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The American Lawyer published results from its annual Am Law 200 report, which includes data and rankings for the nation’s Second Hundred highest grossing law firms. Overall, gross revenue increased on average by 3.1 percent, net income grew by 2.9 percent, profit per equity partner grew by 2.8 percent, revenue per lawyer increased 1.6 percent, and overall headcount rose 1.5 percent. According to the report, eleven Second Hundred firms saw double-digit revenue growth and thirty-eight firms saw revenue increase more than five percent.

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The 2019 Am Law 200 report shows a tempered version of the financial strength demonstrated by the Am Law 100 notes Gina Passarella, Editor-in-Chief of The American Lawyer and ALM’s Global Legal Brands. “Firms, on average, performed well, but the growth was significantly less than what the first 100 firms experienced, highlighting the added pressures faced by smaller firms with less differentiation. In that sense, the Am Law 100’s better performance in 2018 is emblematic of another feature of that larger group: greater historical volatility. Second Hundred managing partners need not look upon that with envy,” (as quoted in The American Lawyer).

See more highlights from The Am Law 200 on The American Lawyer.

Contact Bill Sugarman for more information.

In a recent article, The American Lawyer takes a deep dive look at the strategies and practices of a small group of firms that have delivered year-over-year growth since the Great Recession. According to ALM Intelligence data, only 27 of the 100 firms on the Am Law rankings have had year-over-year growth in revenue since the 2009 fiscal year. To understand how a select group of firms turned the recession into an opportunity to thrive, not just survive, The American Lawyer spoke with a group of leaders who played a pivotal role in reimagining their firms’ trajectories.

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So, what characteristics do these law firms have in common? Janet Stanton of law firm consultancy Adam Smith, Esq. elaborates on the subject, noting “They tend to operate in a more business-like way, which means a focus on profitability, intentional planning, strategic intake and succession planning for leadership roles and client management. From the 1980s to 2008, law land didn’t have to do any of these things, so these firms that are pulling away changed their strategy, notes Stanton. These firms have been able to get it right for nearly a decade, and each had to develop a unique strategy to make it happen,” (as quoted in The American Lawyer).

According to the article, the law firms that have delivered year-over-year growth since the 2009 fiscal year include: Akin Gump; Baker & Hostetler; Barnes & Thornburg; Cooley; Davis Polk; Duane Morris; Fox Rothschild; Fragomen; Gibson Dunn; Goodwin Procter; Holland & Knight; Jackson Lewis; King & Spalding; Kirkland & Ellis; Latham & Watkins; McGuireWoods; Milbank; Morgan Lewis; Ogletree Deakins; Paul Weiss; Perkins Coie; Polsinelli; Proskauer Rose; Ropes & Gray; Sheppard Mullin; Simpson Thacher; and Williams & Connolly.

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer released their 32nd annual Am Law 100 report, which includes data and rankings for the nation’s 100 highest grossing law firms. Overall, gross revenue grew by 8 percent in 2018, coming in at a record breaking $98.7 billion. Additionally, net income increased by 7.8 percent, profit per equity partner grew by 6.5 percent, revenue per lawyer moved up 4.2 percent, and total attorney headcount rose 3.6 percent.

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According to the report, thirty-seven firms posted gross revenue over $1 billion in 2018, six more law firms than in 2017. Additionally, ninety-three firms reported gains in revenue, up from 85 firms last year. For 2018, the top 10 firms accounted for 26 percent of the Am Law 100’s total revenue. The next 17 firms accounted for the next 25 percent of revenue. Firms No. 28 thru 53 accounted for another quarter of the revenue, and the final 47 firms generated the remaining 24 percent of the total Am Law 100 firms, (as quoted in The American Lawyer).

For the second straight year, Kirkland & Ellis landed the No. 1 spot as the highest grossing law firm in 2018, with $3.757 billion in revenue, up 18.7% from 2017. Latham & Watkins remained in the No. 2 spot, rising 10.5% in total revenue to $3.386 billion. Baker & McKenzie retained the No. 3 spot, with $2.900 billion in revenue. DLA Piper remained in its respective spot from last year coming in at No. 4 with $2.836 billion. Skadden Arps claimed the No. 5 spot, up 3.5 percent to 2.673 billion in 2018.

