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A mistaken and dangerous belief pervades much thinking about the U.S. legal market: that it is consolidating as larger firms grow more quickly than the market by taking share from their smaller rivals. A thoughtful look at the numbers reveals that no such consolidation is happening. This is an important correction to the prevailing wisdom. The mistaken perception of consolidation drives firms to bulk up—by merging, acquiring and hiring laterally—to avoid being at a competitive disadvantage. Such moves are high-risk, disruptive distractions for leaders whose attention is better focused elsewhere. Despite the intense effort involved, they create no strategic advantage. Wise partner groups and firm leaders will see past the prevailing dogma and focus instead on optimizing the performance of organically growing businesses.

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Consolidation Is Simply Not Happening

Let’s start with the data. The graph below shows the share of worldwide Am Law 200 revenue that has accrued to the Am Law 10, Am Law 25, and Am Law 50 (respectively, the largest 10, 25 and 50 Am Law firms) over the last 20 years. The data shows that the shares of these groupings grew by 5, 8 and 10 percent, respectively. Surely this is consolidation? No, not at all.

The graphs mix two completely different things: (1) the domestic revenues of all Am Law firms and (2) revenues from the disparate set of international markets in which individual Am Law firms chose to compete to varying degrees (or not at all). What the revenue graph shows is merely that larger firms grew worldwide revenues more quickly than did smaller firms, but there is nothing to say they did so by taking share from smaller rivals and thus are realizing a competitive advantage from their greater scale.

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