Firm Profiles

One has to feel for an historian researching the roots of K&L Gates. The firm has had more mergers than Larry King has had marriages. Luckily, its unions have worked out better: K&L ranked sixteenth on the 2011 Am Law 100 list with just over $1 billion in revenue. It has also proved to be the most “recession–proof” of the country’s big firms, ranking first on The American Lawyer’s Recession Performance Index, which measured growth—or lack thereof—between 2007 and 2009. While many of its peers took hits to the pocketbook, K&L Gates saw its revenue increase at a compound annual growth rate of 17 percent.

The firm—which bolted into the upper reaches of The Am Law 100 when a merger between Pittsburgh’s Kirkpatrick & Lockhart Nicholson Graham and Seattle’s Preston Gates & Ellis was approved in December 2006—numbers some 1,800 lawyers (including nearly 300 equity partners), and is organized into six core practice areas: corporate and transactional, financial services, intellectual property, litigation and dispute resolution, real estate, and policy and regulatory. But its business model is what truly sets it apart.

There is the growth–via–merger strategy, of course, but also the firm’s legendary aversion to debt. K&L finances its operations solely through partner capital contributions—and insists that any firm it acquires pay off its debt.

Those capital contributions can be substantial, particularly given the firm’s comparatively low average partner compensation (129th on The American Lawyer’s 2011 survey). Revenue per lawyer and profits per partner are also middling (coming in at 129th and ninety–third, respectively, on the 2011 list). Along with its big–city offices, K&L also operates in secondary markets like Anchorage and Fort Worth, where billing rates are lower.

“It’s probably not a business model that’s everyone’s cup of tea, ” says K&L’s chairman and global managing partner, Peter Kalis. “ [But] a lot of those same cities that pull down the average [revenue per lawyer] also generate a lot of very substantial work for the large cities. ” Maybe too much work. Associate satisfaction is low compared to other large firms, with K&L turning in a 125th place finish on The American Lawyer’s 2010 Midlevel Associates Survey and a 105th place finish in 2011.

The firm has also suffered some high–profile embarrassments. In 2009 it was dumped from Microsoft Corporation’s preferred provider list—even though the Gates in its name refers to retired partner William H. Gates, Sr., father of Microsoft’s founder. And in August 2011, a former lawyer in K&L’s Hong Kong office admitted to stealing money from client accounts to pay his gambling debts (ironically, he was a member of the firm’s betting and gaming practice). Given K&L’s track record, he should have bet on the firm, instead.

—Updated as of 1/1/12