Is this the end of an era? Having dominated our gross revenue rankings since The Am Law 100 was first published in 1987, Skadden, Arps, Slate, Meagher & Flom has this year been overtaken by both DLA Piper and Baker & Mc­Kenzie to finish in third place for the first time ever.

Skadden had previously failed to top the pile only four times, and even then it took severe recessions to knock the New York firm from its perch: It placed second to Baker in our rankings for 1992, 1993, 2009, and 2010, neatly coinciding with the two most recent downturns.

Skadden’s focus on premium transactional work means that it will always likely be hit harder during periods of corporate inactivity than more midmarket firms like Baker and DLA. But in the past, when the markets rebounded, so did Skadden.

This time, however, the reversal may be permanent. The economic recovery is already reasonably well advanced—in the United States, at least—but rather than regaining its first-place mantle, Skadden fell to number three. Skadden did achieve top-line gross revenue growth for the first time in three years in 2011, with revenue rising just over 3 percent, to $2.165 billion, but this was dwarfed by the increases at Baker (7.7 percent) and DLA (14.6 percent).

The speed of the turnaround has been remarkable. In 2007 Skadden’s revenue exceeded Baker’s by more than $340 million. In 2011 it was $100 million behind.

This is largely because of stark differences in strategy. Baker and DLA each employ more than 3,700 attorneys and operate about 70 offices worldwide. Skadden currently has 1,832 lawyers and 24 offices—nine of which are in the U.S. Skadden simply has not shown the desire to expand with the same relentlessness as the two global giants.

Skadden has a policy of not discussing its financial performance, so the firm declined to comment on this year’s rankings, but it’s unlikely to be too concerned. While revenue is an obvious basis on which to select the top 100 firms for our survey, as a metric for comparing their financial performance it has less meaning. Far more important is the efficiency with which firms convert that revenue into profit. After all, it’s revenue for vanity, profit for sanity, or so the saying goes.

And when it comes to revenue per lawyer, profit margins, and profits per partner, Skadden leaves Baker and DLA in the dust. In fact, its average profits per partner of $2.48 million is the highest of any firm globally with revenues of more than $2 billion. So while Skadden’s number three finish may be the end of an era, its strategy still looks very sane indeed. —Chris Johnson