Posted Apr 29, 2008 07:20 pm CDT
Updated: Once again, the major law firms in the AmLaw 100 reportedly have posted an impressive earnings year. And, in a webinar today, as American Lawyer is about to detail the results of its latest survey of the nation’s top-grossing law firms in its May issue, the magazine’s top editor explained why.
A major factor contributing to a 6.4 percent increase in revenue per lawyer and $1.3 million in average profits per partner among the AmLaw 100 in 2007 was a decrease in the number of equity partners, says Aric Press, American Lawyer’s editor-in-chief.
“The percentage of equity partners shrank again, now down to roughly 23 percent of headcount,” Press told his online audience. “The fastest-growing category of lawyers in the AmLaw 100 was non-equity partners, which now account for 35 percent of all partners. If these growth rates continue, non-equity partners will exceed equity partners by the year 2015—as they already do at 21 firms. Seldom have so many done so much for so few.”
Because of trends such as de-equitizing partners and making fewer partners, the AmLaw 100 firms experienced only a 2.6 percent average increase in equity partners last year, Press said. Put another way, almost half of the AmLaw 100 firms added no more than two new partners in 2007.
At the same time, however, total revenues among the firms reached $64.5 billion dollars—an increase of 13.6 percent, headcount grew by 7 percent, to almost 780,000 lawyers, and (as discussed in earlier ABAJournal.com posts) both Skadden Arps Slate Meagher & Flom and Latham & Watkins for the first time exceeded $2 billion in gross revenue last year, he noted. (According to another legal publication, DLA Piper is also a member of this elite group.)
For other AmLaw 100 firms, “2 million is the new black,” Press reported, noting that 19 had average profits per partner of $2 million or more. (Wachtell Lipton Rosen & Katz, as discussed in a previous ABAJournal.com post, once again led the pack by a considerable margin, racking up a record-breaking PPP substantially exceeding $4 million in 2007.) That means firms could actually earn average profits per partner of $1 million or more in 2007, yet fall in the bottom ranks of the AmLaw 100, Press pointed out.
Although this “golden age” of law firm profits among the nation’s most profitable firms may be nearing an end, at least for now, as an economic downturn reduces the amount of available work, Press nonetheless predicts a profitable future. “The rich will get richer,” he says, citing ongoing client demand for the sophisticated legal services these elite law firms provide, as well as their “unrelenting annual rate hikes.”
To view the webinar (reg. req.), see this American Lawyer web page.
The magazine also promises to post the results of the latest AmLaw 100 survey on its new AmLaw Daily website tonight.
Last year’s coverage:
American Lawyer (April 30, 2007): “The AmLaw 100: A Look Behind the Numbers”
ABAJournal.com: “Top Grossing AmLaw Firms Get Local Spin”
Updated at 8:34 p.m. to provide additional information.