To gain perspective, we ran VPL numbers for the last six years and found that each of the top 15 firms this year have been in the top quintile in every year since 2000.
The top isn’t the only place where firms stay in place. We found that over the six years most firms tended to finish in the same quintile as they started, despite unprecedented efforts at merging, opening new offices, and acquiring laterals. It may not be easy to keep a successful law firm afloat, but what is really difficult, according to the VPL measures, is moving a firm up in class.
The six-year comparison shows that several firms have made real leaps forward. To eliminate arithmetic or fact-gathering irregularities, we looked for firms that had moved into the first, second or third quintiles in fiscal 2003 and 2004 from lower ranks in 1999 and 2000. We found eight: Schulte; Cadwalader; O’Melveny; Dechert; Orrick, Herrington & Sutcliffe; Heller Ehrman White & McAuliffe; Hogan & Hartson; and Akin Gump Strauss Hauer & Feld.
The first three all moved into the first quintile. Schulte’s story is the most dramatic. Founded in 1970, it’s the youngest firm on the list. To the wider world, it’s been pigeonholed as the New York hedge fund firm that also has a big-ticket matrimonial practice. But what’s been missed is the fact that hedge fund work is no longer just highly specialized but somewhat routine fund formations. The funds have become investors, vying with private equity and so-called vulture players for opportunities. “Hedge funds changed,” says Alan Waldenberg, a member of Schulte’s five-partner executive committee.
“They used to be really smart guys sitting in front of screens picking stocks. Over the last few years the line between the funds and private equity operations blurred, and we were in the forefront of that transition. We went with our clients into more and more sophisticated investing.”
As an example, he cites Schulte’s work for Cerberus Capital Management, L.P. As the fund family grew from two to a dozen, Schulte was brought along. As Cerberus has expanded into dealmaking and lending, so did Schulte. “Now,” says Waldenberg, “we do the lion’s share of their M&A.” And reap the financial benefits.