Latham & Watkins Boosts Partner Profit-Shares
Ben Thomson, LawFuel Big Law & Lists editor
Latham & Watkins has long stood in the shadow of its more profitable peers, and is poised for a dramatic surge in partner compensation. The firm is set to catapult its profit-sharing units by a staggering 17 percent for 2024, a move that could see top performers pocketing north of $20 million annually.
The shift comes after a year of both triumphs and tribulations for the Los Angeles-based behemoth.
While Latham has consistently ranked as the world’s second-largest law firm by revenue, its profitability has lagged behind rivals like Kirkland & Ellis and Paul Weiss. The firm’s average profit per equity partner stood at a “mere” $5.5 million in 2023, a figure that paled in comparison to Kirkland’s eye-watering $8 million.
Latham trails Kirkland & Ellis at $7.21 billion with approximate revenues of $5.6 billion.
But 2024 has been a year of redemption for Latham. The value of a single partnership unit has skyrocketed from $7,500 to $8,807, a leap that could propel the average profit per equity partner to around $6.4 million.
This quantum leap in profitability is no accident. It’s the result of a carefully orchestrated strategy, spearheaded by managing partner Rich Trobman, who has set his sights on the elusive $10,000 unit value.
Latham’s renaissance hasn’t been without its challenges. The firm weathered a storm of departures in Europe, with nearly 20 lawyers defecting to rival Sidley Austin.
But a firm of Latham’s size and profitability is not taking such reverses lying down and has countered with strategic hires of its own, including the recent acquisition of sponsor-facing leveraged finance partner Hugh O’Sullivan from Goodwin in London, the Bay Area and elsewhere.
The introduction of “super points” for star performers has been Latham’s secret weapon in the war for talent. And it has been working hard on retaining partners and reducing the lateral movements to other big law rivals.
The innovative compensation model allows the firm to reward its rainmakers with payouts exceeding $20 million, putting it on par with the likes of Kirkland & Ellis and Paul Weiss.
As Latham & Watkins charges into 2025, it’s clear that the firm is not content to rest on its laurels. With a renewed focus on profitability and a willingness to shake up the status quo, Latham is sending a clear message to its rivals: the sleeping giant has awakened, and it’s hungry for more.
It’s intriguing to see Latham & Watkins taking such a bold step to increase partner profit-shares. In a competitive landscape, how do we think this will impact their ability to attract and retain top talent compared to other major players?
Does anyone know if Latham’s move to bump partner profits is reflecting any actual growth in their tech or IP sectors? Seems like a big play if it’s mainly a talent retainment strategy.
Interesting to read about Latham & Wasshington boosts; however, are we considering the potential downsides for associates and non-partner staff? Increased pressure to perform or risk widening the gap in compensation could foster a less collaborative environment.
So, Latham & Watkins is handing out more cash to the partners? Must be tough at the top. Guess it’s ramen for dinner again for the rest of us.
Haha, right? At least someone’s getting a bigger piece of the pie, maybe they’ll share the recipe with us.
Well, increased partner profits could lead to bonuses for the rest. Optimism, folks!
Hey, anyone thinks that these profit-shares changes at Latham might set a new standard for other firms? Looking at industry trends for a paper I’m writing, and this caught my eye.
Significant to note that Latham & Watkins’ strategy re: partner profit-shares could indicate a deeper financial robustness or a play for market share through partner satisfaction. It warrants a closer analysis of their recent performance metrics and sector growth.
True, evaluating their financials compared to other firms might reveal a lot about the sector’s health overall.
Boosting partner profits, eh? Wonder how long before the other shoe drops and associates are asked to hit even harder billable targets. Seems like the rich get richer scenario to me.
Maybe, but maybe it’ll trickle down. Here’s hoping for a raise or bonus down the line!