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Partners Bringing In Less Revenue, Wachovia Survey Finds
The American Lawyer
December 10, 2008
So far this year, equity partners at the nation's top law firms are bringing in 4 percent less revenue than they did in 2007, according to a new survey.
"That's the first time we've seen that in a long time," says Jeffrey Grossman, a managing director at Wachovia Corp.'s legal specialty group, which conducted the survey.
The survey, which Wachovia provided details of on Monday, found that gross revenue for firms was up by 7 percent through September. But that number was mainly a product of larger groups of lawyers billing less, Wachovia says. Hours per attorney were down 4.5 percent on average, Grossman says.
The survey included 50 firms in The Am Law 100 and five in The Am Law 200 and focused on firms' finances through the third quarter of 2008. It contrasts with similar research by Citigroup released in November, which found that revenue for the first nine months on 2008 was up 5.5 percent.
Wachovia found that revenue-per-lawyer was up 1.5 percent, Grossman says. Yet that number would likely be negative if it included the lawyers laid off this past year. Firms on average reduced their associate and non-equity partner classes through the third quarter, Grossman says. And as Wachovia found, revenue per equity partner was down.
"The growth rate in revenue has slowed down significantly, and firms have begun to cut their expenses," he says.
While associate cuts make headlines, the bigger reduction among those firms has been in administrative staff, which dropped 18 percent through September, Grossman says. Yet for all the staff and associate reductions, Grossman says it's too late to make a difference in 2008 end-of-the-year results.
"It will have a benefit next year," he says. "But it won't reduce [firms'] expenses too much this year if they're reducing head count now, because they have severance and it'd only be a month or two benefit even if they didn't have severance."
Firms are expected to increase billing rates in 2009, but at a fraction of the increases instituted for 2008. Firms are increasing rates 5 percent on average, Wachovia found. The median rate increase is 4 percent. That is "significantly lower" than 2008, Grossman says, which saw increases of 6.5 to 7 percent, according to the firms surveyed.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
