The world’s legal market continued on its upward path last year. Given the sluggish growth, at best, of the globe’s major economies and the ongoing economic uncertainty surrounding some members of the European Union, that in itself should be considered some achievement. Total revenues for the world’s 100 largest law firms grew by just over $3 billion last year, hitting $85 billion, up from $81.9 billion in 2011. Total lawyer numbers also grew by a shade under 4,000 to reach 108,378, a year-to-year increase of 3.8 percent.

On the downside, that growth in revenues represents a slowdown from 2011, when the cash pile for the top 100 grew by 6.8 percent. Productivity stalled, as average revenue per lawyer—our most reliable measure of the legal sector’s health—was flat ($784,297 in 2012, compared to $784,419 in 2011).

For the first time in our global rankings, DLA Piper took the top spot as the world’s highest-grossing firm, displacing Baker & McKenzie. DLA’s gross revenue grew by 8.6 percent in 2012, reaching $2.44 billion, surpassing Baker, which saw its top line grow by 4.6 percent, to $2.42 billion. DLA’s revenue per lawyer grew 0.8 percent, to $605,000, while Baker’s increased 1.7 percent, to $590,000. (This is the third year that The American Lawyer has counted DLA’s American and international practices as a combined firm.)

As DLA Piper’s numbers show, there are growth opportunities in the world’s legal market. But for the most part, firms remain unsure of just how sustainable the tentative signs of a recovery are, and they continue to be exposed to sluggish markets. “It’s a bit like that line from Jaws: ‘Just when you thought it was safe to go back in the water,’ ” says Norton Rose Fulbright chief executive Peter Martyr. “ Everything seems safe, but then there’s another setback which unsettles activity.”

Of the 10 highest-grossing firms, four are British—Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters, and Allen & Overy—but in the five years since the collapse of Lehman Brothers, all have lost ground to their U.S. rivals. In total, 23 firms headquartered outside the U.S. made it into the top 100 by revenue. (Both DLA Piper and Hogan Lovells have a plurality of their lawyers in the United States, so we consider them U.S. firms for the purposes of this analysis.) When firms are ranked by head count, the number of non–U.S. firms grows to 36, including eight from China (King & Wood Mallesons is the only firm with an indigenous Chinese business to make the “Most Revenues” list).

While growth of Chinese firms is expected to be one of the most prominent trends in the Global 100 over the next five years, runaway organic expansion is unlikely to be back on the agenda. “If you look at the elite global legal market overall, you should not expect to see very strong growth over the next few years,” says Linklaters managing partner Simon Davies. “There are some growth opportunities, but, at least for established markets, they mostly involve taking market share.”

In many ways the downturn since 2008 followed a familiar narrative: a core group of U.S. firms outperforming their foreign peers, thanks to the depth of the American litigation market and, more recently, improvement in the U.S. economy. Of the 10 worst-performing firms ranked by compound annual growth rate (CAGR) in revenue per lawyer over the last five years, seven come from the United Kingdom, with Clifford Chance, Freshfields, and Linklaters among them. Of the best-performing firms ranked by revenue per lawyer CAGR, three are U.S. entities that are known for the strength of their litigation practices—Quinn Emanuel Urquhart & Sullivan, Kirkland & Ellis, and Gibson, Dunn & Crutcher.

Given all that, one might have expected the British firms to have pulled back from their long-held plans for global domination. Most were hit hard during the slowdown, as a short spike in economic crisis work in such areas as restructuring gave way to depressed transactional flows.

But that expectation would be wrong. In the last three years, even as they endured the worst of the recession, the U.K. firms have doubled down on their global ambitions. Offices, alliances, and full-on mergers have been launched in Australia, Norton Rose Fulbright has gone from one of the City of London’s forgotten firms to a billion-dollar business, Lovells has thrown in its lot with Hogan & Hartson, Clyde & Co is well on the way to becoming the global firm of choice for the insurance sector, and Herbert Smith Freehills has opened in New York. Allen & Overy alone has added 11 new offices since 2009 while increasing the size of its equity partnership from 358 to 442.

“The more recessions you go through, the more you realize that you need to focus on two things—survival and taking advantage of opportunities as they emerge,” says Norton Rose’s Martyr. For his firm this has meant a series of transformational combinations in Australia, South Africa, Canada, and, in June of this year, with Fulbright & Jaworski in the U.S.

