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Question about PPP calculation
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Date: March 7th, 2006 12:24 PM Author: Chrome roast beef shrine Question: Is PPP calculated based on equity partners only or does it include nonequity partners? (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271150) |
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Date: March 7th, 2006 12:27 PM Author: crusty cowardly stead electric furnace There's one way that makes sense, and I sure hope they do it that way. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271168) |
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Date: March 7th, 2006 12:35 PM Author: Chrome roast beef shrine I think it is Profit per Equity Partner because yes, that makes much more sense.
However, some firms do not have nonequity partners while others do. If this is factored in, it would make some firms look far more attractive than the raw PPP number would otherwise suggest.
For example, assume that two firms have a 1:1 partner (equity and nonequity) ratio. Further assume that one has nonequity partnership, but the other doesn't. Finally, assume that the PPP for both firms is around 1 million. Under these circumstances, the firm that does not have nonequity partnership looks a lot better.
In thinking about that example, I wonder how many of the top firms in terms of PPP have nonequity partnership. This is a way to boost PPP without affecting the leverage ratio. |
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Date: March 7th, 2006 12:37 PM Author: Cheese-eating volcanic crater organic girlfriend Few elite firms have "non-equiTTTy" partners. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271254) |
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Date: March 7th, 2006 12:43 PM Author: Chrome roast beef shrine What firms do you consider elite?
V1?
v20?
V50?
Edit: It looks like you might be referring only to V5 since firms in the V10 and beyond have nonequity partnership.
http://www.law.com/special/professionals/nylj/2003/partner_compensation_25_highest_per_equity_partners_ny_law_firms.shtml |
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Date: March 7th, 2006 12:47 PM Author: Cheese-eating volcanic crater organic girlfriend How about none of the above? (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271298) |
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Date: March 7th, 2006 12:54 PM Author: Chrome roast beef shrine Sure, but on this question none of the above is followed by a big blank space for explanation. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271349) |
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Date: March 7th, 2006 12:38 PM Author: Sapphire Alpha Haunted Graveyard Somebody posted leverage ratios in the PPP thread, and leverage there was the ratio of associates to equity partners. I made a comment about why I thought it might sometimes be okay to include nonequity partners, but regardless of that, it seems like they're adjusting for what you said. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271257) |
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Date: March 7th, 2006 12:41 PM Author: Chrome roast beef shrine It makes more sense, but it still has a fatal flaw. The nonequity partners are just like associates in that they are billing machines that don't profit directly. Thus, it is misleading to not include them in the "associates" category. The leverage ratio should capture likelihood of making equity partner if what we care about is likelihood of getting paid around the firm's PEP. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271277) |
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Date: March 7th, 2006 12:46 PM Author: Sapphire Alpha Haunted Graveyard Well, my point was that leverage can be used in lots of different situations, and you might want to calculate it differently depending on that. Aside from possiblity of making partner, you can also think of it as how many associates are likely to be working for a particular partner/client, or how much work (or "responsibility") the firm expects from its associates, etc. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271296) |
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Date: March 7th, 2006 12:56 PM Author: Chrome roast beef shrine Right.
But in the context of PEP, you want to know to what degree is the firm utilizing non equity partners to pump up PPP and disguise the difficulty of making partner. |
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Date: March 7th, 2006 12:31 PM Author: Sapphire Alpha Haunted Graveyard My answer from the other thread: "You should assume all the numbers I've posted are profits per equity partner. You'll notice a couple of firms also have stats for profits for all partners (if you know the # of equity/nonequity partners, you can do the math yourself)."
Just to be more clear, all the numbers from thelawyer.com and legalweek.com have explicitly been profits per equity partner, or what they abbreviate as PEP. |
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Date: March 7th, 2006 12:36 PM Author: Chrome roast beef shrine That's what I thought (I saw PEP too). I was just confirming because there is a serious problem with simply looking at the raw numbers. See above. (http://www.autoadmit.com/thread.php?thread_id=374503&forum_id=2#5271245) |