The American Lawyer reports the legal industry is poised to have its strongest annual performance in a decade, according to a recent report by Wells Fargo Private Bank’s legal specialty group. The report, drawn from a survey of 120 firms, found that revenue was up 7 percent industry-wide, buoyed by demand growth of 3.3 percent when compared to the same time period last year. The results, Wells Fargo said, “almost certainly assure that the industry will report its strongest annual performance in a decade.”
The report revealed revenue at the 50 largest firms grew by 8.2 percent, compared with 5.7 percent at firms ranked 51 to 100 and 2.3 percent for the Second Hundred firms. In addition to revenue growth, law firm demand increased 4.3 percent for Am Law 50 firms; rose 2.5 percent for Am Law 50-100 firms; and dipped 0.2 percent for the Second Hundred. Firms also reported strong increases in profitability, with income to equity partners up 7.7 percent from a year ago at the same time. That is partly driven by shrinking partner head count. The survey noted a 3.5 percent decline in equity partner full- time equivalents in 2018, with 75 percent of firms reporting a decline in partner head count, (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 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.
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 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.
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.
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.
Law firm financial performance finished 2017 on a positive note, with a larger segment of the legal market contributing to upward trends in revenue and profits than in recent years, according to a new report by Wells Fargo Private Bank’s Legal Specialty Group.
The report, drawn from a survey of 160 firms, reported that law firm revenue and profits were up between 3 percent and 4 percent for the legal market overall. Firms in the Am Law 50 reported revenue growth of 6.8 percent in 2017, while the Am Law 100 as a whole reported a 5.26 percent increase in revenue. Firms in the Am Law Second Hundred saw a smaller revenue uptick of 2.33 percent in 2017, the report revealed (as quoted in The American Lawyer).
“The enthusiasm is derived from a slight-to-moderate improvement in transactional activity,” the Wells Fargo report said. “Most believe the corporate tax changes and a general improvement in our economy will buoy corporate, M&A, capital markets, and other transactional work.”
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer released a recent article reporting that a number of midsized law firms have doubled down on their commitment to secure, and deepen existing relationships with midmarket clients. According to the article, law firm leaders in the middle market segment, which generally includes businesses with $50 million to $500 million in annual revenue, agree deep-rooted relationships are extremely common among law firms that service midmarket clients.
Law firms with roots in major markets are also finding ways to prosper in middle-market locations. For some midsized firms, including Cozen O’Connor, Ballard Spahr and Fox Rothschild, that has spurred geographic expansion across the country. For others, like McCarter & English and Vorys Sater Seymour & Pease, it has meant doubling down in the region where they already have roots.
“Midmarket companies are normally always in growth mode, so as they’re growing there are opportunities to grow with them and expand the amount and type of work that you’re doing for them. They have the same sophisticated work that larger Fortune 1000 companies may have. The number of zeroes may not be the same, but the sophistication of the work is and the complexity of the matters are,” notes Cozen O’Connor’s CEO, Michael Heller.
ALM journalist, Lizzy McLellan concludes, “the perception of value often attracts midmarket clients to firms with a more affordable rate structure than the very top of the Am Law 100 offers. Sometimes that means a national Am Law 100 firm in the second 50, like Cozen O’Connor or Fox Rothschild. But it can also mean a midsize firm like Pryor Cashman or a regional Am Law 200 firm like McCarter & English.” McCarter & English’s chairman, Michael Kelly, notes “the big expensive firm gives them cover, but I can tell you with no uncertainty that we will do a better job with less cost.”
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.
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.
Law firm managing partners’ expressed greater optimism in the economy and legal market for the second half of 2017, according to a report released by Citi Private Bank.
The quarterly survey polled law firm leaders, 106 of which are among Am Law’s top 200 firms. Over half of those who participated in the survey expressed confidence that the second half of the year will be considerably or somewhat better than the first, indicating an uptick in overall confidence from the previous quarter.
The projections, according to the Am Law Daily, “may prove to be a bullish outlook for an industry that has been dogged by stagnant demand, particularly among Am Law Second Hundred firms.”
See the full report and article on The American Lawyer.
Contact Bill Sugarman for more information.
The frenzy of mergers between IP boutiques and national full-service firms shows no signs of abatement, The American Lawyer reports. Since April, at least eight IP firms have been acquired by Am Law 200 firms, driven largely in part by the recent changes in patent law, according to the article.
The America Invents Act, passed in 2011, allows the Patent Trial and Appeal Board to review patent challenges, creating a quicker and less costly alternative to litigating in federal district courts.
However, patent litigation “remains hot,” the article argues, citing the results of a Lex Machina study, which found that patent litigation in the U.S. increased by 15 percent last year. The struggle for boutique patent firms, according to shareholder Thomas Anderson of Gifford Krass, a firm that merged with Dinsmore this past fall, is acquiring and keeping the larger clients. Anderson says that it “becomes hard for a firm of our size to attract large-scale patent litigation [because] Fortune 50 companies want large firms with lots of resources” (as quoted in The American Lawyer).
Larger, full-service firms view the bolting on of IP boutiques as a quick and easy way to build up their patent practice, an area which is “incredibly important” to clients, says Lewis Rose, managing partner of Kelley Drye.
With boutique IP firms across the country continuing to battle to maintain revenue and retain partners, it looks like this merger rush won’t be slowing down anytime soon.