April 29, 2009 9:44 AM
The Am Law 100 2009
Posted by Ed Shanahan
By Aric Press and John O'Connor from Lessons of The Am Law 100 in the May 2009 issue of The American Lawyer
Nothing grows forever. For the first time since 1991, both average profits per partner and revenue per lawyer dipped last year among the Am Law 100 firms, the top-grossing firms in the nation. And, given the weakness in the market thus far in 2009, another decline seems likely this year.
Those are the headlines from our twenty-third annual Am Law 100 report (access the full report--the charts and the stories--by visiting www.americanlawyer.com/amlaw100). These results are for 2008. They capture the start of the economic distress that set the stage for record law firm layoffs and anxiety but, because of the cutoff date, they mask the distress many firms are now dealing with. Last year, overall gross revenue grew by 4.1 percent, to $67 billion, a new record. But head count grew faster, increasing by 5.4 percent, to 81,992 lawyers. As a result of that growth, plus a serious drop in demand during the second half of 2008 for high-end work--especially in the corporate and finance sectors--profits per partner (PPP) fell by 4.3 percent, to an average of $1.26 million, and revenue per lawyer (RPL) dropped 1.2 percent, to $818,000.
The downturn was widespread but not ubiquitous. On average it was felt most acutely among the firms that we classify as New York, national, and international. Firms in those three categories, which include 57 of The Am Law 100, suffered profit and RPL drops. By contrast, the 12 firms headquartered in Texas and Washington, D.C., when taken together, showed both revenue and profit gains. The rest of the firms were, on average, flat on revenue and down about 3 percent on profits.
Even in a down year, there were bright spots. Sixteen firms logged profits per partner of $2 million or more, down from last year's record 19. Five firms joined The Am Law 100, including 12-year-old Boies, Schiller & Flexner and newly merged Husch Blackwell Sanders. For those keeping score, Boies Schiller joins with PPP of more than $3 million, roughly $500,000 ahead of Cravath, Swaine & Moore, the firm David Boies left in 1997. Two other positive notes: Howrey, coming off a big litigation year, led the pack with a 15.2 percent increase in revenue per lawyer, the key metric for judging the health of a firm, and Wilmer Cutler Pickering Hale and Dorr, with strong white-collar, regulatory, and IP work, became the eighteenth firm to have a seven-figure RPL.
For all the hand-wringing, there was little relative change in law firm standings. For example, comparing year-over-year ranks on PPP, only six firms moved up a quintile, most notably Gibson, Dunn & Crutcher into the first tier.
As of the end of 2008, The Am Law 100 was essentially still a bit ahead of where it was in fiscal year 2006, which, at the time, was hailed as yet another record year. But after 17 years of steady and sometimes spectacular growth, it's hard to find many big-firm lawyers who remember an industry-wide downturn.
Click here to read Lessons from The Am Law 100 in full.
The complete Am Law 100 report--charts and stories--can be accessed at www.americanlawyer.com/amlaw100.Make a comment