THE American Lawyer magazine has been ranking law firms since 1986. And each year the “AmLaw 100” numbers are eagerly devoured by lawyers. But this year’s league table, the 25th, published on April 30th, has given the editors the chance to look at the industry over that entire span.
Most readers of the magazine are professionals, eager to see whether their own firms (and rivals) have inched up or down in the rankings. Many are no doubt shaking their heads at the speed with which Dewey & LeBoeuf, a big and until recently profitable New York firm, hascircled the drain. On May 1st several news outletsreported that Dewey’s management has conceded the worst, encouraging partners to find other jobs if they can.
At the top of AmLaw’s league table is a new number one: Baker & McKenzie has swapped places with DLA Piper to become America’s (and the world’s) biggest firm. Both Baker & McKenzie and DLA Piper have an unusual structure in that they areVereins, meaning they are incorporated in Switzerland as a network of firms, not a single legal entity. Baker & McKenzie is the world’s most globalised firm, with offices in 39 countries. (Its former managing partner, Christine Lagarde, now runs the International Monetary Fund.) DLA Piper was the product of a merger between two already big merged firms, Britain’s DLA and America’s Piper Rudnick. Skadden Arps Slate Meagher & Flom, after dominating the rankings for years, has fallen to third place for the first time.
To the outsider, overall trends are more interesting. One is stability: 69 of 1986’s top 100 firms are still on the list. Just 30 of America’s biggest companies (the top 100 of the Fortune 500) have stayed on that list for the same amount of time. And a few firms have left the list only because they merged with bigger ones. So despite the rapidity with which a weakened firm like Dewey disappears, most firms are models of longevity.
Equally remarkable is the profitability of the legal industry: the top two firms pulled in more than 4m in profits for each partner. Even middle-of-the-pack firms in the 100 saw profits per partner of more than $1m. Though the legal job market has been terrible for several years—the number of students taking the law-school entrance exam took an unusual dive this year—those who do score a job (and especially a partnership) find themselves richly rewarded.
But perhaps the most striking finding has been the rise in firms that did not originate in New York. Neither of the top two, DLA Piper and Baker & McKenzie, are New York firms. But more than that, 17 firms saw gross revenue grow by 1000% over 25 years and gross profits by 400%; 16 of them originated outside New York. Michael Goldhaber of American Lawyer, who took the lead in putting the numbers together, says there is no obvious reason that this should be. He points to the mergers that created many of the biggest firms today. Some elite New York firms—Mr Goldhaber mentions the storied Cravath, Swaine & Moore—do not seem to be chasing growth, but rely on their close-knit partnership as a strength.
Dewey’s fate seems to bear this out: its growth over the past few years resulted both from a big merger and the poaching of expensive partners from other firms. The most profitable firms—Wachtell, Lipton, Rosen & Katz and Quinn, Emanuel, Urquhart & Sullivan—stick to their knitting. Wachtell is a one-office mergers-and-acquisitions specialist on Wall Street. Quinn Emanuel, based in Los Angeles, does only litigation, no transactional work. While other firms compete to merge, open new offices and expand to new practice areas, others are happy just making obscene amounts of money at the one thing they do best.
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