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Bottom Line: Buchanan CEO Thomas VanKirk says the firm is doing well in a tough economy.
Credit: Roberto Westbrook
Barely a quarter of Buchanan Ingersoll & Rooney's 500 lawyers have hit their targeted billable hours this year. Average associate hours have fallen below 1,650. And as of May, the firm was $10.5 million shy of its billing goals. A rash of departures -- including some big names -- has left the firm with 35 fewer lawyers and lobbyists than last year. The firm has also shuttered its Northern California office.
This isn't where the Pittsburgh-based Buchanan Ingersoll aimed to be two years after its merger with Klett Rooney Lieber & Schorling vaulted the firm into the Am Law 100.
The rough economy hasn't helped: Like many other firms, Buchanan Ingersoll has seen transactional work dry up without a reciprocal torrent of bankruptcy and credit cases. But a weak economy is just one issue. Former Buchanan partners say a lack of commitment to its satellite offices -- specifically, New York, Miami and California -- has caused many profitable lawyers to flee. In Miami, the firm has just six lawyers, but a lease on one and a half floors of prime downtown real estate.
"I don't believe there is anybody [at Buchanan Ingersoll] who has any potential of moving who doesn't have his résumé out there," says Jerry Kowalski, a headhunter at Highland Legal Search in New York who used to recruit for the firm.
Buchanan Ingersoll's chief executive officer, Thomas VanKirk, doesn't view the situation as dire. And the suggestion that Buchanan is pulling back from its expansion efforts is false, he says.
"It was a terrible four months for the profession, and we're still ahead on a bottom-line basis," he says, noting that firm revenue is 3.4 percent higher than it was at this point last year. He also says the firm's Pennsylvania operations remain strong. "Given the kind of year it is, we look at [the internal numbers] as very positive."
LOOKING NATIONAL, MERGING LOCAL
Over the last decade, the Pennsylvania firm's ambitious expansion plans drove mergers with such firms as Washington's 30-lawyer Silverstein & Mullins and Alexandria, Va.'s 65-lawyer Burns Doane Swecker & Mathis and brought Buchanan into top-tier markets like New York, Washington, D.C., and California.
In Washington, its office has grown to 50 lawyers and lobbyists since its 1999 launch, and it has office space available for significantly more.
Unlike rival Pittsburgh firms Reed Smith and K&L Gates, the firm didn't trim its Pennsylvania growth in its push for a national presence. Instead, it merged with 120-lawyer Klett Rooney to dominate the Pennsylvania market and give itself the financial base to expand.
At first, the move seemed to dodge standard merger pitfalls. In 2006, the firm exceeded its target revenue of $265 million by more than $6 million -- which placed it for the first time on the Am Law 100 (it was 83rd). Last year, Buchanan Ingersoll boosted revenue to $282 million and profits per partner to $570,000.
But all was not well. Interviews with former partners and an internal firm document suggest a firm struggling with its identity and profitability.
According to Buchanan Ingersoll's June 25 Shareholder Business Report, the firm has come up short in key business measures for 2008. Along with its disappointing results for billable hours, the firm's unused value -- in other words, the deficit in work for its lawyers -- exceeded $16.4 million in the first five months of the year. Bread-and-butter practice areas like intellectual property, employment law and financial institutions missed budget projections by margins between 8 and 13 percent. According to VanKirk, the firm will still hire attorneys in these areas -- but only if they bring a book of business with them.
Departed equity partners see deeper problems. In interviews, several argue that the firm has paid too little attention and channeled too few resources to its new offices. With a solid majority of equity partners located in Pennsylvania following the Klett Rooney merger, the former partners say the firm has grown reluctant to compete in markets with staggeringly higher costs than Pennsylvania.
Even former equity partners who say they have no grudge against the firm detected a shift in direction.
"Personally, I was puzzled by the firm's decision to make its next big move to expand within Pennsylvania through the Klett Rooney merger," says Daniel Pascucci, who headed Buchanan Ingersoll's San Diego office before jumping to Mintz Levin Cohn Ferris Glovsky and Popeo last year. "It's a perfectly valid move to add strength to strength, but it struck me as something that was in a different direction than becoming known as a national player."
Legal recruiters say the problems went further back than that.
