The world’s top-grossing law firms didn’t just cross the $100 billion revenue threshold for the first time in 2017—they vaulted across it.
Total revenue for the Global 100 increased a robust 6.4 percent in 2017, dwarfing rises of 2.8 percent and 3.1 percent from each of the previous two years. These firms brought in a collective $105.7 billion dollars, almost $10 billion more than the 2015 total. And a total of 41 firms cracked the $1 billion mark, up from 34 firms in 2016.
“It’s reflective of the fact that last year was the first in a long time that most firms had all practice areas faring well,” says former Clifford Chance managing partner Tony Williams, now a management consultant at Jomati.
That’s thanks to a booming mergers and acquisitions market, alongside a vibrant tech sector, with businesses of all shapes and sizes requiring legal help. Demand for cybersecurity and data protection work—fueled by the global impact of the European Union’s General Data Protection Regulation—has been brisk, and investigations practices have been busy handling hot-button issues ranging from sex discrimination to anti-money laundering and sanctions violations.
“All of these have been areas where global law firms have been active,” Williams explains.
There’s more good news: The members of the club also grew increasingly profitable, rebounding from a year in which profits per equity partner (PEP) were down by a half-percent to post a rise of 3.4 percent in 2017.
The one metric from 2017 that might give onlookers pause—a 3.9 percent decline in revenue per lawyer (RPL)—is actually indicative of another noteworthy trend: a tilt toward China.
While the 100 firms on the list employed more than 135,000 lawyers in the last year, an increase of 13,000 from the previous year, two Chinese firms that qualified for the first time in 2017 (of the four total new arrivals) added a total of more than 9,000 attorneys to the count, far outweighing the nearly 1,800 attorneys from the four American firms exiting the list. Combine that with over 1,200 attorneys added in the last year at Dentons, with its own massive China footprint, and these three firms account for more than 65 percent of that growth. With four China-heavy firms—comprising over 20,000 attorneys—together taking the final spots in RPL on the Global 100, it’s little surprise their surge is bringing down the aggregate figure.
Even beyond indigenous Chinese firms Yingke and Zhong Lun joining China-heavy King & Wood Mallesons and Dentons (which categorizes itself as “polycentric”), the Global 100 took on more of an international flavor in 2017 than in the two previous years, when American firms accounted for a record 81 spots on the list. That number dropped to 77 this year, with the balance composed of 13 U.K. firms, three from Canada, two from Australia and one from Korea. For a second year in a row, no firms from continental Europe made the cut.
Also for the second year in a row (and the third year in Global 100 history), U.S.-based firms occupied the top five firms in the revenue chart. The order shifted, however, with Kirkland & Ellis leapfrogging Latham & Watkins and Baker McKenzie to complete its march to the pinnacle. Kirkland and Latham both cracked $3 billion in total revenue for the first time in 2017. But while Latham posted a commendable 8 percent increase in revenue, Kirkland’s grew at a whopping 18 percent, more than any other American firm and trailing only Yingke, the U.K.’s CMS Legal Services and King & Wood Mallesons.
With regard to profitability, American dominance was even more pronounced. U.S.-based firms locked down the first nine spots in the PEP ranking, as well as 25 of the top 26 positions, with their run interrupted only by the U.K.’s Slaughter and May.
The RPL trend was similar. With the exception of Slaughter and Canada’s Osler, Hoskin & Harcourt, firms with their largest footprint in the United States took the first 42 spots in the chart.
“It’s a recognition that in other parts of the world, outside of North America, you are seeing clients looking more closely at fees, opting for alternative arrangements or fixed rates,” Williams says.
That reality is reflected in the largest U.K.-based firms witnessing stagnant revenues. Of the four biggest earners, revenue leader Clifford Chance, Linklaters and Freshfields Bruckhaus Deringer all posted meager gains of less than 1 percent, while Allen & Overy saw revenue slide by 1.5 percent. (Clifford Chance also shed 12 percent of its lawyers, allowing the firm to post an RPL figure that grew at 13.9 percent, higher than all but four other firms in the survey.)
