It appears the honeymoon at newly combined Faegre Baker Daniels is still going strong.
The product of a January 1, 2012, tie-up between Minneapolis-based Faegre & Benson and Indianapolis-based Baker & Daniels, the merged firm had gross revenue of $443 million in its first year of existence. That sum surpassed by 3 percent the $430 million in combined gross revenue the legacy firms earned in 2011 (Faegre's $254.5 million plus Baker's $175.5 million). Faegre Baker recorded profits per partner of $700,000, above both Faegre's 2011 PPP of $540,000 and Baker's 2011 PPP of $680,000. Revenue per lawyer, meanwhile, was $650,000 in 2012, compared to the $600,000 and $640,000, respectively, that Faegre and Baker took in the previous year.
"The numbers reflect some of the deeper success we had in integrating the two firms and in how clients responded to the merger," says managing partner Andrew Humphrey, who previously served as chair of the management committee at Faegre & Benson.
The combined firm's practice groups are now spread across four industry categories: food and agriculture, financial services, life sciences, and energy and clean tech. Each of the firm's lawyers chose the area in which he or she wanted to work—a move Humphrey says produced cross-practice teams in each group. "This is not just a marketing position. We want our lawyers to develop a deep knowledge of their area," he says. He pointed to Faegre Baker's representation of Austin, Minnesota–based Hormel Foods Corporation in its acquisition of Unilever's Skippy peanut butter unit as a bright spot on the corporate front in 2012, as well as its work on behalf of Deepwater Horizon oil spill victims in a suit against BP, a matter that recently settled for $7.8 billion.
When Faegre & Benson and Baker & Daniels confirmed their plans to merge in the fall of 2011, their respective leaders touted the ways in which the firms complemented one another in practice areas as well as geography. The new firm has nine offices in the Midwest; outposts in Beijing, Shanghai, and London; and a consulting arm in Washington, D.C.
Those synergies notwithstanding, the merger was not entirely seamless. Faegre had long operated as a one-tier equity partnership, while Baker & Daniels had a two-tier system. To unite the two platforms, the merged firm created a hybrid nonequity partner category as part of a revamped confidential compensation program. With a current head count of 104, the new nonequity tier is designed for newly promoted partners easing into their capital contribution responsibilities and for lawyers who hold the partner title but want a flexible work schedule or fixed compensation.
"We recognize that the legal marketplace is changing," says Humphrey, explaining that the merger allowed the two firms to take a fresh approach to compensation. "We could draw from what each firm had done well and do some new things that will position us for the future."
Faegre Baker considered costs related to the merger—including the money spent to stage a firmwide meeting in Chicago last February at which the two firms' lawyers were introduced—when budgeting for 2012, Humphrey says: "We allotted for 'getting-to-know-you' expenses and for flying around meeting each other. We wanted to make that investment, and it didn't chip away at revenue in a way that wasn't planned."
The two legacy firms employed 699 lawyers collectively in 2011. Overall attorney head count at the new firm shrank by 16, to 683, last year. That number includes 252 equity partners, giving Faegre Baker a leverage figure of 1.71 that is slightly below either legacy firm's associate-to-partner ratio in 2011. "I can't say that we were operating for that number specifically, but we are conscious of the role that proper leverage can play in serving our clients," Humphrey says. "Overall, I'm very proud of our integration and how our professionals responded. We all know that lawyers don't always accept change easily."
This report is part of The Am Law Daily's early coverage of 2012 financial results of The Am Law 100/200. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2013 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue. An interactive chart of the financial results reported so far is available here. The chart will be updated as additional data is reported.
