Well, now we know which firms were swimming naked after all. In fiscal 2012, The Am Law 100 posted modest gains on our key metrics. For gross revenue, revenue per lawyer, and profits per partners, firms notched low single-digit year-over-year increases. But these averages belied the unevenness of the recovery. Only 76 firms reported gross revenue increases last year. And only 66 firms had profit per partner increases—down from 80 firms and 72 firms, respectively, on the previous year’s Am Law 100 list.
Who were the lucky ones? They tended to have an international footprint, a strong transactions group, and a diverse set of practice areas. (The boutique labor and employment and immigration firms were the exception.) Many of these firms also have a strong brand and are known by clients for standout work in a particular area. The firms that did well also held the line on their equity partner head count and continued to raise rates, increase billable hours, or both. Some stood out for capitalizing on high-growth industries. Bracewell & Giuliani saw its profits and RPL skyrocket on energy work last year. Scrappy Fragomen, Del Rey, Bernsen & Loewy landed on The Am Law 100 thanks to international demand for immigration work.
Click here to see American Lawyer editor in chief Robin Sparkman discuss the 2013 Am Law 100 on Bloomberg TV.
Bulking up like a prizefighter was another winning strategy: DLA Piper ascends to the number one spot on our gross revenue chart this year thanks to an 8.6 percent spike in top-line growth: The firm reported gross revenue of $2.44 billion for 2012. DLA’s 7.7 percent year-over-year increase in head count helped propel this rise—making it the biggest and richest firm on The Am Law 100 this year. “Our platform and strategy are working for us,” says Jay Rains, cochairman of DLA Piper U.S. “Some firms have decided to retrench, but we’re willing to push forward.”
• As a whole, The Am Law 100′s revenue increased by 3.4 percent (or $2.43 billion) to $73.4 billion last year, a new record.
There’s also some good news in the latest year-over-year revenue-per-lawyer numbers. On average, firms posted a 2.6 percent RPL increase (to $844,245) on basically flat head count (just an 0.8 increase). The uptick suggests that attorneys are billing slightly more hours, that they are able to modestly increase their rates, and that firms are using their lawyers in an “efficient” way, economically speaking.
The profit numbers back this up, too. Net income—the amount of money that’s left over for equity partners after a firm pays all its other expenses—rose 4.2 percent, to an average of $28.2 million. Profits per partner also went up 4.2 percent, to an average of $1.47 million. Equity partner head count was flat, which indicates that the PPP increase is not a result of head count fluctuations (e.g., deequitizing partners and moving them to the expense line), but of real net income gains. (Note: The American Lawyer defines an equity partner as a partner who gets no more than half of his compensation on a fixed-income basis.)
The Am Law 100′s leverage also inched up from 3.49 to 3.52 as firms made incremental hires to their associate and nonequity ranks.
• But The Am Law 100 is not Lake Wobegon.
There was a noticeable difference in the results between The Am Law 1–50 and The Am Law 51–100. The firms ranked 1–50 posted a gross revenue increase of 3.6 percent and a profits per partner uptick of 8.0 percent. However, the firms ranked 51–100 reported a 3.0 percent increase in gross revenue and a pronounced 3.3 percent drop in profits. Why the big swing? On average The Am Law 1–50 firms have a more diversified global practice and do more work in premium billing practice areas. They also tend to have fewer equity and nonequity partners, which keeps expenses down and allows the firms to convert more of their revenue into profits.
The Am Law 1–50 also includes several firms that maintained a streak of solid results. Twenty-fifth-ranked Paul, Weiss, Rifkind, Wharton & Garrison, for instance, posted a 12.4 percent increase in gross revenue and an 8.2 percent rise in PPP even as it grew its attorney head count 9 percent. The firm continued to bring in deal work last year: It jumped from 55th to 20th on mergermarket’s M&A league tables, and it brought on more sweeping litigation and regulatory work, according to our online sibling The Am Law Daily.
DLA also grew in size and wealth. The firm, which is structured as a verein rather than as a traditional partnership, increased its attorney head count by 290 lawyers last year. A look at the firms ranked 1–10 on The Am Law 100 shows that DLA had the highest leverage (7.74) among the top 10. That size helped lead to an 8.6 percent rise in revenue, which pushed DLA past last year’s number one firm, Baker & McKenzie. A modest increase in billing rates, office expansion, and a favorable mix in practice areas (such as deal work, IP litigation, and investigations) and geographic areas (such as continental Europe and New York) spurred the revenue surge, says Rains. DLA “tries to serve clients as broadly as possible,” he adds. Getting more work from clients around the world happens “incrementally. But if you stay with it over time you’re successful,” says Rains.
The Am Law 51–100 had, on average, a more challenging year. Barnes & Thornburg, Chadbourne & Parke, Cozen O’Connor, and Wilson Elser Moskowitz Edelman & Dicker fell off our ranking. Chadbourne ended a 26-year stretch on The Am Law 100 and moved to the Second Hundred after a year of volatile partner churn, a 5.1 percent drop in revenue, and a 6.1 percent fall in PPP. Managing partner Andrew Giaccia told The Am Law Daily that the firm got off to a difficult start last year, but that its work on disputes and insolvency matters will be reflected in 2013 figures. “[That work] generates inventory into this year, and a ton of momentum,” Giaccia says.
Still, some firms in The Am Law 100′s second half bucked this downward trend. Houston’s Bracewell posted the list’s second-biggest RPL gain—an increase of 16.3 percent that brought this metric up to $750,000. (Kilpatrick Townsend, which had a sizable contingency fee, came in first place for RPL gains.) This was a particular feat for Bracewell, given that its head count increased by just 10 lawyers (from 422 to 432) last year. Bracewell also posted the highest PPP gain (42 percent) on The Am Law 100, bringing its PPP up to $1.45 million. In our gross revenue rankings, the firm rose 14 spots, leaving The Second Hundred to land on The Am Law 100 at number 92.
Bracewell managing partner Mark Evans says that the firm’s goal last year was “to get more and better business from our top clients.” That list included energy heavyweights such as Chesapeake Energy Corporation, ConocoPhillips Company, Halliburton, and KinderMorgan Inc. He adds that the firm was able to rely both on its historic Texas energy roots, and to leverage its offices in other cities, such as Washington, D.C., where its energy regulatory practice is based.
Fragomen also had a spectacular year. The firm jumped 16 ranks to land at number 86 on The Am Law 100. In 2005 the New York–headquartered immigration firm first appeared on The Second Hundred. Since then, its gross revenue and head count have almost tripled. In 2012 Fragomen grew to 404 lawyers, a 32 percent gain in head count from 2011, and it posted revenue of $346.5 million, up 20 percent from 2011. Ten percent of the gain in last year’s revenues was from its acquisition of 16 lawyers from rival Berry Appleman & Leiden, while the rest of the money was split between more work for current clients and work for new clients, says chairman of the executive committee Austin Fragomen. He says that the uptick in matters was “a function of the economy.” The more employment there is around the world, Fragomen says, the more work typically comes into his immigration firm. But he expects next year’s gross revenue to generally be flat.
Will other firms be able to keep up the good work in 2013? The budget impasse in the United States, continuing economic woes in Europe, and the slowdown in China’s growth are certainly a concern. But if the M&A market and global litigation (such as the LIBOR suits) continue to thrive, many of the biggest firms will have a different set of issues—growing while keeping their expenses in check. After a lengthy recession and a fitful recovery, that’s a nice problem to have.