The American Lawyer’s Am Law 100 Issue is leading with Foreshadowing Layoffs, 2008 Revenue Per Lawyer, Partner Profits Dropped for the First Time since 1991
The Am Law 100 issue of Incisive Media’s The American Lawyer has revealed that the top-grossing firms in the USA have continued to expand and hire aggressively last year, even as the nation’s economy and the demand for high-end legal work—especially in the corporate and finance sectors — hurtled towards a precipice.
The press release for the issue goes on to say
While total gross revenue for the group grew by 4.1 percent, lawyer head count at all levels grew even faster, increasing by 5.4 percent, to 81,992 lawyers. As a result, both average profits per partner and average revenue per lawyer dropped last year for the first time since 1991, setting the stage for massive law firm layoffs that began late in 2008 and have continued throughout 2009, as firms struggled to bring staffing and costs into equilibrium with a recessionary economy. The 2009 Am Law 100 rankings, based on FY 2008 financial performance data, are featured in the redesigned May issue of the magazine, available beginning today. Selected Am Law 100 survey results are also available at www.americanlawyer.com and www.law.com.
“All great runs come to an end. After 17 years of revenue and profit growth—sometimes spectacular growth—big law firms hit a bump in 2008,” said editor in chief Aric Press. “They hired too many lawyers, just as their clients were pulling back. As a result, 2009 is shaping up as a much more difficult year.”
Profits per partner fell by 4.3 percent, to an average of $1.26 million, and revenue per lawyer dropped 1.2 percent, to $818,000. The downturn was widespread but not ubiquitous; overall, it was felt most acutely by the list’s 57 national, international and New York-based firms.
Skadden again led the list in gross revenue, posting $2.2 billion, an increase of 1.4 percent. Baker & McKenzie moved into second place, with gross revenue jumping 19.6 percent to $2.19 billion. Wachtell remained atop the PPP rankings at $4.0 million, despite an 18.9 percent drop in PPP and also ranked first in revenue per lawyer with $2.5 million, a decrease of 13.4 percent over last year’s RPL.
But even in a down year, there were bright spots. Based on virtually every measure, the Am Law 100 at the end of FY 2008 was slightly ahead of where it was in fiscal year 2006. Sixteen firms still logged profits per partner of $2 million or more, although down from last year’s record 19. And, since 1991, the Am Law 100 firms, as a group, have doubled in size and gross, while equity partner profits have shot up by 215 percent.
Firms again created more nonequity partners than equity partners last year. That has been the case each year since 1999, as firms have increased the number of income partners by 300 percent while increasing the number of equity partners by only 33 percent over the period.
Five new firms joined this year’s Am Law 100, including 12-year-old Boies, Schiller & Flexner and the newly merged Husch Blackwell Sanders.
Readers of this month’s print magazine will find a new design and organizational structure inside, including new opening pages for many sections and new sections on “The Churn” and “New Business,” as well as “Lawyers Lives,” a new section focused on life issues outside of work and lawyers’ passions. The new design also reflects a closer alignment between the organization of the print magazine and the americanlawyer.com Web site.
As an addendum this piece at the Law & More blog is worth a read as well
2012 in 2009, for BigLaw: No Ordinary Downturn
Journalist Gregg Braden says that cosmic shift scheduled for 2012 will happen because of "a reversal of the Earth’s magnetic poles." For BigLaw, it is appearing that what’s being referred to as "2012" is already under way. No, in the legal business, this is no ordinary downturn. This is a systemic and irreversible upheaval.
Take breaking news about Cravath, Swaine & Moore. As Susan Beck reports in THE AMERICAN LAWYER, this once pillar of the White-Shoe Legal Establishment experienced a 13% drop in revenue and a 24% decline in PPP. Its cash cow – that deep-pocketed Wall Street – is no more, at least not for a long time. Beck observes that "the future" of Cravath and about 14 other elite firms "is as uncertain as the Wall Street world they draw their strength from."
The layoffs go on and on. The latest are the 10 more associates cut at Wildman, Harrold, Allen & Dixon. Nixon Peabody reduced first-year salaries to $145,000 from $160,000. Meanwhile associates at Nixon Peabody are bumping into Pay-for-Performance slashes of up to 20 percent in salary.
What’s going down, pun intended, in BigLaw is analogous to what occurred in the early 1980s in Corporate America. That whopper of a recession, along with the emergence of a global economy driven by technology, triggered a model restructuring which is still a work-in-progress. The term "redundancy" was shorthand for radically eliminating full-time high paid employees who had benefits.