And, unlike the last two years, currency fluctuations stemming from the fateful Brexit decision can’t be blamed for these firms’ lukewarm performance in the rankings. After sliding against the U.S. dollar and the Euro for two years since the 2015 vote, the pound has been largely stable for the past year.
Outside those four, the results were more mixed. While Herbert Smith Freehills saw revenues sink by 4.3 percent, Slaughter and May saw a rise of 6.5 percent. And CMS, which expanded operations to six countries in 2017—most notably Singapore—posted a whopping revenue growth of 34 percent. Gowling WLG, formed in early 2016 through the combination of Canada’s Gowlings and U.K. firm Wragge Lawrence Graham & Co, also had an enviable year, growing at 11 percent.
Moving beyond Britain, Norton Rose Fulbright flourished as it completed its merger with New York’s Chadbourne & Parke. The firm boosted gross revenues, RPL and PEP, all at more than 16 percent, with the latter touching 32 percent. Global chief executive Peter Martyr says the firm is “seeing some of the rewards for our major investments in global growth this past decade.”
Morrison & Foerster was the only other firm in the Global 100 to post gains over 12 percent in all three categories, including a 23 percent rise in PEP. Firm chair Larren M. Nashelsky attributed the gains to a “banner year working on landmark technology and life sciences matters,” both on the M&A side and in trials and investigations.
At the other extreme, two American firms saw the sharpest declines in the top line and in RPL: K&L Gates and Baker Botts. Both firms pointed to extraordinary contingency fee awards in 2016 that caused record results and said that 2017 marked a return to steady, measured growth.
The bottom end of the Global 100 saw less fluctuation than in previous years, with only four new arrivals, compared with five in 2016 and eight the previous year.
In addition to previously noted Yingke and Zhong Lun, Australia’s Allens and Canada’s McCarthy Tetrault joined the list. Allens’ placement at 81st in total revenue, tops among debutantes, along with a jump by Ashurst (which The American Lawyer categorizes as an Australian firm) from 84th to 64th, suggests that growing commodity prices have helped boost Australia’s lagging economy. McCarthy Tetrault was ranked the second-strongest law firm brand in Canada in a 2018 Acritas report, trailing fellow Global 100 member Blake, Cassels & Graydon.
Yingke, Zhong Lun, Allens and McCarthy displaced four U.S. firms: Kilpatrick Townsend, Williams & Connolly, Cadwalader Wickersham & Taft and Crowell & Moring, which was new to the list last year. In data collected for The Am Law 100, the first two firms saw slight growth of less than 2 percent in 2017, while the latter two witnessed declining revenue: down 3.6 percent for Crowell and down 9.7 percent for Cadwalader.
Two other members of the group have new formal names, and significantly higher rankings on the revenue chart, thanks to 2017 combinations with firms outside of the Global 100. Arnold & Porter Kaye Scholer, created through the 2017 merger of Arnold & Porter and Kaye Scholer, jumped from 67th to 45th. And Eversheds Sutherland, which was formed through the merger of the U.K.’s Eversheds and Atlanta-based Sutherland Asbill & Brennan, climbed from 71st when it was just Eversheds to 39th following the completion of the trans-Atlantic combination. The combination meant the firm no longer had the plurality of its lawyers in the United States and therefore was not included on the Am Law 100 or 200.
Looking forward to next year’s rankings, mergers can be expected to upend the order further, with several Global 100 firms—Foley & Lardner, Bryan Cave and Hunton & Williams—already combining with substantial firms that didn’t quite make the cut for their 2017 financial performances.
Another takeaway for all these firms—and those on the outside looking in—is the gap between total revenue growth and PEP. Even with plenty of money coming in, costs are growing across the world. That, according to Williams, is causing firms to “look much more carefully at who becomes an equity partner and who stays one.” Those elite American firms, consolidating their hold on the top of the list, are already doing this. Now it’s up to those who wish to be in their position to follow suit.