Big mergers and significant group moves played a major role in the financial performance of Pennsylvania's large law firms in 2018.

Several firms reached new milestones, while others struggled to keep up with their peers, in what turned out to be a record-breaking year for the legal industry.

As 2019 comes to a close, it's easy to see these trends of consolidation and stratification have continued. How that will shake out for these firms' performance this year remains to be seen in the beginning of 2020.

Morgan Lewis & Bockius

Surpassing the $2 billion barrier, Morgan Lewis grew revenue by 4.7%, to $2.095 billion in fiscal 2018. Revenue per lawyer (RPL) was up 1%, at $1.04 million for the fiscal year, which ended Sept. 30, 2018.

The firm's head count was up 3.7%, at 2,015 lawyers, and the 717-person equity partnership brought in profits per equity partner (PEP) of $1.39 million.

Among the firm's most significant additions in 2018 was a group of more than 50 IP lawyers and staff from McDermott Will & Emery, including 16 partners. 

Reed Smith

The Pittsburgh-born international firm saw revenue and profit growth accelerate slightly in 2018. Revenue was up 5%, reaching $1.175 billion, and RPL increased by 5.4% to $761,000. 

The firm saw PEP increase on lower equity partner head count, rising 7% to $1.26 million, as net income grew by 2.6%, reaching $359.7 million. 

Global managing partner Alexander Thomas said Reed Smith benefited from strong demand in 2018. "We had a very high level of sophisticated work coming into the law firm, and our lawyers were working very hard," he said.

While the equity partner tier decreased in size by 4.4%, to 285 partners, the nonequity partner tier also shrank, by 3.2%, to 361.

Firmwide, however, total lawyer head count barely changed, at 1,544. 

Thomas said he and the firm "run a tight ship from a cost perspective," but one expense that grew was associate salaries.

K&L Gates

Another Pittsburgh-born firm with a global presence, K&L Gates, saw revenue grow slightly in 2018, but still lost ground among the Am Law 100, dropping from No. 32 to No. 37 this year in the revenue ranking.

Gross revenue was up 1.8% in 2018, at $1.01 billion, returning to the billions after a major revenue step back in 2017. 

RPL grew by 4%, to $574,000, and PEP, at $990,000, was up 6.2% from 2017. Head count shrank by 37 lawyers, to 1,756, with 180 equity partners and 632 nonequity partners. 

While the revenue and profits showed improvement year-to-year, 2018 was still the second-lowest gross revenue year for the firm since 2009. 

Dechert

In what firm CEO Henry Nassau called a "milestone year," Dechert passed the $1 billion gross revenue marker in 2018.

Gross revenue grew by 4.5%, to $1.02 billion in 2018, up from $977.9 million in 2017. Revenue per lawyer increased by 3.2%, to $1.09 million.

Profits grew a little more slowly, with net income up 3.5% to $447.67 million, and PEP up 1.7%, to $2.73 million. Dechert remains the most profitable of the Philadelphia-born Am Law 200 firms.

Nassau said the firm's hours were up 6% in 2018, while rates increased in line with industry averages. Geographically, he said, it was a particularly good year for Dechert's Philadelphia, New York and London offices.

Nassau said 2018 revenue growth can be attributed in part to the firm's lateral hiring strategy, but he noted those additions would have had a greater effect on the numbers if not for the delay in collections typical in a lateral move.

Fox Rothschild

In a year of four mergers, including the largest combination in its history, Fox Rothschild managed to grow revenue per lawyer and profits per equity partner.

The Philadelphia-based Am Law 100 firm saw gross revenue increase by 12.8% from fiscal 2017 to fiscal 2018, to $507.5 million. RPL was up 6.6%, to $645,000, as the firm saw its total head count increase by 5.8%, to 787.

Fox Rothschild's fiscal year ends March 31. 

The firm also grew net income by 20.8% and PEP increased by 3% to $695,000, even as the equity partner tier added more than 30 partners for a total of 224, an increase of 17.3%.

On the heels of those combinations, the firm's total head count increased by 5.8%, to 787 lawyers. 

