Shearman & Sterling posted a gross revenue increase of 17.5% and saw its profits per equity partner soar over 58% in what was the firm’s best financial year on record.
As part of that 17.5% revenue growth, the firm topped the $1 billion mark for the first time, coming in at $1.012 billion. Shearman also saw profits per equity partner jump from under $2 million in 2020 to just over $3 million in 2021.
Revenue per lawyer was up 34.5% to $1.39 million and net income hit $340 million, up from $236 million in 2020.
After several years of incremental revenue gains in the late 2010s, 2020 was a big financial step backward for Shearman. The firm saw its revenue decline by 11% from 2019 to 2020 and its PEP drop 22% in the same time period.
And then 2021 happened.
“We are well-positioned and the financial results are just the way we like,” David Beveridge, senior partner at Shearman, said. “We are not quite where we want, but things are falling into place nicely.”
Some of the percentage gains in PEP and RPL can be attributed to a smaller lawyer head count. The firm went from 829 total lawyers and 124 equity partners in 2020 to 727 and 113, respectively, in 2021.
The firm’s total partner count, including 88 non-equity partners, was down 11% to 212.
The firm added 20 laterals partners across its various offices in 2021 and, according to data provided by Shearman, lost 37 partners for various reasons.
But the head count declines, even with a booming legal market in 2021, doesn’t account fully for the gains the firm made. That can be attributed to the firm’s strategy, Beveridge said, which saw profit margin surge from 27% to 34%.
“2021 was a record year for profit and revenue,” he said. “The market was helpful, but we are reshaping to take advantage of market opportunities and fundamentally changed the firm to focus on the right business.”
Beveridge said overall the firm did raise its rates, as was “consistent with the market”. He also said there were rates changes that were done piecemeal depending on the demand of the practice area and the geography of the office.
Beveridge pointed out that 50% of the firm’s current partnership were not partners eight years ago and that the firm is now the same size it was then, but generated an additional $250 million in revenue compared to that time.
For Shearman, that revenue was derived from leveraged finance in Europe and the U.S., disputes, compensation and benefits and antitrust, all of which were landing soundly, according to Beveridge.
It did not provide a breakdown of how its international offices performed but Beveridge said “the whole firm performed well.” Shearman has bases around the globe, including in London and across continental Europe, as well as in China and across Asia. It also has offices in the Middle East and Brazil.
The firm had victories in high-profile disputes for Citigroup, JetBlue, General Electric and Morgan Stanley, among others.
Shearman also made hay in the red-hot deal market of 2021, including working with SAP and Qualtrics International on a $1.55 billion carve-out of Qualtrics from SAP; Hitachi on its $9.5 billion acquisition of GlobalLogic; and Apax Partners and Warburg Pincus in the firms’ $5.56 billion buy of T-Mobile Netherlands Holding B.V. from Deutsche Telekom AG and Tele2 AB.
The additional work is driving expansion moving forward, Beveridge said.
“We will continue to focus on growth,” he said. “We are adding more people and want to get to between 230 and 250 partners with continued growth and profit.”
Moving forward, Beveridge said the firm will continue to invest in its real estate and technology as part of its growth strategy, and while he wasn’t sure “what the future holds”, he said the firm is on the right track for continued expansion.
“I’m proud of what we have done,” he said. “All of our offices are almost right-sized and we have won a number of awards for our innovation.”