In the process, Norton Rose’s revenues have gone from $582.5 million in 2008 to $1.33 billion last year. Fulbright’s revenues in 2012 were just under $600 million, so when the combined firm’s numbers are counted for the first time next year, it is likely to be an almost $2 billion business.

Norton Rose Fulbright’s expansion path started in Australia, and it is hard to think of an international legal market that has been transformed to such an extent in such a short space of time. Over the last three years, Australia has gone from a quiet legal backwater to a significant player.

Since Norton Rose merged with Deacons in January 2010, Allens has formed an alliance with Linklaters, Freehills has merged with Herbert Smith, Blake Dawson has tied up with Ashurst, Phillips Fox has fully integrated with its longtime partner DLA Piper, K&L Gates has picked up local practice Middletons, and Mallesons has done a deal with China’s King & Wood. Include the greenfield openings by Allen & Overy, Clifford Chance, and Clyde & Co, and it’s clear that the Australian market has changed beyond recognition. Of the Australian firms that have typically featured in our Global 100 rankings, just Clayton Utz and Minter Ellison remain in their original incarnation.

It’s been Australia’s importance in relation to Asia, underpinned by a commodities boom, that has elevated the country’s importance. “What changed to make a merger more compelling than five years ago was our realization of the new capital flows coming from the U.S. and Asia into Australia and outbound flows from the Australian economy,” says Mark Rigotti, a legacy Freehills partner who is now a member of Herbert Smith Freehills’s management team.

Nonetheless, these deals have not been predicated solely on aggressive opportunism. Herbert Smith’s October 2012 merger with Freehills, for instance, came after Herbert Smith’s alliances in Germany and the Netherlands ended, and after a period when its profitability had continued to lag far behind the Magic Circle’s. In the global legal market, Herbert Smith was starting to look a little undersized.

“It’s easier to do a deal in better market conditions,” says Herbert Smith senior partner Jonathan Scott. “However, both firms realized that they needed repositioning and that both would risk becoming more marginal players over time if we didn’t do this merger.”

Of those foreign firms that have been relatively successful over the last five years, it’s notable that two have very clearly defined strengths in specific sectors. Neither Bird & Bird nor Clyde & Co made it into the top 100 until 2011, but both have followed a growth plan of international expansion built on their strongest practices—technology, media, and telecoms for Bird & Bird and insurance for Clydes.

“The last five years have favored firms that have focused on their core strengths,” says Peter Hasson, chief executive of Clyde & Co. “We’ve seen a big change in some of the markets we work in, such as insurance and commodities, where the focus now is on value for money, with a heavy pressure on pricing, and on how firms work with their clients.”

Clydes & Co’s top line was boosted, in particular, by its 2011 merger with rival U.K. insurance practice Barlow Lyde & Gilbert. But it has also continued its expansion in the U.S. with a new Atlanta office, added a pair of Australian offices, opened in Beijing, Madrid, and Libya, and entered into an association with an Indonesian firm.

Of course, the other part of this expansionist narrative—one that would be all too familiar to more circumspect American managing partners—is that this growth has not translated into improved profitability. Quite the opposite: Of the 10 worst-performing firms ranked by CAGR in profits per equity partner (PPP), all except one—Fried, Frank, Harris, Shriver & Jacobson—are based outside of the U.S. The U.K. firms’ numbers in our rankings have undoubtedly been affected by a weaker British pound (this year we used a rate of £1=1.5853, down from $1.8545 in 2008 and £2.0020 in 2007), and three members of the Magic Circle remain in the top 25 most profitable practices. But for the likes of legacy Herbert Smith, Ashurst, legacy Norton Rose, and legacy Lovells, their transformational deals have not been achieved from a position of high profitability.

“Is our ethos that we want to be the richest firm, like a Wall Street practice?” Martyr says. “No, because we’re not a Wall Street firm that doesn’t have any foreign offices.” To Martyr, the emphasis on the bottom line reflects a hangover from the boom times of the 1990s and 2000s when, he claims, “good equaled more money.”

That said, no managing partner can sit idly by and let his or her firm’s PPP lag far behind its rivals. Change may be happening at an unprecedented level among the world’s largest firms, as strategic opportunities emerge and clients demand more return on their legal budgets, but partners still expect some payoff from their investments—wherever they are in the world.

Richard Lloyd is a freelance writer in Washington, D.C.