What some BigLaw firms are doing that makes them look more profitable
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Ninety-eight of the nation’s top 100 law firms had 44 fewer partners last year than in 2021, continuing a long-term trend of firms “pulling up the ladder,” according to an analysis by Bloomberg Law.
By shrinking their equity partnerships, firms are able to increase their profits per equity partner, Bloomberg Law explains in its Big Law Business column.
The profits per equity partner measure “is a popular metric for success because it shows which firm’s partners cash in the biggest checks at the end of the year,” the article reports.
The Big Law Business column excluded two firms from its analysis because their partnership ranks increased because of significant mergers. The firms are Taft Stettinius & Hollister and ArentFox Schiff.
The analysis found that 16 firms reduced their equity partner tier by 5% or more. The profits per equity partner of these “biggest shrinkers” increased by an average of 2.2%.
Nineteen firms increased their number of equity partners by 5% or more. These “biggest growers” had a decrease in profits per equity partner of 8.1%. But they had significantly higher profits per equity partner “to begin with—giving them more leeway to add equity partners,” the article explains.
The Big Law Business column viewed an increase in equity partners as an indicator of financial health. The 19 biggest growers firms increased revenue 4.3%, compared to 1.1% for the biggest shrinkers.
“It’s fairly safe to assume,” the article reports, “that a law firm willing to report significant equity partner growth is doing it because they’ve got a good story to tell.”