King & Spalding Posts Double-Digit Revenue Increase to $1.26B

King & Spalding chairman Robert Hays.

King & Spalding had another strong year, posting an almost 11 percent revenue increase to $1.26 billion and a 9.3 percent increase in net income to $551.9 million.

That followed 2017 revenue growth of 7.7 percent and net income growth of 4.3 percent.

“It was a solid year for the firm—even good,” said King & Spalding chairman Robert Hays, adding that the firm exceeded budget. “We have been committed to growing both the top and bottom lines, and we were able to do that last year at about a double-digit growth rate.”

That resulted in a boost to profit per equity partner to nearly $2.85 million—up from almost $2.61 million in 2017. Revenue per lawyer increased from $1.13 million to nearly $1.17 million.

“We also benefited a good bit from the expanding economy,” Hays said. “Our client base—and new clients—had a greater demand for legal services because of an improving economy. There was more demand for what we are doing and more people to do it.

“We continue to see strong demand, but I don’t expect it to go on indefinitely,” he added. “We do believe there will be a slowing or downturn, but when, I don’t know. I think it is not wise for the industry or people to ignore that reality.”

King & Spalding raised rates in line with the industry, at a bit over 3 percent, Hays said. Expenses were also up—notably for associate compensation after the associate salary hikes that started in New York in June last year—as well as increased technology and health care costs.

The firm also increased its head count, adding a net of 74 lawyers, for a total lawyer head count of 1,081. While the equity partner count stayed constant at 194 in 2018, the firm added a net of 14 income partners for an increase to 218. By contrast, in 2017 the firm’s overall lawyer and partner head counts had remained flat, increasing by a net of only two lawyers from the prior year.

The Talent

King & Spalding added 54 lateral partners last year—a record number—and elected 30 new partners internally. “We are committed to growing—and being profitable by growth and not by cutting ourselves to success,” Hays said, noting that the firm has already added 13 lateral partners this year.

The firm’s most high-profile lateral hire was former Deputy Attorney General Sally Yates, who joined its Atlanta headquarters in May. It also landed outgoing Atlanta U.S. Attorney John Horn, both for the special matters group. Also in Atlanta, King & Spalding recruited two securities litigators, Lisa Bugni and Jessica Corley from its rival down the block, Alston & Bird.

That said, New York remained a major focus for talent recruitment last year, with 15 lateral partner hires in its office there—one-quarter of the new-partner recruits. That included private equity partner Jonathan Melmed, who focuses on energy infrastructure deals, with a team that includes partner Enrico Granata and four other lawyers from Morrison & Foerster. Melmed is heading King & Spalding’s global private equity team.

Also in New York, the firm landed a duo of pharmaceutical patent litigators, Gerald Flattmann and Evan Diamond, from Paul Hastings.

There were partner departures, as well. In Atlanta, David Meadows, who handles complex business disputes, left for Troutman Sanders. Two tobacco litigators also left: Frank Bayuk decamped for Jones Day, and Bethany Schneider started a plaintiffs firm, Schneider Law. Drew Dropkin became the assistant general counsel for the Public Company Accounting Oversight Board and securities litigator Matthew Baughman joined the DOJ as the director of the Task Force on Market Integrity and Consumer Fraud. Appellate partner Merritt McAlister became a law professor at the University of Florida, and Gibbs Fryer joined real estate investor TC US Partners.

The Work

King & Spalding handled several transactions, including quite a few financing deals, worth more than $1 billion. Energy and health care were two big industries for its deal work last year.

It advised offshore driller Transocean on its $2.7 billion cash and stock acquisition of Ocean Rig UDW and represented Brookfield Infrastructure Group on the $1.1 billion acquisition from AT&T of 31 data centers in 10 countries.

In London, it represented Life Company Consolidation Group in its £1.8 billion ($2.4 billion) purchase of Britain’s oldest mutual life insurance company, The Equitable Life Assurance Society.

In Atlanta, King & Spalding represented Piedmont Healthcare on its acquisition of Columbus Regional Health System, which was represented by Alston & Bird.

The firm handled a string of financing transactions based on the securitization of restaurant companies' franchise assets, including Taco Bell, Wingstop and Jamba Juice, in the fast-growing asset-backed or esoteric securitization market, which can be a lower cost way for companies to borrow money.

In international arbitration, King & Spalding scored a big victory at the Hague for client Chevron in its 26-year dispute with Ecuador over clean-up costs for pollution and damage that its drilling operations caused to the country’s rainforests. The Hague’s Permanent Court of Arbitration ruled that an Ecuadorian judge’s $9.5 billion ruling against Chevron was fraudulent and should not be recognized internationally. Courts in the United States, Canada, Brazil and elsewhere where Chevron has assets have rejected Ecuador’s attempts to collect.

King & Spalding also won a $2.2 billion award from the World Bank’s International Centre for the Settlement of Investment Disputes for its client Union Fenosa Gas, a Spanish-Italian joint venture, from Egypt. Union Fenosa Gas operates an LNG export terminal in Egypt and claimed the state-owned gas company was not sending enough gas its way.

It continues to represent Atlanta-based Equifax in its extensive data-breach litigation resulting from the 2017 breach that affected more than 146 million consumers. In January, Chief Judge Thomas Thrash Jr. of the U.S. District Court for the Northern District of Georgia ruled that a string of consolidated lawsuits by both consumers and financial institutions may go forward.

On the pro bono front, almost 70 King & Spalding personnel across multiple offices helped more than 100 "Dreamers"—undocumented immigrants who arrived in the United States as children—with their renewal applications for the Deferred Action for Children Arrivals program and performed an investigation for Cook County, Illinois’ State’s Attorney’s Office over rates paid to outside counsel.