Paul, Weiss, Rifkind, Wharton & Garrison grew revenue 11.2% to cross the $1.5 billion mark, upped its profits per partner over 14% to nearly $5.4 million and saw its net income grow almost 19% to $856 million in a strong year for the firm that saw not just financial challenges for many businesses, but social and political upheaval that went to the core of how Paul Weiss wants to define itself.
Unlike many firms, Paul Weiss did not institute cost cutting measures such as staff layoffs, equity partner demotions or furloughs. And that may have impacted the firm’s profitability, which saw a close alignment between revenue growth (11.2%) and profits per equity partner (14.3%), while many other firms saw much larger PEP growth, some of which was facilitated by cost cutting and increased reliance on non-equity partners.
“When the pandemic first hit, our community was fragile,” Paul Weiss chairman Brad Karp said in an interview. “Everyone was laboring under stress and anxiety. The first thing I did was assure everyone that we would take care of them. Regardless of the financial consequences, there would be no cuts and no one would lose their job. We wanted everyone to look back on this and be proud of the empathy we showed each other.”
Clearly those measures didn’t hit the bottom line too hard. The firm, which does not have a nonequity partner tier, saw its revenue per lawyer jump almost in line with revenue, increasing 11.6% to just over $1.5 million.
“During the pandemic, as we had seen years earlier during the financial crisis, there was a dramatic flight to quality from clients,” he said. “As the problems our clients faced became more complex, consequential and existential, they increasingly turned to the most sophisticated lawyers at the most sophisticated law firms in the world to craft solutions.”
That was reflected in the firm’s profit margin, which, already high at 52, moved up three points to 55.
Karp attributed the growth to high activity in several practice areas, including but not exclusive to restructuring and mergers and acquisitions work.
“Our transactional and restructuring practices were turbo-charged,” he said. “And M&A, oddly enough, even after things seized up in the second quarter, was very busy. I believe we announced $150 billion in M&A work.”
There were a few notable deals the firm worked on to get to that point. Paul Weiss represented Chevron in its $5 billion acquisition of Noble Energy in July of 2020, Teladoc in its $18.5 billion buy of fellow telehealth company Livongo and Roark Capital in its $11.3 billion acquisition of Dunkin Brands in October of 2020.
Karp also said the firm’s fund and PE work was strong and its capital markets and financing practices were also quite busy.
The firm’s head count dipped slightly, moving from 1,020 attorneys to 1,017 (-0.3%) while it added seven total partners, moving from 153 to 160.
Part of that increase was from some high-profile laterals the firm brought in, including former Boies Schiller Flexner executive committee members Karen Dunn and Bill Isaacson, former White & Case M&A partner Charles Pesant and former Simpson Thacher & Bartlett tax partner Robert Holo.
Karp noted that while head count overall remained relatively static, the firm has added about 40% to its partner head count since the Great Recession while many firms have deequitized partners over that span.
“While many of our peers have carefully managed their equity partnership, either freezing or even reducing its size, since 2008 and building up a large nonequity partner contingent, we have adopted a very different strategy. We are investing in our core practices and adding star talent to our ranks opportunistically. We have never been more confident about the firm’s future prospects,” he said.
Karp said the racial justice protests over the summer and through the year were of particular importance to the firm given its history and the presence of prominent Black attorneys like Ted Wells, Loretta Lynch and Jeh Johnson.
“We are the firm that worked with Thurgood Marshall on Brown v. Board of Education, and we have always led the country in matters of racial justice and diversity and inclusion. It was one of the reasons I came to Paul Weiss nearly 40 years ago,” he said.
Karp said that just after the murder of George Floyd by members of the Minneapolis police department, the firm had a town hall that featured Wells, Lynch and Johnson discussing the complex and difficult issue of racial justice.
“You could have heard a pin drop while they were talking about how the firm gets it and encourages dialogue,” Karp said. “It was probably the most moving and most important discussion I have been involved with in my 38 years at the firm.”
The firm did have some social issues to deal with itself. In October, a group of law students delivered a list of 600 signatures from law school students from NYU, Harvard, Yale and others saying they would not consider working at the firm unless it stopped representing longtime client ExxonMobil.
Overall, Karp said the firm is “tighter and more cohesive” than it has been at any point since he has been there, and credited the public interest work the firm is so heavily involved in as giving common cause to stay together even while working remotely.
“People really pulled together from day one and made a difference, not just for our commercial clients, but for our most vulnerable communities,” he said. “I have never been more proud of our firm and its place in our society.”