McGuireWoods office in Washington, D.C. Photo: Diego M. Radzinschi/ALM

In early March, around the time when the second U.S. death stemming from the novel coronavirus was announced in Washington state, the McGuireWoods executive team gathered to discuss what the pandemic would mean for the economy and, by extension, the firm.

The worst-case scenario, the team decided, was a 30% decrease in revenue through the third quarter of 2020, driven by softening demand and a liquidity crisis that would lengthen the turnaround time for client payments. More positive projections were informed by the consensus among many economists predicting a "V" shaped recovery: a sharp decline followed by a quick, intense rebound.

Today, managing partner Tracy Walker is no more certain about the contours of an economic recovery, and the firm has since instituted relatively mild cost-cutting measures. It has heavily cut down on discretionary spending and held back a portion of the smaller fraction of partner distributions it doles out in April—the majority is dispersed in January.

"In our view, our equity partners have enjoyed the benefit of great years we had in 2018 and 2019," Walker said. "To me, it was a no-brainer that the owners of this business have to take care of our people."

Last year, the firm saw a 4.5% increase in gross revenue, from $817 million to $854 million. Revenue per lawyer grew 7.1%, from $806,000 to $863,000. And profits per equity partner also saw growth of 8.4%, from $1.36 million to $1.47 million.

What Walker and the firm is watching closely now is demand: Sluggish demand in April will be an important factor in adjusting the firm's projections, as will the lengthening of collections. Some of the firm's practices, such as mass torts, have already seen a hit as clients turn away from discretionary litigation.

While Walker said he is prepared to institute broader cuts to other attorneys and staff, should the recession prove more stubborn, he does not anticipate introducing those austerity measures now. In fact, the firm's first quarter of 2020 outperformed the first quarter of 2019, and he anticipates that pre-crisis matters will drive revenue for the next couple months.

For now, the firm's private equity team is still busy as clients hunt for bargain deals and opportunities in a down market. The financial services team also remains strong. And, not surprisingly, the firm's labor and employment practice has stayed busy as businesses grapple with the implications of mass closures and layoffs.

"I am confident that when we come out of this lawyers will be more in-demand than ever, but the question now is bridging that gap," Walker said.

Walker said the firm's conservative spending and technological advancement in years past have put it in a good position to weather the storm. He said the firm is less reliant on rate growth to pay for overhead—it raised rates by 4% last year—and has benefited from a strong performance in 2019.

Walker said last year's growth was broad-based, though the litigation team had a particularly good year. The firm's most high-profile victory was a $500 million judgment against North Korea on behalf of the family of Otto Warmbier, who died shortly after being released from a North Korean prison in 2017.

Early last year, firm litigator George Terwilliger III successfully defended former Republican congressman Aaron Schock in what the Chicago Tribune dubbed as "virtually unheard of in a high-profile corruption case."

McGuireWoods achieved its financial growth last year even as lawyer head count contracted slightly. Total lawyer head count was down 2.5% in 2019, from 1,014 to 989. The firm added three equity partners, ending the year with 201. And the nonequity partnership shrank by 7%, from 225 to 209, leading to a nearly 5% drop in nonequity compensation. The firm's profit margins subsequently grew two percentage points to 35%.

The firm picked up several key laterals. In January last year, it picked up a life science litigation trio from Baker & Hostetler in New York. And in May, the firm brought on Stephen Foresta, a former litigation leader at Orrick, Herrington & Sutcliffe.

Walker said McGuireWoods is more conservative and careful than its peer firms when it comes to lateral hiring, and that's an asset in uncertain times.

"We've taken a conservative approach to growth and expenses that has served us well and will serve us in this crisis," Walker said.

Correction: A previous version of this article said the firm was holding back a small portion of partner draws, rather than distributions. The error has been corrected.

Read More

Partner Profits Spike at McGuireWoods as Equity Partnership Grows

Pay Cuts, Layoffs, and More: How Law Firms Are Managing the Pandemic