The 2016 Am Law 100: Trouble Ahead?

Some firms did exceptionally well, such as Silicon Valley powerhouses and Wachtell Lipton, but for many other firms, danger looms on the horizon.

chart graph flat up downCall me Chicken Little. I’ve been waiting for the sky to fall on Biglaw for a while now. But this year I might be right. Last year was marked by slowing growth, which is generally the transition from boom to bust.

Yesterday the American Lawyer issued its eagerly anticipated Am Law 100 rankings. In 2015, for the sixth year in a row, the nation’s 100 biggest law firms by revenue enjoyed overall growth in critical measures like overall revenue, revenue per lawyer, and profits per partner. But as noted by Am Law, “despite a record year for U.S. mergers and acquisitions, the continued flattening of demand for legal services and patchy conditions in core markets, particularly in Europe, saw growth slow to its lowest level since the Great Recession seven years ago.”

Before we talk about specific firms, let’s check out the overall stats about how the Am Law 100 performed in 2015:

  • Total revenue: $83.1 billion, up by 2.7 percent (a new record).
  • Total net income: $328.1 million $32.8 billion, up by 3.3 percent.
    [UPDATE (4/27/2016, 10:15 a.m.): An alert reader raised this typo with us; we raised it with Am Law, and they corrected it.]
  • Average revenue per lawyer: $894,253, up by 2.6 percent.
  • Average profits per partner: $1.61 million, up by 4 percent.

So 2015 witnessed weaker growth than 2014, when these same figures grew by 4.6 percent, 7.4 percent, 3.7 percent, and 5.3 percent, respectively. As Am Law points out, “excluding the financial crisis in 2008 and 2009, when The Am Law 100 contracted across most metrics, you’d have to go back more than two decades, to 1993, when the U.S. was still recovering from another recession, to find lower year-over-year increases in collective top and bottom lines.”

And headcount, another indicator of Biglaw health, didn’t tell a happy tale either. The total number of lawyers in the Am Law 100 stayed basically flat, at just below 93,000, and the total number of equity partners actually dropped by 0.6 percent, to 20,337. That dip – the first annual decline since 2009, per Am Law – caused profits per partner (PPP) figures to look better than they should have. Of the 77 firms that grew PPP in 2015, 10 would have actually posted declines in PPP if not for their reduction of equity partners.

Here are some additional themes identified by the American Lawyer’s Chris Johnson:

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— Despite mediocre growth overall, several firms had a stunning year. And the gap between firms at the top of The Am Law 100 and the bottom grows ever wider.

— West Coast beats East: Elite New York firms struggled for growth despite a bumper year for high-end M&A, while those in Silicon Valley feasted on a frothy tech market.

Am Law mentions Wilson Sonsini and Cooley, which each grew revenue by almost 14 percent, and Fenwick & West, which enjoyed an 11 percent increase in revenue. All three firms enjoyed lots of IPO and M&A work in 2015.

— Consolidation continued to reshape The Am Law 100, with major law firm mergers and acquisitions helping two firms charge up the rankings.

— The makeup of The Am Law 100 changed little from last year. (Yes, Latham, you’re still No. 1.) Three new firms joined the list; three dropped off. A noticeable absence: Dentons, which no longer qualifies as a U.S. firm, which we define as having a plurality of lawyers in the U.S., after its merger last year with China’s Dacheng.

Congrats to the three returning firms: Ballard Spahr, Cozen O’Connor, and Mintz Levin. Condolences to the three departing firms: Bracewell (fka Bracewell & Giuliani), the now-defunct Bingham, and the aforementioned Dentons.

Now let’s dig into specific metrics: the top firms by gross revenue, revenue per lawyer, and profits per partner….

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