Spring has sprung. The days are getting longer. Flowers are blooming. And for Big Law, that can only mean one thing. It’s Am Law season. A considerable amount of time will be spent in the coming weeks and months teasing out the secrets contained within the Am Law 100’s vast array of financial data.

Much, in fact, has already been written, though the official rankings have yet to be released. In advance of the publication of the full list, The American Lawyer has been previewing the numbers in a series of profiles of individual firms. In that vein, I thought I’d provide a different kind of preview, a retrospective with a twist of sorts. In order to give some context for what is to come, I endeavored to examine the financial data through the perspective of the 100th ranked firm.

For the uninitiated, the Am Law 100 rankings are first and foremost a list of the top-100 U.S.-centered firms by worldwide gross revenue. Accordingly, the 100th ranked firm—the Big Law equivalent of that other spring madness, the team awarded the final at-large bid to college basketball’s Big Dance—must edge out its nearest rival in the revenue metric in order to gain inclusion onto the list.

Though the Am Law 100 rankings are published with tremendous fanfare, unlike the NCAA’s Cinderellas, the story of the Am Law 100’s final firm often gets lost in the shuffle. That’s unfortunate. Firms on the cusp of inclusion or exclusion in the Am Law 100 are under a significant amount of pressure. They are squeezed from above by the ever-growing reach of the larger global players and from below by the smaller regional specialists that are able to leverage their local knowledge and connections to maximum effect. Examining the fate of those firms can provide another lens for understanding the state of Big Law.

100th Ranked Firm_Figure 1

As shown in the chart below, the year over year change in revenue for the 100th ranked firm has seen remarkable volatility. Consider the movement from FY06 to FY07 to that from FY12 to FY13. In FY07, Kilpatrick Stockton, to achieve the 100th ranking, posted 9.3% more revenue than Ballard Spahr’s 100th ranked revenue total from the prior fiscal year. On the other hand, Baker Donelson, in FY14, earned the final spot on the Am Law 100 list while delivering 1.0% less revenue than that of the previous year’s 100th ranked firm.

100th Ranked Firm_Figure 2

However, most significant is the growing disparity in gross revenue between the Am Law 100′s first and last ranked firms. For the 2006 fiscal year, Ballard Spahr, the 100th ranked firm, reported $243 million in gross revenue while in fiscal year 2015, Kramer Levin showed $332 million, a 37% increase whereas the 1st ranked firm posted a 43% increase over the same time period. The increasing disparity is illustrated in the chart below.

100th Ranked Firm_Figure 3

Since fiscal year 2010, the gross revenue gap separating the two firms has grown each year, and in 2015, it reached a ten-year high as the spread hit $2.3 billion. In FY06, that difference was a mere $1.6 billion.

Will this trend continue when the FY16 figures are released, and if it does, how will the firm at the bottom of the list respond? The recent past may provide an answer.

Kilpatrick Stockton (#100 in FY07 and FY08) and McKenna Long & Aldridge (#100 in FY10) have gone the merger and acquisition route. With its merger with Townsend and Townsend and Crew in 2011, the newly formed Kilpatrick Townsend & Stockton has risen up the Am Law charts hitting #73 in FY15. And McKenna Long & Aldridge has become a true global player as a result of its June 2015 merger with Dentons. That said, ALM Intelligence research on mergers and acquisitions between Am Law ranked firms suggests firm leaders should proceed with caution.

The pros and cons of large scale law firm mergers and acquisitions. The impact of increased globalization. These are big issues in Big Law. Going forward, when the Am Law rankings are published, don’t overlook #100, because that firm is often at the forefront facing those challenges.

ALM Intelligence Notes:

  • Legal Services Sourcing: More evidence law departments are rethinking the build versus buy equation. InsideCounsel recently reported that some fintech startups are innovating too quickly for many of their outside counsel partners. The perceived failure of firms to keep up with the industry’s emerging issues and technologies has led some GCs to seek new representation or bring the work in-house.
  • Legalweek West: Register now to join legal industry leaders at ALM’s Legalweek West conference in San Francisco from June 12-13. Legalweek West will offer five areas of focus presented as events-within-an-event to address the key issues at a tactical level as well: LegalOps, LegalDiversityForum, LegalSmallFirm, LegalExecutive in addition to the anchor of Legaltech, the world’s largest and longest running trade show for legal technology.

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