Despite double-digit revenue growth, the firm only moved up one spot in the Am Law 100, coming in at No. 74. That ranking was based on a gross revenue estimate provided two weeks before the firm's official year-end, but even with $507.5 million in gross revenue, Fox Rothschild would have the same position in the Am Law 100.

Duane Morris

Philadelphia-based Duane Morris saw its PEP surpass the $1 million mark for the first time in 2018, putting it in an exclusive club of Pennsylvania-founded firms, of which Dechert, Morgan Lewis and Reed Smith were the only other members this year.

"We didn't back into that number by de-equitizing partners. We did it our way, just by being disciplined," firm chairman Matthew Taylor said.

To reach that milestone, Duane Morris brought in gross revenue of $491.6 million, an increase of 5.5%, and RPL of $732,000, an increase of 3.7%. 

PEP rolled in at $1.01 million, showing growth of 4.8% from the year before, as net income grew by 8.8% to $127.45 million.

Meanwhile, the firm grew it's equity partner tier by 3.3%, to 126 lawyers, and its total head count increased by 1.7% to 671.

Cozen O'Connor

In what CEO Michael Heller called "an investment year," Cozen O'Connor continued to grow revenue, while profit growth slowed.

Gross revenue at the Philadelphia-based Am Law 100 firm increased 13.7%, reaching $473 million. RPL grew 4.4%, to $711,000.

PEP showed more incremental gains, rising 2.6% to $828,000 as the equity partnership grew. Net income was up 6.2%, to $152.8 million.

The firm continued to grow its head count, adding a net 54 lawyers throughout the year, to reach 665. The equity partnership grew by seven partners to 185, while the nonequity partner tier grew by 9.1%, to 155 lawyers.

Cozen O'Connor's lateral additions in 2018 included 14 commercial litigators in Philadelphia who made a move from Drinker Biddle & Reath in April, bringing with them a practice focused on life insurance and annuities.

Still, "it was a slower year for group acquisitions," Heller said, compared to a 2017 in which the firm added about 100 lateral hires.

Drinker Biddle & Reath

Gross revenue dipped at Drinker Biddle & Reath in 2018, on the heels of some noteworthy defections, and profits came in just short of the year before.

The firm saw gross revenue decline by 2.6%, to $449.7 million, while RPL grew on account of the firm's lower head count. RPL reached $848,000, marking an increase of 3.2% from 2017.

The firm's net income declined 8%, to $166.4 million, and PEP were down 1.1% as a result, to $916,000.

The firm's total head count declined by 5.7% to 530 lawyers. Equity partner head count was down 6.7% to 182 partners. The firm's nonequity partner tier grew by four lawyers in 2018, to a total of 66. 

Lawyer departures included the 14 litigators who went to Cozen O'Connor, as well as another group of class action partners who left for Akin Gump Strauss Hauer & Feld.

Blank Rome

In a year of leadership transitions, Blank Rome saw modest gains in revenue and profits for 2018.

The firm increased gross revenue by 2.7% over 2017, reaching $443 million, as RPL increased by 3.5%, reaching $804,000.

Profits per equity partner, at $931,000 in 2018, were up 1.6% from a year earlier, as the equity partnership grew slightly. Net income, meanwhile, increased by 3.9%, to $138.1 million in 2018.

"We view that as a solid year," said managing partner Grant Palmer, who officially took on that title Jan. 1. "We billed more hours with less lawyers, and so we view it as a very strong year."

The firm's total head count decreased by four, or less than 1%, to 551 in 2018. The total partnership stayed steady in number, at 306. But the equity partner tier, at 148 partners, grew by three lawyers, while the nonequity tier shrank by three, to 157 lawyers.

Ballard Spahr

After completing the largest merger in its history, Ballard Spahr saw significant gross revenue growth in 2018, while PEP took a slight hit. 

The Philadelphia-based firm saw gross revenue increase by 17.4%, to $414.88 million in 2018, up from $353.34 million in 2017. RPL was roughly flat, increasing by 0.6%, to $689,000.

PEP was down 2.8% from 2017 to 2018, dipping to $620,000. But net income was up 16.7%, to $162.98 million.

Ballard Spahr chairman Mark Stewart said the 2018 PEP was still the second best the firm has seen. 

