The 2017 Am Law 100: A Turning Point For Biglaw?

Revenue per lawyer was basically flat; also, there's a new #2 in the rankings.

turning point aheadMany observers of Biglaw, myself included, have been waiting for the inevitable downturn that will bring down the curtain on the post-recession recovery. The good news is that it hasn’t happened — yet. But it could be coming sooner than one might think.

Today the American Lawyer released its industry-defining Am Law 100 rankings, the nation’s largest law firms ranked by revenue. The overall picture the numbers paint is not particularly dramatic, but there’s one telling statistic that could mark the beginning of the end. Here are some overall stats about how the Am Law 100 performed in 2016:

  • Total revenue: $86.7 billion (a new record), up by 4.3 percent (compared to 2.7 percent last year).
  • Total headcount: 95,515, up by 2.7 percent (compared to less than 1 percent last year).
  • Average profits per partner: $1.66 million, up by 3 percent (compared to 4 percent last year).
  • Average revenue per lawyer: $907,765, up by 1.5 percent (compared to 2.6 percent last year).

It’s that last figure that has some folks worried. As Roy Strom explains over at Am Law:

[A] slowdown in the growth of revenue per lawyer may portend trouble ahead for a growing number of firms. “RPL,” long believed to be the most reliable single indicator of a law firm’s financial health, increased a mere 1.5 percent, the second lowest increase in RPL since 2011. That broadly disappointing number, however, is driven by another ongoing story in Big Law: increasing stratification among firms.

That stratification, a growing gap between winners and losers, is also part of the not-so-new normal. Among the winners:

Consider perhaps the most interesting development in this year’s Am Law 100: Kirkland & Ellis’ 15 percent growth in revenue, to $2.65 billion, propelled the firm to the Am Law 100’s second place-ranking for the first time ever. For the erstwhile Chicago firm that now has offices spanning the globe, including an established stronghold in the wealthiest legal market, New York City, 2016 was the culmination of more than a decade of growth in both revenue and profitability. The firm joined rarefied air in growing profits per equity partner (“PPP”) above $4 million, a distinction only held by five other New York firms: Wachtell, Lipton, Rosen & Katz; Quinn Emanuel Urquhart & Sullivan; Paul, Weiss, Wharton, Rifkind & Garrison; Cravath, Swaine & Moore; and Sullivan & Cromwell.

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There K&E goes again, shattering the market. Am Law attributes Kirkland’s success to its thriving practices in M&A, private equity, and energy (driven in part by the firm’s relatively new Houston office, which now boasts more than 100 attorneys).

Its alphabetical neighbor, K&L Gates, also had a strong year. The firm is going through some upheaval — a leadership transition, some layoffs, a bunch of partner departures — but there’s no denying that it fared well financially. Revenue grew by almost 11 percent and PPP grew by 16 percent, topping $1 million (although one has to wonder how much of this was due to a big contingency win, and whether it can be repeated next year).

Now let’s take a deeper dive into major metrics: the top firms by gross revenue, revenue per lawyer, and profits per partner, on the next page….

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