See more highlights from The Am Law 100 on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports that law firm profitability is at a record high, according to a recent report released by ALM Intelligence. The report revealed that the average equity partner, at an Am Law 200 firm, received $1.8 million in profit sharing compensation last year. This is higher than any point in recorded history (the Am Law 200 data goes back to 1984). In addition, average profits per equity partner are nearly $500k dollars more, in nominal terms, than they were at the peak in profitability experienced before the past downturn. Even after adjusting for inflation, profits per equity partner are $125k per year more than they were a decade ago.

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Given the myriad of obstacles law firms are currently facing, this raises an obvious question — how are law firms doing it? Director at ALM Legal Intelligence, Nicholas Bruch investigates, positing that there are four ways to increase firm wide profitability. The most straightforward path is to focus on increasing revenue per lawyer, notes Bruch. This can be achieved in several ways. Firms can increase worked hours by, for example, increasing hourly targets on associates. They can also increase utilization rates or realization rates. While these “levers” can boost a firm’s revenue per lawyer the most potent lever is rate increases. Increasing prices – which most often means increasing hourly rates – is the most rapid and straightforward path to increasing revenue per lawyer, (as quoted in The American Lawyer).

The next, most obvious, path to higher PPEP is to reduce costs. Again, there are multiple ways to accomplish this goal. According to Bruch, firms can reduce salary costs. This can be accomplished by cutting salaries or, more realistically, by shifting work to lower cost resources – either less skilled individuals or individuals who are based in lower cost locations. While these strategies have been pursued by some firms, Bruch notes that the more common route to lower costs has been to reduce both direct and indirect expenses, or more broadly speaking, “overhead”. Bruch adds that the last two paths to boost a firm’s profits per equity partner are to increase the firms’ leverage by either hiring more associates or by shifting the structure of the partnership to include more non-equity partners and fewer equity partners, (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports that recent data released by ALM Intelligence shows female attorneys have ascended into Big Law’s partnership ranks at a faster pace than ever before in the wake of the #MeToo movement. According to the analysis, the pace of promotions for female lawyers since the #MeToo movement began has soared from 125 per month to 265 a month —or more than double the rate from the previous period.

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Mary Leslie Smith, who became managing partner of Foley & Lardner’s Miami office earlier this year, notes that the movement has raised awareness. “What the Harvey Weinstein and #MeToo movement has done is raise awareness,” Smith said. “Firms began to look internally and ask, ‘Are we doing right by our women?’”

In addition, the article reports on several high-profile elevations of women in Big Law including Donna Wilson, named to become CEO and managing partner of Manatt, Phelps & Phillips in July 2019; Julie Jones, who will become the first female chair of Ropes & Gray at the end of 2019; and Patricia Brown Holmes, who became managing partner of Riley Safer Holmes & Cancila in April.

Debra Baker, a lawyer and managing director at GrowthPlay, concludes that “the most significant force now encouraging firms to promote women is an increased demand by clients for diversity. Clients are looking for diverse lawyers, not just to appear politically correct, but because they want advisers that know something about their businesses, will share fresh perspectives and work collaboratively, added Baker, noting that women often do better on those fronts since they “tend to score higher on social sensitivity.”

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

Law firms have a lot of room to increase leverage, despite clients pushing back against the use of more junior lawyers, reports ALM Intelligence Analyst, Nicholas Bruch from The American Lawyer. Bruch notes that real-world pyramid structures will never be perfect, nor will work cascade down them smoothly. However, he adds it’s hard to escape the inference that there is a lot more room for increased delegation and leverage. In addition, there are many forces that align against increasing leverage, however, they can be overcome.

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Nicholas Bruch notes that a starting point is that partners be clear on what increasing leverage requires. “It is not achieved, as some partners initially think, by adding associate hours on their matters, something they know to be difficult given the pushback they get from clients on ‘overstaffing.’ Rather it is about replacing partner hours with associate hours, keeping total hours close to constant, and bringing down total billings,” Bruch adds.

According to Bruch, it helps to also track and report out on leverage as closely as firms track partner hours; to get profitability measurement right (i.e. not just realization, but the combined effect of realization and leverage); and to have structured discussions about increasing leverage among partners (so all can see leverage can be increased without departing from the group identity as great lawyers). Curiously, raising partner billing rates also plays a role: some partners like to keep their rates low as they know not all they do is true partner work; raising partner rates leans against this, (as quoted in The American Lawyer).

Nicholas Bruch concludes that that the overarching message is that firms need to grow PPP to be competitive in the market for partner talent; increased leverage is a proven driver of PPP growth; today’s leverage levels are about half of what they could be; and firms have proven they can raise leverage despite the forces that align against doing so. The implication: leverage increases have a lot further to go.