The firm made its merger with Minneapolis-based Lindquist & Vennum official at the start of 2018. Just a couple months before, in fall 2017, it had acquired media law boutique Levine Sullivan Koch & Schulz.

Integrating all those lawyers was "the biggest thing we've ever undertaken," Stewart said.

The firm's total head count, on a full-time equivalent basis, went from 516 in 2017 to 602 last year. Its equity partnership grew by 20.1%, to 263 partners. Ballard Spahr doesn't have a nonequity tier.

Pepper Hamilton

Though it shrank in head count and revenue for the third year in a row, Pepper Hamilton saw per-lawyer productivity improve in 2018. 

The firm saw gross revenue decline by 2.2%, to $334.36 million. But on a lower head count, its RPL increased by 3.8%, to $789,000, which managing partner Thomas Cole said is a record high for the firm.

PEP, at $830,000, showed a decline of 0.8%, as net income decreased by 5.8%, to $95.45 million.

The 115-person equity partnership was smaller by six lawyers in 2018, compared to 2017. And the nonequity tier shrank by 6%, to 78 lawyers. Overall head count also declined, by 5.8%, from 450 in 2017 to 424 in 2018.

"We're a little different firm than we were a few years back," Cole said. "Our revenue and head count is much better matched now."

Buchanan Ingersoll & Rooney

At Pittsburgh-based Buchanan Ingersoll & Rooney, gross revenue grew by 1% in 2018, to $289.87 million. RPL, however, was up 5.7%, reaching $719,000, as the firm saw head count decline.

The firm saw PEP improve by 6.6%, at $746,000, as the equity partner tier shrank by seven lawyers, to 93. Net income was down slightly, decreasing by just under 1%, to $69 million.

Total head count was down 4.5%, to 403 lawyers.

While Buchanan does not comment on its financial performance, CEO Joseph Dougherty, at the start of his second term this year, said that 2018 was "a very strong year," and the firm's "best ever."

"The economy is good, our lawyers are busy, we had a very good year last year," he said.

Saul Ewing Arnstein & Lehr

Saul Ewing's biggest-ever merger appeared to be paying off in 2018, as PRL and PEP beat firm leadership's expectations.

The firm saw its gross revenue increase by 3.6%, to $227.3 million. But RPL climbed by 6.5% to $623,000, recovering from a dip in 2017 when head count grew by nearly 50%.

PEP increased by 8.5% to $602,000 in 2018, also surpassing 2016 levels after a slide in 2017. Net income, at $70.9 million, showed a 9.5% increase.

Saul Ewing announced in September 2017 that it had merged with Arnstein & Lehr, adding more than 100 lawyers in Chicago and Florida to the Philadelphia-based Am Law 200 firm.

With a head count of 365, Saul Ewing had 10 fewer lawyers in 2018 than in 2017, showing a decrease of 2.7%. Much of the contraction came in the nonequity partner tier, which shrank by six lawyers, to 84 nonequity partners.

According to managing partner Barry Levin, Saul Ewing beat its budget by 18% in 2018. "It was a great year," he said.

Marshall Dennehey Warner Coleman & Goggin

Insurance-defense firm Marshall Dennehey saw gross revenue increase by 4.6% in 2018, reaching $219.7 million. RPL improved by 2.2%, reaching $424,000.

The firm saw net income increase by 5.5% to $94.9 million, while PEP increased by 6.3% on lower equity partner head count, reaching $357,000.

The firm's total head count increased by 2.4% to 518 lawyers, while the equity partner tier lost  two people, coming in at 266 total partners. Marshall Dennehey has no nonequity tier.

Eckert Seamans Cherin & Mellott

Regional firm Eckert Seamans saw gross revenue increase by 5.8%, to $155.59 million in 2018. RPL was down slightly, by less than 1%, at $444,000.

The firm saw net income increase by 8.4%, to $44.6 million, while PEP improved by 6.1%, to $331,000. 

Total lawyer head count was up 6.7% at the Pittsburgh-based firm, reaching 351 total lawyers, while the equity tier grew by three, to 135 partners. The nonequity tier grew as well, by four lawyers, to 108. 

Lizzy McLellan can be contacted at 215-557-2493 or [email protected]. Follow her on Twitter @LizzyMcLell.