Welcome to the 2018 edition of The Am Law 100, where we analyze the financial health of the nation’s 100 largest law firms by gross revenue and other key metrics based off of 2017 returns.
Despite a number of strong headwinds—from low demand growth to competition from clients taking work in-house to alternative legal services providers entering the market in bigger ways—the nation’s largest law firms pulled out arguably the best year they have had since the Great Recession. Below you will find detailed analysis of just how the market managed these gains, how individual firms fared and what this all means for the future. Plus, our detailed charts offer a look at how firms stack up against one another across several key financial metrics.
The data was compiled over the course of several months by ALM reporters and editors in conjunction with ALM Intelligence and Legal Compass.
It’s probably no surprise that the Super Rich are still, well, rich. And they are only getting richer. While firms of all types and sizes across The Am Law 100 posted solid gains this year, a 10-year analysis of the financials shows the elite of the elite are pulling away at a much faster clip.
While so many negative trends across The Am Law 100 seem to more acutely impact the bottom half of the list, there is one area that impacts profitable firms more than anyone: volatility. Equal parts strategy, fiscal management and psychology, leaders of Am Law 200 firms are increasingly having to manage unpredictable financial returns from one year to the next. Talk about adding stress to the budgeting process. And when the most profitable firms are going after the highest-dollar-value work, replacing those matters and keeping pace to meet budget becomes all the more difficult.
Not all law firm partnerships are profit-maximizing entities; rather, many balance profits with the psychic income partners get from collegiality, intrinsic joy of the work, contained performance pressures and satisfaction drawn from developing the next generation. The gap between what firms do based on these drivers and what they would do in a narrower pursuit of profitability separates individual firm performance.
Morgan, Lewis & Bockius has quickly grown from its Philadelphia roots to be one of the largest law firms in the world, all while adopting a business model most of its brethren at the top of The Am Law 100 eschew. Morgan Lewis has made it a point to keep practice areas other firms find aren’t profitable enough, and to do anything its clients need, even if it isn’t the highest-end work. The model has depressed the firm’s profitability at times, but hasn’t stopped it from growing into new practice areas and geographies.
The drumbeat was steady. The observers, myself included, were relentless. External pressures on law firm business models were mounting and firms had to act fast. They just weren’t doing enough to meet new market realities—or, for some, to survive. Maybe they listened. Maybe they had enough of the talk. But something happened in 2017, particularly in the second half of the year, that spurred law firms to post their best gains in about a decade. Perhaps a proverbial middle finger to the critics? Perhaps the critics were dead wrong? Perhaps the industry is turning a corner that no one saw coming? Or perhaps our definitions of success have shifted in a decade?
See Also: The Am Law 100/200 Early Reports