Shearman & Sterling offices in Washington, D.C. Photo: Diego M. Radzinschi/ALM
Shearman & Sterling's financials improved in 2018, with the firm reporting higher revenue and profits compared to a year earlier.
Gross revenue in FY2018 totaled $955.5 million, compared to $917.5 million in FY2017—an increase of 4.1 percent. The firm reported net income of $335.3 million, compared to $328.3 million in FY2017—an increase of 2.1 percent.
Profits per equity partner were up 5 percent, to $2.4 million from $2.3 million the year before as the firm shed some equity partners. The firm said it had 138 equity partners in 2018, compared with 142 in FY2017. It also reported 65 nonequity partners, up from 42, and a total lawyer head count of 882—up from 853 a year earlier.
Despite reports in recent years that the firm has boosted the number of its nonequity partners in an effort to reverse declining profits, Shearman senior partner and former global managing partner David Beveridge said the firm has definitely not abandoned the equity partner model characteristic of Wall Street law firms.
"We're still predominantly an equity partner firm. We have more equity partners than all other law firms that are global," he said.
Although the firm finished FY2018 with a 2.8 percent drop in equity partners, Beveridge maintains that in some cases the de-equitization of partners is part of a normal process by which partners prepare for retirement, rather than being a reflection of a given attorney's performance.
"There are always some partners who are de-equitized as they get to the end of their career and move out, but that isn't a big part of what we've been doing. Every year, we have five to 10 scheduled retirements from the firm. People move into a nonequity role and move out. That's just how a firm runs," Beveridge stated.
He also said the firm's 16 new income partners helped drive growth over the past year.
With a focus on sustaining improvement in the firm's financials, Shearman has just brought aboard a new chief financial officer, Jim Burke, who was previously global senior vice president of finance for Young and Rubicam.
Beveridge said that over the past fiscal year the firm has pursued a strategy of maximizing growth in the U.S. and the U.K., largely through its core practice areas of mergers and acquisitions, private equity and leveraged finance. Other areas that surged in FY2018 include project finance, capital markets and litigation.
A number of high-value, headline-making deals helped drive up revenue. Transactional highlights include advising CVS Health Corp. on its $40 billion bond offering in March 2018—the third-largest corporate bond sale ever made—to obtain partial financing for its acquisition of Aetna. It also advised PagSeguro Digital on its $2.6 billion IPO in January 2018. The latter deal was the biggest IPO of a Brazilian business on the New York Stock Exchange since 2013, and the largest IPO of any kind on the NYSE since Snap Inc.'s IPO in March 2017.
Shearman's role in global M&A matters included advising LyondellBasell Industries on the antitrust aspects of its $2.25 billion merger with A. Schulman; advising Boston Scientific Corp. on its recommended $4.2 billion offer to acquire BTG; and serving as counsel to Liberty Global on the $22.7 billion sale of its European assets to Vodafone.
Going It Alone
Beveridge also said Shearman & Sterling has no interest in engaging in merger talks with another law firm. It plans to continue to hire talented lawyers on a selective and strategic basis, with a view to adding bench strength in key markets such as New York, London, and the two Texas cities, Austin and Houston, where the firm opened offices last year, he said.
Beveridge describes the Texas office openings as part of a strategy to develop a U.S.-based oil and gas practice to complement the firm's longstanding presence in the energy markets of the Middle East, Asia and Latin America.
"Houston's the energy capital of the world and it's a natural location for us. Our clients in Latin America, Asia, and the Middle East are now using us in Houston," he said.
Notwithstanding the law firm's recent inroads in Texas and its plans to open an office in South Korea soon, Beveridge said that additional geographical expansion is not a core part of Shearman's strategy at present. The South Korea office will be relatively small, designed to serve a few clients in Korea, he said.