“And you get a car, and you get a car and you get a car!”
As I went through the results of our Am Law 100 reporting, I couldn’t help but think of a classic Oprah Winfrey giveaway special. Like her shows where guests would all receive extravagant gifts, nearly all of the nation’s top-grossing firms took home big gains in top-line revenue and partner profits in 2018.
But the Oprah analogy isn’t quite fair, as it would suggest these firms didn’t work exceptionally hard to earn those premiums. Only seven of the 100 largest firms saw their revenue decline in 2018. About 60 percent saw growth of 5 percent or more. Last year’s financial results took some of the wind out of the argument that increased stratification among segments of the top 100 exists.
But there are clearly standouts, such as Kirkland & Ellis adding nearly $600 million in revenue in 2018, on top of adding almost the same the year before that. There are only a handful of firms that are pulling in such dramatic figures. In fact, if firms at all aim to move into a certain Am Law 100 tier (I’m not suggesting they should), many may be disappointed. Moving up in the rankings when everyone is having such a great year is difficult to do. Only 31 firms improved their ranking, and typically by only a slot or two. Those who saw big gains in rank did so via merger or close ties to the tech industry.
We saw California firms and those that represent major tech companies have a strong year, as did firms heavy in the M&A and private equity space (read Christine Simmons’ piece on how Wachtell and Cravath capitalized on that momentum). Litigation and other countercyclical practices helped firms further down the Am Law 100. Rate increases helped just about everyone.
Within 2018′s stellar returns there is plenty of nuance. As my colleague Nicholas Bruch of ALM Intelligence told me, evidence of the stressors on demand, including alternative legal service providers, the Big Four, technology and client competition, are in the numbers. In the years leading up to the recession, year-over-year revenue growth was consistently in the 12 to 14 percent range. This year, 10 years after the recession, we are celebrating 8 percent as a watershed moment.
Dan Packel breaks down the story behind the numbers and how various market segments fared in our overview story. We also have a look at how a few firms were able to turn the Great Recession into a great opportunity. And in an interesting finding in the numbers over 10 years, we see how the top 50 have shrunk in every major U.S. market and grown in every major international market, creating significant implications for profitability. On top of that, we tally the toll that discounts and writedowns have taken on the Am Law 100′s top and bottom lines.
We offer a big congratulations to the Am Law 100 for a successful year. We will continue to cover and analyze the opportunities and challenges in the market, as well as what these numbers may look like when a recession inevitably hits. But as we note within this issue, firm leaders are feeling that if they can get one or two more strong years under their belts, they can weather any pending storm just fine.