Law firms in The Am Law 100 saw gross revenue fall 3.4 percent in 2009 as a weak economy took its toll on the nation’s largest law firms.
The results of The American Lawyer’s annual report on the profitability of the nation’s largest law firms, released online today, reflect the fact that firms have faced one of the toughest economic climates they have seen in years. Yet the figures are not as bad as firms predicted just a year ago. And the 23 New York firms, which are located at the epicenter of the financial crisis, outperformed the rest of their competitors on the list.
The 13 New York firms with more than $2 million in profits per partner saw that figure grow 3 percent from 2008. Davis Polk & Wardwell saw gross revenue climb 7.2 percent to $846 million, while profits per partner grew 9.7 percent to $2.09 million. Cravath, Swaine & Moore saw revenue increase 6.8 percent to $568.5 million while profits per partner went up 7.7 percent to $2.72 million.
Even the 10 New York firms with smaller profits per partner managed to post a 1 percent increase over 2008, according to the report. In contrast, the 77 non-New York firms on the list saw profits per partner fall 0.8 percent.
Nationally, revenue per lawyer in The Am Law 100 for the second straight year fell 2 percent to $802,381. Despite the smaller earnings, Am Law 100 firms eked out a 0.3 percent increase in profits per partner, to $1.26 million, the result of expense cutting and fewer equity partners.
The results come amid increased optimism about the state of the economy and the legal market. A quarterly survey of law firm managing partners nationwide by Citi Private Bank released Monday found that 78 percent of respondents expected profits to increase more than 5 percent over the next 12 months. Nearly three out of four expect revenues to increase over the next year, the survey found.
“No one is out of the woods yet because the economy is obviously still fragile,” Rohan S. Weerasinghe, senior partner at Shearman & Sterling, said Tuesday. “But it is looking stronger today than it was last year.”
Shearman & Sterling’s gross revenue fell 8.6 percent in 2009 to $801 million. Profits per equity partner grew 4.2 percent to $1.74 million.
Skadden, Arps, Slate, Meagher & Flom lost its long-held position as the No. 1 firm in terms of revenue on The Am Law 100 list for the first time since 1994. The firm was outpaced in revenue by Baker & McKenzie. Skadden last year grossed $2.1 billion to Baker’s $2.11 billion. But Skadden’s profits per partner reached $2.16 million, up 4.5 percent. Baker, in contrast, saw its profits per partner slip 17.8 percent to $990,000.
Wachtell, Lipton, Rosen & Katz, long listed as the most profitable firm, continued that trend. Profits per partner at Wachtell hit $4.3 million, up 7.2 percent.
Cadwalader Wickersham & Taft, after two years of declining profits per partner, in 2009 posted the second largest increase in profits per partner in The Am Law 100—up 28 percent to $2.41 million, despite gross revenues falling nearly 10 percent to $456.5 million. The difference was explained largely by a reduction in the number of partners at the firm.
At some firms, the downturn hit not just revenues but profits as well. Willkie Farr & Gallagher for the second year in a row saw both revenues and profitability decline, with gross revenue off 5.8 percent to reach $549.5 million and profits per partner down 5 percent to $2 million. Simpson Thacher & Bartlett’s profits per partner declined 2.4 percent to $2.42 million, while gross revenue slipped 3.7 percent to $870.5 million. Schulte Roth & Zabel’s profits per partner slipped 7 percent to $2.13 million, while revenues fell 5.5 percent to $397 million.
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