Am Law 100: 2007 Was a Year to Feast, But Is It a Prelude to Famine?
2007 was a banner year for the nation's top law firms according to the much anticipated American Lawyer 2008 Am Law 100 Report, which hit the streets today. On the positive side, combined revenues for the top 100 reached $64.5 billion, an increase of 13.6 percent, with two firms, Skadden and Latham and Watkins breaking the $2 billion barrier. As for "profits per partner," the metric that matters most to firms, nineteen firms had profits per partner of $2 million or more, an increase of four over last year.
But as Aric Press and John O'Connor describe in this accompanying analysis, the good times won't last. Though part of the increase in PPP was attributable to increased demand for high-end legal services and "unrelenting rate hikes," they're also higher because fewer lawyers are getting a piece of the partnership pie. In 2007, the average equity partnership grew by 2.6 percent -- or roughly five partners per firm. And as Press explained in a webinar held yesterday:
The percentage of equity partners shrank again, now down to roughly 23 percent of headcount... The fastest-growing category of lawyers in the Am Law 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.
(H/T to ABA Journal for its summary.)
Moreover, with the economy now in a slump, big ticket items, notably deal activity, have declined -- and haven't been offset by revenues from hotter practice areas like litigation or bankruptcy. Head count at law firms has exceeded the growth in revenues per lawyer -- which can begin to take a bite out of profits. Finally, consultants argue that firms will pay the price of last year's salary hikes as the demand for high-priced legal help begins to decline.
Stay tuned for more feedback on the Am Law 100 as bloggers begin to analyze the results.
Posted by Carolyn Elefant on April 30, 2008 at 05:12 PM | Permalink
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