N.Y.C. Law Firms Double Bonuses

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New York law firms such as Simpson Thacher & Bartlett and Sullivan & Cromwell are doubling the annual bonuses paid to some associates after a surge in revenue from advising companies on mergers and acquisitions.


Simpson Thacher, the second-largest law office in Manhattan, is paying $30,000 to first-year lawyers and twice that amount to senior associates, said Sarah Cogan, co-chair of the personnel committee. Associates are paid a salary and law partners receive a percentage of a firm’s profits.


Law firms are having “a healthy year financially,” said Ward Bower, principal at Altman Weil, a law firm consulting company in Newtown Square, Pa. The firms are also trying to manage fixed costs by increasing bonuses rather than locking in higher salaries, he said.


“We also wanted a broader range of bonuses to reward our senior associates,” Ms. Cogan said. “We didn’t like the compression.”


Simpson Thacher ranks fifth this year among law firms in the number of mergers, acquisitions, or divestitures for which it was a legal adviser.


The firm advised on 85 transactions in 2004 with a total announced value of $231 billion as of December 10. Last year it advised clients on transactions with an announced value of $140 billion.


Sullivan & Cromwell, the 47th largest American law firm, announced bonuses of $20,000 to $30,000 this month. It granted another bonus of $10,000 to $20,000 in October. It did not divide its bonuses that way last year.


In a December 6 memo, Cravath, Swaine & Moore said associate bonuses would range from $30,000 to $50,000. Last year, the range for both Sullivan & Cromwell and Cravath was similar to that of Simpson Thacher – from $17,500 to $25,000.


Sullivan & Cromwell is “having a good year, and the associates have made an immense contribution,” said a managing partner of the firm, Rodgin Cohen.


Sullivan & Cromwell ranks first among law firms that advised clients on mergers, acquisitions or divestitures this year.


The firm advised companies in 2004 on 125 transactions with an announced value of $336.3 billion through December 10.Last year, it ranked second, advising on transactions worth $150 billion.


In its biggest deal of 2004, the firm represented Strasbourg, France-based Aventis SA in the $72.7 billion acquisition of the drugmaker by Sanofi-Synthelabo SA to form Sanofi-Aventis SA. It also advised JPMorgan Chase & Company in its $58 billion acquisition of Bank One.


Sullivan & Cromwell’s $30,000 bonus for its newest lawyers brings first-year attorneys’ annual cash compensation to $155,000, Mr. Cohen said. The firm’s starting salary is $125,000.


That is the highest total pay level since 2000, when a rise in the stock market pushed bonuses to $40,000 for the newest associates and $100,000 for senior associates, according to the New York Law Journal.


Sullivan & Cromwell’s revenue for 2003 was $687 million, ranking it 11th among American law firms, according to American Lawyer magazine. The firm has not disclosed revenue for 2004 yet.


Skadden, Arps, Slate, Meagher & Flom, the fourth-largest American law firm by number of lawyers, announced bonuses for associates before Thanksgiving. The range is from $12,500 to $45,000, the firm said. The lower bonuses for the newer associates, compared with those of other firms, is made up for by Skadden’s larger starting salary – $140,000 rather than the typical $125,000.


Skadden ranks second among law firms hired to advise on mergers, acquisitions, or divestitures in 2004. It advised on 170 transactions worth $270.9 billion as of December 10. Last year it ranked first, advising on 191 transactions worth $161.9 billion.


Skadden ranked first in revenue in 2003 with $1.3 billion, according to the American Lawyer.


Ropes & Gray, a Boston-based firm with an 81-lawyer New York office, is giving its 2003 class of associates a $30,000 bonus and its 2002 class a $35,000 bonus. It would not comment on the bonuses for the more senior associates. Ropes & Gray is the 60thlargest American law firm.


The lawyers’ bonuses are dwarfed by those of their counterparts at the investment banks and other financial companies their firms represent. Trading desk heads with 10 years’ experience at investment banks will probably get an average $1.4 million bonus this year, said Alan Johnson, who heads New York-based executive recruiter Johnson Associates. That bonus is 28 times the senior lawyers’ extra pay.


Third-year associates in such companies will get a bonus of about $300,000, Johnson said – 7.5 times what third year associates in law firms receive.


A first-year investment-banking associate would typically get a bonus of $115,000 – four times that of a lawyer with the same experience.


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