Call it the Don Draper effect: standing still while the world around you is changing rapidly. That’s largely what The Am Law 100 did last year. It posted modest but nevertheless respectable gains. Revenue, revenue per lawyer, average compensation–all partners, and profits per equity partner all edged up: 3.4 percent, 2.6 percent, 3.0 percent, and 4.2 percent, respectively. It wasn’t a flashy year, but a few things stood out.
• Legitimate good news. Revenue per lawyer is up not because firms added head count—that metric only nudged up 0.8 percent—but primarily as a result of positive economic indicators. Firms were able to raise rates, and their lawyers, as a rule, were able to bill more hours (although this varied widely by practice area). Profits followed a similar path. Net income edged up 4.2 percent, and profits per partner rose even as equity partner head count stayed flat. This suggests that firms posted real profit gains, as opposed to (ahem) adjusting their partner head count.
It also looks as though partner deequitizing has slowed. In years past we saw noticeable swings in the number of partners leaving the equity partner ranks, at the same time that firms swelled their nonequity class. Equity partner head count stayed almost exactly the same last year: There were 19,221 equity partners in 2012 and 19,225 in 2011. Firms are keeping a tight rein on equity partner expansion, but they are not taking a hatchet to these lawyers either.
• Foreign Affairs. The 2013 list continues to show the power of having a global footprint. DLA Piper glided into the number one spot on our roster this year. The verein has a long and complicated history of acquisitions and mergers dating back more than 200 years. But in 2012 its size and global reach—67 percent of its lawyers are outside the United States—propelled the firm up both our head count and gross revenue charts: It’s now the biggest firm in The Am Law 100, with 4,036 lawyers, and the richest, with $2.44 billion in revenue. In a difficult economy, DLA has found room to grow in certain practice areas (e.g., investigations and litigation) and locations (e.g., expanding in New York) to offset slower areas around the globe.
• Margin Calls. In recent years, the mainstream business press has devoted increasing amounts of ink to law firms’ foibles—lawyer oversupply, financial shenanigans (see "D" for Dewey), and the lateral partner Whack-A-Mole—but one thing that doesn’t get a lot of attention is profit margin. The Am Law 100 continues to rack up profit margin numbers that, compared to almost any Fortune 500 industry, can’t fail to impress. In 2012 firms posted, on average, a profit margin of 38 percent, the same as 2011. Some firms far exceeded this: Wachtell had a 64 percent profit margin. Quinn Emanuel, with 50 percent more equity partners, had a 63 percent profit margin. You can knock The Am Law 100, with good reason, for its problems with gender and racial diversity, issues with associate recruitment and retention, or lack of creativity about billing—but it’s hard to argue with these firms’ business savvy when it comes to their own bottom line.