"There was a tremendous amount of jealousy and rivalry that existed between Pittsburgh and the branch offices, with the guys in Pittsburgh believing the branch offices were taking out too much money," says Highland Legal Search's Kowalski. With Pittsburgh a lock to win any fight, he says, the atmosphere turned sour.
Signs of upheaval aren't hard to come by. In Florida, the head of the firm's Miami office, William Davis, took eight attorneys to launch an outpost of Foley & Lardner in December, leaving Buchanan Ingersoll with six attorneys to fill a floor and a half in Miami's landmark Bank of America Tower. (The firm has subleased half a floor already and is interested in subletting more. Space in the building is currently being listed at around $40 a square foot.)
In New York, the firm lost William O'Connor, the head of its Manhattan office, along with eight other financial practice attorneys last year. Constance Huttner, the firm's intellectual property practice chairwoman, left the office last week. And while the 27-lawyer office has declined in size by only a handful of attorneys since the beginning of 2007, turnover in that period exceeded 60 percent. The firm has moved into a smaller office in the New York Times Building on a three-year lease without an automatic option to renew. (Space currently listed at the address is around $100 a square foot.)
In Washington, D.C., the firm lost the head of its lobbying practice, Ronald Platt, who left for Sonnenschein Nath & Rosenthal this spring. A seven-lawyer intellectual property team headed by E. Joseph Gess and Teresa Stanek Rea, who respectively led Buchanan Ingersoll's chemical and biotechnology practices, went to Crowell & Moring in January. Ronald Perlman, who directed the firm's government contracts practice in Washington, starts this month at Holland & Knight.
Not all of the departures may have been unwanted. While VanKirk declines to publicly discuss most personnel matters, he portrays some of the changes, like the shuttering of the firm's Redwood Shores office in Northern California, as housecleaning. Acquired with Burns Doane in 2005, the office was ordered to draw up a business plan this spring, VanKirk says. Instead, leaders of the small office bolted to Mintz Levin.
"That told me volumes about what they thought of the prospects of that office," he says, adding that despite the setback, the firm remains interested in Northern California.
ON THE MARKET?
Growth in those markets will likely occur under the leadership of Jack Barbour, a former Klett Rooney partner picked last month to succeed VanKirk in June 2009. In two rounds of strategic planning -- one following the Klett Rooney merger and another starting in July -- Buchanan Ingersoll's management reaffirmed its interest to grow in California, New York, D.C., and Florida, VanKirk says. The firm is now mulling over schemes to move into the international legal market.
In the wake of Barbour's selection, VanKirk says he'll be devoting himself to recruiting and acquisitions. He's made a half dozen recruiting trips to Miami in the last four months, he says, and other trips to California. Following the departure of Platt, the D.C. office has received a visit from either VanKirk or Barbour once a week on average.
Nor is another merger out of the question. "Would we be interested in a merger of equals or a merger with a substantial larger firm? Certainly, we'd be interested in that," VanKirk says. "At the same time, I'm not going to put myself in the position of a Wolf Block, saying we'll merge with anybody."
Buchanan Ingersoll office heads outside the firm's home turf say they don't see a firm in retreat. Keith Morgan, who leads Buchanan's Aventura, Fla., and Miami offices and sits on Buchanan's board of directors, plans to rebuild Miami's litigation capacity and will be interviewing a practice group with VanKirk this week.
And in D.C., co-managing partner Edward Allera scoffs at the idea that the firm is hunkering down in Pennsylvania. "I've gotten everything I've ever asked for," he says, and the D.C. office has grown from 28 to 50 since 1999.
According to Allera, the drop in the number of equity partners firmwide is due in part to Buchanan Ingersoll's own rising standards.
"You've got to produce, and we've become more and more demanding," he says. "Perhaps this wasn't the optimal forum for a number of people."
In New York, office managing partner Ellen Shapiro says the firm is doing just fine in an economy that's tough industrywide.
The firm has opted to be cautious in its choice of office space, Shapiro says: A three-year lease gives the firm the flexibility to consider mergers and reduces pressure to maintain a certain growth rate in a shaky legal economy. But the firm is still looking to add the right attorneys.
"If I wanted to fill all the offices, I could just open the door," she says.
