December 14, 2012 12:03 AM EST
It’s time for K Street to cash in.After a year that saw Washington grind to a halt amid nonstop campaigning, lobbying firms see 2013 as an opportunity to rebuild business that’s atrophied. And a few shops that have managed to do well in the current climate are preparing for an even bigger payday.
The backlog of big issues facing President Barack Obama and the divided Congress is a lobbyist’s dream: tax and financial legislation, defense, health care, transportation, energy and immigration, just to name a few.
“I think there’s actually a lot of excitement to get something done,” said David Thomas, a partner at Mehlman Vogel Castagnetti. “There is some optimism. In that respect, it’s quite refreshing. People are ready to get going.”
But some firms have been doing well the past few years, even with gridlock in the legislative branch.
This year, Capitol Counsel is on pace to exceed $11 million, an increase over 2010 and 2011.
John Rafaelli, founding partner at Capitol Counsel, says that’s thanks to tax reform and implementation of the Affordable Care Act and the Dodd-Frank law. “Those issues are at the forefront,” Rafaelli said. “As a result, we’ve been lucky and fortunate.”
Alston & Bird has watched its lobbying revenue steadily increase in recent years, hitting an annual high of $13.6 million last year — a mark it’s on pace to beat this year. Along with the Dodd-Frank financial reform law and health care reform, Alston & Bird has benefited from attention to agriculture and cybersecurity. Having a team of former lawmakers — including former Sens. Bob Dole (R-Kan.) and Blanche Lincoln (D-Ark.), and ex-Rep. Earl Pomeroy (D-Minn.) — doesn’t exactly hurt either.
Mehlman Vogel Castagnetti has also been on the upswing in terms of lobbying revenue. The firm reported earning $9.2 million through the end of September. The firm earned $11.7 million per year in both 2010 and 2011 and $10.3 million in 2009.
Partner David Thomas attributed the upward trend to the firm’s diverse client base and said that in 2013, tax reform will be the hottest of all issues.
“I think it’s going to be all taxes, all the time,” he said. “We think this might be an issue like health care reform. It really does touch everybody. It doesn’t really matter what industry you are. That’s going to be the No. 1, No. 2 and No. 3 issue in 2013 and maybe even 2014.”
Fortune has hardly smiled on all lobbying firms, with several prominent outfits witnessing a slide in their traditional lobbying business — a reflection of the industry overall, which peaked in 2010 after a decade of runaway revenue increases.
Different firms are taking different approaches to reverse the trend or otherwise compensate for decreases in cash flow from traditional lobbying activity.
Van Scoyoc Associates, one the major players on K Street, has seen its lobbying revenue dip in recent years, mostly due to a struggling economy and gridlock on Capitol Hill. The firm has reported $16.1 million in lobbying revenue so far this year — significantly less than the $25 million at the end of 2011 and the nearly $29 million in 2010.
But looking ahead to 2013, Stu Van Scoyoc, the firm’s chief executive, said he is expecting revenue to pick up, buoyed by tax reform and appropriations-related lobbying.
“Congress is going to start getting more active and aggressive,” Van Scoyoc said.
Van Scoyoc said they aren’t hurting as badly, given the conditions the lobbying industry has been under. The firm has three nonlobbying divisions, and although they are seeing increasing revenues, they are not making up for the dip in lobbying revenue.
Ogilvy Government Relations, which has so far reported $12.1 million in lobbying revenue this year, has lost notable clients, key personnel have quit, and the firm has shuffled its leadership. In 2011, it earned just under $20 million; at its peak in 2009 and 2007, it made $22 million a year.
Brendan Daly, a spokesman for the firm, pointed to two new hires — Dee Buchanan, former House Republican Conference chief of staff, and veteran American Petroleum Institute lobbyist Con Lass — and a new strategic alliance with tax lobbying firm GDS Strategies. With the alliance, GDS Strategies’ three principals — James Gould, Thomas Dwyer and Tucker Shumack — will co-market their services with Ogilvy and share the firm’s office space.
Venable, for its part, is “really bullish on lobbying in 2013” and “destined to go up on the list” of top-earning lobbying firms, said Rob Smith, co-chairman of the firm’s legislative practice.
That’s in large part because the firm is stocked with clients, such as hotel and construction interests, concerned with corporate tax issues and other timely topics including online gambling and Hurricane Sandy relief, he said.
Smith said the Washington-based firm, which is best known for its legal practice, isn’t planning on growing its lobbying business by acquiring smaller firms but by expanding from the inside out. Venable’s most robust lobbying earnings came in 2009, when it took in about $12.4 million. Earnings dropped in 2010 and 2011 but are on pace to go back up in 2012, federal disclosures show.
It’s not all about traditional lobbying these days, however.
Diversification may be the salvation for many government affairs firms, said Doug Turner, a partner at public affairs firm Agenda, who argues that “to get through the noise of lobbying, you’ve absolutely got to cut through it with other forms of advocacy these days.”
Cassidy & Associates is another firm seeing lobbying revenues dip, reporting $11.5 million so far this year — about half the roughly $20 million it pulled in for each of the previous three years.
But it’s just added a $1.2 million-a-year client in the government of Guinea-Bissau. And Gerald Cassidy, chairman and chief executive of the firm, said lobbying revenue alone is not reflective of the firm’s overall performance because it also offers non-lobbying services to clients.
“That is a point reflected in all our internal decisions and demonstrated by continued growth of our global reach, public policy and political intel counsel and other work that best manages our clients’ Washington risk but doesn’t necessarily fall under the label of traditional lobbying,” Cassidy said in a statement.
The industry must continue reinventing itself because “lobbying is harder today than ever before but more necessary than ever before, given the volume and complexity of issues,” said Nick Allard, a partner at Patton Boggs and dean of the Brooklyn Law School.
Lobbying firms that don’t adapt to today’s communication preferences — email and social media in particular — put themselves at risk, Allard said.
And while nothing will ever replace traditional lobbying fare such as platinum contacts and knowledge of rules and procedures, “the old stuff of just scheduling meetings or going to hearings or getting a committee report for a client isn’t going to cut it,” he said. “Those lobbying shops not up to speed and not able to keep up are at a disadvantage.”
© 2012 POLITICO LLC