You never know when you start a year what to expect, but we were very pleased with the strong performance of the firm and we enter 2018 with a lot of momentum.”
As the broader legal industry grapples with flat to no growth in demand for billable hours, Sidley also grew that statistic by 3 percent with the firm’s lawyers billing on average about 1,560 hours.
Sidley’s new executive committee chair, New York-based partner Michael Schmidtberger, who took over last month for Carter Phillips, said the firm saw growth across its litigation and corporate practices. Those two groups comprise about 85 percent of the firm. The other 15 percent of Sidley’s lawyers are mostly focused on regulatory work, Schmidtberger said.
“The regulatory environment has continued to be challenging for clients and that has frankly helped us to continue to have steady and strong performance as those clients come to us with regulatory matters and litigation,” Schmidtberger said. “That was a key driver of our performance in 2017. This complexity is something that plays to our strength.”
Last year the firm picked up a seven-partner group of private equity lawyers from Kirkland & Ellis in Munich. That office opened in 2016 after Sidley hired a six-partner private equity team from Kirkland primarily in London.
Barden said that Sidley continued to invest in several practice groups, including cross-border M&A, energy, international arbitration, life sciences, private equity, project finance, restructuring and technology. The firm’s strategy, he said, has been to expand its capacity to serve global clients for all of their various legal needs.
“We’ve always been a diverse firm [that] had a global footprint, and we’ve been looking for ways to build out the breadth, depth and quality to build our practices,” Barden said. “And with that comes efficiency.”
Barden said Sidley continued to hold tight on costs from an effort embarked upon a year ago. But he said the firm has increased its budget for technology investments. Sidley is particularly focused on a knowledge management investment that came out of a committee formed last year, Schmidtberger said.
“It’s an area of major focus over the coming years,” Barden said of technology.
Sidley last year saw its nonequity partner ranks fall by nearly 8 percent, to 324. Barden said the decline was not a concerted effort to thin the ranks of nonequity partners, but attributed the decline to retirements, normal succession and lateral hiring from other firms. (Sidley sought to offset at least one of those retirements in January with a lateral hire in Chicago.)
Some of those lawyers have also had opportunities to move in-house, as corporate legal departments continue to bulk up. Schmidtberger said he expects law departments to continue to recruit in-house lawyers to handle routine matters, but he said they would struggle to do so “ad infinitum.”
“In-house departments aren’t going to carry that sort of broad expertise to confront those most important matters,” Schmidtberger said. “And if they start building into that, it will be very uneconomical, very fast. So I expect [in-house hiring] will slow over time and will frankly pressure the more midmarket firms and the less differentiated firms.”
Looking forward, Barden said he was “cautiously optimistic” that 2018 will be a strong year.
“[It's] hard to predict a full year these days, but we entered the year with a fair amount of business in the pipeline and a lot of momentum,” Barden said. “Tax reform would seem to favor the business environment. But there are political headwinds and other issues on the world scene that create uncertainty as you get further into the year.”