What's Behind The New Am Law 200 Numbers?

Michael Allen of Lateral Link analyzes the recently released Am Law 200 rankings.

Michael Allen

Michael Allen

Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients and placements for in-house attorneys.

Growth in Biglaw was tepid over the last year. Gross revenue increased by 1.5%, compared to 4% for 2015. RPL grew by 1.8%, and PPP was up around 2%. However, both metrics were down significantly compared to their 2015 growth of 3.3% and 5.5%, respectively; and both outpaced inflation.

Continuing trends in both fiscal and employment growth reveal diverging paths between the Am Law 100 and Am Law 200 firms. PPP growth for Am Law 100 firms from 2014-2015 was 4.6%. The following year, growth remained steady at 4.4%. Meanwhile, growth at firms in the bottom half of the Am Law 200 stalled from 3.7% to 1% in just one year.

This phenomenon is not limited to PPP. It seems Am Law 100 firms are outpacing Am Law 200 firms by almost every metric. Headcount at Am Law 100 firms is growing at a much higher rate, with Am Law 100 firms reporting an increase of 2.39%, compared to just .015% for Am Law 200 firms.

Additionally, Am Law 100 firms have been more successful in growing their equity partner ranks. The number of equity partners grew by .66% for Am Law 100 firms, compared to a -.23% decrease in the number of equity partners for Am Law 200 firms.

This is not simply a case of the Am Law 100 poaching fiscal and headcount gains from Am Law 200 firms. Lateral Link conducted a random sample of 3,000 attorneys moving into Am Law 100 firms. This sample revealed only 11% of lateral moves into Am Law 100 firms are coming from Am Law 200 firms. In fact, 42% are coming from firms, companies, and government positions outside the Am Law 200, and 46% come from other Am Law 100 firms.

Am Law 100 firms also surpassed their smaller counterparts in almost every other financial metric as well.

PPL at Am Law 100 firms grew 3.47% over the last year, compared to .98% for Am Law 200 firms.

(Click on each graph to enlarge.)

PPL Growth (2015-2016)

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Gross revenue increased by 4.43% for Am Law 100 firms compared to 2% for Am Law 200 firms.

Change In Gross Revenue (2015-2016)

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Lastly, a common misconception is that a higher Am Law rank denotes a better or more prestigious firm. While not true for all firms, many firms at the top of the Am Law 100 sacrifice profitability for volume. In fact, many of the most prestigious firms, including Irell and Munger, occupy slots in the bottom half of the Am Law 200.

We ran a single-variable regression of a firm’s 2016 Am Law rank vs. their PPP and the results revealed a measured correlation between the two variables. Am Law rank accounted for just 32% of the variation in PPP. If we segment the Am Law 200 even further into four discrete parts, we can see that the correlation between PPP and Am Law rank greatly differs based on a firm’s position in the ranking.

Correlation Between PPP and Am Law Rank

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By adding more nuance to this regression lines, we can see that Am Law rank correlates positively with PPP for the top 20 firms before dropping precipitously for the next 60, and then it finally evens out for the rest of the firms.

Quintic Regression Of PPP vs. Am Law Rank

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If Am Law rank alone is not impetus behind this growing dichotomy, what is?

Forty-six firms posted a negative PPP growth from 2015 to 2016. Twenty-five of those firms were Am Law 200 firms. Three of the top four losses in PPP came from firms in the bottom half of the Am Law 200, and Am Law 200 firms exhibited more volatility in their PPP growth rates compared to Am Law 100 firms.

A closer look at PPP growth rates reveals that much of the Am Law 100’s growth is being augmented by steady growth at Am Law 50 firms.

PPP Growth Rates vs. Am Law Rank

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It is important to note that the system of dividing Biglaw into two discrete parts engenders a disparate continuum whereby successful firms on the precipice of each group can potentially harm or help the other group. Mostly though, this construct hurts Am Law 200 firms. If two Am Law 200 firms merge into an Am Law 100 firm, one firm displaces the “bubble” firm at the start of the Am Law 200, while the Am Law 100 gains the benefits of two combined firms metrics, for one spot. Similarly, some firms in the Am Law 100 may realize sharp drops in profitability that will drop them into the Am Law 200, potentially displacing growing and profitable firms at the top of the Am Law 200.

This growing schism challenges the definition of Biglaw as we know it. Superfirms like Dentons, Baker & McKenzie, and DLA Piper are continually redefining the limits of Biglaw expansion, while firms like Latham, Skadden, and Gibson Dunn are showing that size and high profit margins are not mutually exclusive.

Earlier: What’s Behind The New Am Law 100 Numbers?


Lateral Link is one of the top-rated international legal recruiting firms. With over 14 offices world-wide, Lateral Link specializes in placing attorneys at the most prestigious law firms and companies in the world. Managed by former practicing attorneys from top law schools, Lateral Link has a tradition of hiring lawyers to execute the lateral leaps of practicing attorneys. Click ::here:: to find out more about us.