Mark Kelly of Vinson & Elkins.

Vinson & Elkins posted record results for the third straight year, even as revenue per lawyer (RPL) showed only slight growth, while a smaller partnership enjoyed solid growth in profits per equity partner (PEP).

But Mark Kelly, a partner in Houston who chairs the firm, said he was overall very pleased with the results, because the firm's revenue continued a three-year climb.

“We did well,” Kelly said.

In 2018, V&E's gross revenue hit $747.2 million, up 2.7 percent compared with $727.5 million in 2017, and RPL came in at $1.202 million, an increase of 1.6 percent when compared with $1.183 million the prior year.

Net income declined, at $315.2 million in 2018, a 3.7 percent drop compared with $327.3 million in 2017. But PEP grew 6.6 percent to $2.517 million in 2018, compared with $2.361 million the year before, as the firm had 10.1 percent fewer equity partners.

While V&E did post record revenues for three years running, the 2018 year-over-year growth was not as impressive as in 2017, when revenue increased by 11.3 percent, or in 2016, when revenue came in 4.2 percent higher than the year before.

Kelly said a number of practices logged very strong performance in 2018, but the firm made a significant investment in the private equity and alternative lending space, hiring partners with that focus.

He said the firm's private equity work is in the energy sector, such as representing TPG Capital, a shareholder in Nexeo, in global chemical company Univar of Nexeo for about $2 billion. While the firm is known for its energy-related private equity work, Kelly said, it is also growing the practice in other sectors including infrastructure, transportation and logistics, technology, consulting services and real estate.

Private equity wasn't the only hot practice area in 2018, Kelly said. The firm worked on a number of major M&A projects, both public and private, including its representation of Energy Transfer Partners in its merger with a wholly-owned subsidiary of Energy Transfer Equity. Another was advising RSP Permian when it was acquired by Concho for about $9.5 billion.

Other busy practices, according to Kelly, include finance, international arbitration (which is based in London), appellate, regulatory and restructuring and distressed assets. The firm's litigators are working on a number of lawsuits for upstream energy companies, he said, and defending companies from “shareholder activist” litigation.

“It was quite a year,” Kelly said.

On the downside, Kelly said the energy capital markets practice, particularly with initial public offerings, was “not robust” because of commodity prices. But the firm handled an IPO for New Fortress Energy in early 2019, which could bode well for the practice this year.

Playing the Long Game

V&E focused on expanding in London, New York and Washington, D.C., in 2019, Kelly said, noting that the firm hired lawyers in practices including private equity, antitrust, finance, funds formation and others.

On the expense side, V&E was the first big Texas firm to announce last summer that it would match the Big Law salary increase that pushed starting salaries to $190,000, plus a $5,000 bonus, for first-year lawyers.

The London and Washington, D.C., offices relocated to new space, he said. The firm also renovated its Dallas office and is planning moves in New York and Houston, he said.

In terms of head count, V&E grew slightly, coming in at 622 lawyers in 2018 on a full-time equivalent basis, up 1.1 percent from 615 in 2017. But the firm's equity partner count was 125, a 10.1 percent decline from 139 the prior year. Kelly said the firm has fewer equity partners mostly because of retirements, although some of those lawyers stayed as counsel.

Kelly said 2019 is shaping up well, with a number of deals in the hopper for private equity, infrastructure and technology clients. While energy capital markets has been slow, the firm's REIT (real estate investment trust) practice—which has lawyers concentrated in Richmond, Washington, D.C., and New York—has been picking up.

Kelly said the the firm's partners have “no appetite today” to be a merger candidate, and the firm plans to continue lateral growth in 2019 through the way it usually does it—by hiring  “onesies and twosies.”

But long-range growth is also in V&E's sights, he said. The firm expecting a large class of 130 summer associates this year.

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