Strong Key Metrics Mask Underlying Softness in Legal Demand Among the Am Law 100
New York, April 27, 2017 (PRNewswire) — Firms within the Am Law 100 posted strong top- and bottom-line gains in 2016, but softness in revenue per lawyer and growing volatility from year-to-year portend some uncertainty ahead. In addition, the revenue and profit disparities between firms in the top and bottom half of the Am Law 100 continue to widen, forcing the firms ranked toward the bottom to contemplate new business strategies in order to maintain profitability.
This year’s Am Law 100, along with several articles analyzing the results, are available in the May 2017 print issue of The American Lawyer, and online at http://www.americanlawyer.com. Am Law 100 data is available for online purchase at http://at.law.com/B588AY. In June 2017, The American Lawyer will publish its rankings of the second hundred largest firms. Since its introduction in 1987, the Am Law 100 has been the definitive public ranking of financial performance for the country’s largest law firms.
“As clients continue to give more legal work to in-house legal teams and other legal service providers, and the gap in revenue at different ends of the Am Law 100 deepens, those in the second half of the ranking find themselves at a crossroads,” said Gina Passarella, Executive Editor of The American Lawyer. “If they want to grow revenue and remain profitable in today’s highly volatile and uncertain industry, they may have to change course. That could mean focusing on the core practice areas that differentiate them, and altering their staffing and compensation models so their firms can efficiently operate at optimal capacity.”
On the whole, the Am Law 100 grew gross revenue 4.3 percent, profits per equity partner 3 percent and revenue per lawyer 1.5 percent. But the figures look much different when looking at the Am Law 1-50 versus the 51-100. While the Am Law 100’s top 50 firms grew their total profits per partner by 6.1 percent, the bottom 50 saw theirs decrease by 1.7 percent. In addition, the top 50 firms in the Am Law 100 experienced a 3.6 percent increase in revenue per lawyer, while the bottom 50 firms saw a decline of 1.3 percent.
Other Am Law 100 highlights include:
- Overcapacity is Putting Pressure on Revenue Growth: Big Law profits are increasing on average, with overall profits per partner having grown by 3 percent. However, the firms’ overcapacity is preventing them from maximizing their revenue per lawyer. While overall revenue across the Am Law 100 grew by 4.3 percent, total revenue per lawyer grew by only 1.5 percent.
- A New Class of Super Rich: More firms are able to post profits per equity partner of more than $3 million than ever before, with six firms surpassing the $4 million mark. But in redefining our criteria for entry in the Super Rich club, we threw out profits per equity partner and look now at a higher revenue per lawyer standard and a firm’s profits per all lawyers. This has resulted in a new crop of Super Rich firms.
About the Am Law 100
The American Lawyer‘s Am Law 100 has been recognized as the definitive public ranking of financial performance for the nation’s largest law firms since its introduction in 1987. (The Am Law 50 was introduced in 1985 and the Am Law 75 was first published in 1986.) Am Law 100/200 metrics are primary benchmarks for law firms seeking to assess their competitive position in the marketplace.
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