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer published results from its annual Am Law 200 report, which includes data and rankings for the nation’s Second Hundred highest grossing law firms. Overall, gross revenue decreased on average by 0.2 percent, net income decreased by 1.4 percent, profit per equity partner decreased by 1.4 percent, revenue per lawyer decreased by 0.3 percent, and headcount rose 0.1 percent.

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Although the group as a whole declined in all major metrics, the report revealed that eight Second Hundred firms saw double-digit revenue growth and 22 firms had growth of 5 percent or more. Among the Second Hundred firms, Kobre & Kim had the largest increase in revenue, up by 49 percent. According to the report, one firm dropped from the Am Law 100 to the Second Hundred this year: Pepper Hamilton. Meanwhile, six firms moved onto the Am Law 200. They were Buchalter; Cole Schotz; Eckert Seamans; Goldberg Segalla; Herrick Feinstein; and Marshall Dennehey Warner Coleman & Goggin, (as quoted in The American Lawyer).

“The 2018 Am Law 200 data reflects a stark contrast to this year’s Am Law 100,” notes Gina Passarella, Editor-in-Chief of The American Lawyer. “The declines in key financial metrics among the Am Law Second Hundred were more to do with the firms who fell off the list via merger or closure than an overall decline in financial health of the group as a whole. These stats show there is much more volatility in the Second Hundred when it comes to who is on or off the list than we saw with the Am Law 100.”

Senior Analyst at ALM Intelligence, Nicholas Bruch adds, “Two important findings emerge from the Am Law 200 data. First, many firms within the Second Hundred are struggling with the transition the legal market is undergoing right now. Am Law Second Hundred firms fared less well, on average than their larger peers. The second finding is more hopeful. Many firms within the Second Hundred produced strong years. This points to a fact we see very clearly in the Am Law data: that some firms are finding ways to manage difficult market conditions and outperform the market.”

See more highlights from The Am Law 200 on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer released results from its annual Lateral Report, which tracked lateral movement strategies among the nation’s largest and most successful law firms. The report, conducted by ALM Intelligence, reported 2,895 lateral moves among Am Law 200 firms in 2017, decreasing 2.3% from 2016. According to the report, law firm leaders reported a variety of strategies aimed at improving lateral hiring such as geographic expansion, spending top dollar on superstar partners, hiring lateral groups, recruiting experts in other fields, and expanding lower cost-firms in larger markets.

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Chicago-based Winston & Strawn hired the most lateral partners of any Am Law 200 firm, the report revealed. The firm brought on 73 partners, representing nearly 22 percent of its partner ranks. DLA Piper hired the second-most partners, 69—a mere 5.7 percent of its partnership. The next three firms to grow their partner ranks by more than 10 percent through lateral hiring included Cozen O’Connor, Fox Rothschild and Hogan Lovells opening new offices in Pittsburgh, Los Angeles and Seattle, respectively (as quoted in The American Lawyer).

Kansas City, Missouri-based Polsinelli is another firm to see recent growth in the lateral partner market. Much of the firm’s recent growth has been in Chicago, where it has grown from just six lawyers in 2006 to 99 as of last December. The firm has found success recruiting from some of the city’s legacy firms, many of which have pursued a more international, higher-profit model (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

Millennials make up the largest generational group among lawyers at large and midsize firms, according to a report released by ALM Intelligence on Law.com.

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Data collected by ALM Intelligence reported millennials (ages 18 to 36) now outnumber lawyers from Generation X (ages 37 to 52) and baby boomers (ages 53 to 71) at firms in the Am Law 200 and The National Law Journal’s NLJ 500. According to the report, millennials make up 43 percent of lawyers at nearly 400 of the nation’s top law firms included in ALM’s data. Millennials represent 88 percent of associates and only 5 percent of partners. Generation X lawyers make up 52 percent of partners, and baby boomers make up 40 percent of partners.

“The numbers starkly illustrate the reality facing law firm leaders: Millennials will soon take over the legal profession in sheer numbers—and soon enough they’ll dominate leadership positions and partnerships too,” ALM journalist, Lizzy McLellan reports. “Employing millennials appears to go hand-in-hand with profitability—illustrating how Big Law continues to use rainmakers to land major clients and young lawyers to put in long hours serving them.”

See the full report and article on The American Lawyer.

Please contact Bill Sugarman for more information.