Reed Smith saw gains in both revenue and partner profits in 2017, as the number of lawyers at the firm and the size of the equity partnership remained nearly unchanged.

Revenue at the Pittsburgh-based international firm grew by 4.1 percent last year, reaching $1.12 billion. Revenue per lawyer was up 3.1 percent, to $722,000.

Profits per equity partner grew by 6 percent, reaching $1.18 million, as net income increased by 7.1 percent to $350.6 million.

Global managing partner Alexander Thomas said it was “a really strong year,” with Reed Smith ”hitting on all cylinders” across practices.

“When I think about 2017, it was a balanced contribution across the firm,” Thomas said. “I mean that in terms of practice, industry and geography.”

The firm began to see investments from the last four to five years deliver in 2017, he said, citing the sector-oriented strategy that the firm has built around the financial services industry, life sciences and health, energy and natural resources, shipping, and entertainment and media. Thomas said the life sciences and health group had a particularly good year across litigation, regulatory work and disputes. Energy and natural resources performed well too, he said.

As for specific matters that contributed to the year's performance, Thomas noted the firm's work on behalf of HCR ManorCare Inc. In that case, the U.S. Justice Department abandoned its fraud case against the nursing home operator after a judge struck a key witness.

“The government, on the eve of summary judgment, well after discovery, walked away from its case,” Thomas said. “The DOJ doesn't do that lightly. It was just one of these extraordinary results for a client under a statute that is a very powerful statute.”

Focus on Efficiency

Reed Smith managed to grow its revenue without major head count growth.

The firm kicked off 2017 with the addition of 50 lawyers from King & Wood Mallesons in London, Paris and Germany, but head count for the full year increased only slightly, by 14 lawyers, or less than 1 percent, to 1,550.

The firm moved the needle a bit more in London, where head count grew from 190 lawyers to 198, and the London-based partnership expanded from 112 partners to 119.

Across the firm, the equity partnership tier grew by 1 percent, to 298, while the nonequity partner ranks shrank by 2.1 percent to 373 partners. Leverage was identical year-to-year, at 4.21.

The modest growth last year followed a 2016 in which Reed Smith shrank total lawyer head count by 5.1 percent. That included layoffs in early 2016, and Thomas said the firm has continued to rigorously monitor head count against demand.

“We've sort of kept up what we've gotten used to … making sure we're clear about our performance expectations,” Thomas said.

In terms of lateral hiring, he said, “we were very specific and very honest with ourselves about what talent we needed to add to the law firm.” Any additions the firm did make, he said, were tailored to specific sectors.

Thomas noted that the firm built a group focused on helping clients navigate federal energy regulations, hiring former Federal Energy Regulatory Commission commissioner Colette Honorable in Washington, D.C., along with partner Regina Speed-Bost, who chaired the energy group at Schiff Hardin, and counsel Debra Ann Palmer, also from Schiff Hardin.

Reed Smith raised rates in some practices, Thomas said. But a greater priority was placed on realization, he said, noting that it improved by a couple percentage points, though declining to provide specific numbers.

“A dozen people on our client value teams are focused on helping our client teams work as efficiently as possible,” he said. “Improvements in efficiency translate almost directly into improvements in realization.”

Thomas said the firm's client value team, which includes lawyers and nonlawyers, has grown from just two or three people to more than a dozen since he became global managing partner. Part of that group's work involves matter management for fixed-fee engagements, he said, which is particularly common in transactional work.

Throughout 2016 and 2017, Reed Smith has been reducing square feet per attorney in its offices, Thomas said. In 2018, the firm will continue to remodel, he said, with the Chicago office among the targets for renovation.

Rose Walker contributed to this report.