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The American Lawyer released its annual A-List rankings of the top 20 “most well-rounded” law firms in the United States. According to the report, law firms are ranked based on a combination of financial and cultural factors including revenue per lawyer, pro bono commitment, racial diversity, associate satisfaction and gender diversity among the equity partnership level. The last metric was added to A-List’s calculation in 2017 to recognize firms for supporting women and making them partners.

In a year that’s been marked by upheaval and uncertainty, there’s also plenty of continuity in the upper reaches of the A-List. For the second year in a row, Munger Tolles & Olson claimed the No.1 spot on this year’s list, while landing in the top five for a fifth time in the last five years. Ropes & Gray landed the No. 2 spot, improving across all five categories, most notably associate satisfaction. At O’Melveny & Myers, improvements in the firm’s metrics for racially diverse attorneys and women in the equity partnership fueled a four-place jump into the No. 3 position, marking the firm’s third straight year in the Top 10 and its fifth time on the list in the last five years.

Los Angeles-based Manatt, Phelps & Phillips returned to this year’s list following two years off, rising seven places to No. 15, thanks to a 20.5-point improvement in the female equity partner category. Two more firms new to this year’s A-List rankings included Cravath Swaine & Moore (No.17), and Arnold & Porter (No.19). A few firms on the list made last year’s Top 20 but faced shortcomings in vital areas, forcing them off in 2020. Those four firms were Shearman & Sterling, Buckley, Milbank, and Simpson Thacher & Bartlett.

See more highlights from the A-List rankings on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer recently published results from its annual Am Law 200 report, noting that for the first time in years the second hundred largest grossing law firms matched the growth of the top one hundred in nearly every key financial metric. Overall, the Second Hundred increased gross revenue on average by 5 percent, profit per equity partner grew 4.6 percent, revenue per lawyer increased 2.9 percent, and overall headcount rose 2.1 percent.

According to the report, twenty-one Second Hundred firms saw double-digit revenue growth and forty firms saw revenue increase by more than five percent. Within those numbers, there were pronounced differences among different groups in the Second Hundred, as firms ranked 151 through 200 nearly doubled the growth of those ranked 101 through 150, posting a 7.2% revenue increase on average, compared with 3.9% for the top half of the list, the report notes.

Among the Second Hundred firms, Burr & Forman had the largest increase in revenue, jumping 14 spots to No. 155, up 32% from last year. Two firms dropped from the Am Law 100 to the Second Hundred this year: Baker Donelson (101) and Williams & Connolly (102). Meanwhile, three firms joined the Am Law 200: Cole Scott & Kissane (163); Hanson Bridgett (192); and Pryor Cashman (178).

Additionally, twenty-five Am Law 200 firms based or founded in the Midwest increased their revenue on average by 8% last year. Seven of them posted double-digit gains, far exceeding the average 5% growth the Am Law 200 and the 6% growth Chicago-based firms saw in 2018. Those seven firms were Barnes & Thornburg, Polsinelli, Ice MillerPorter Wright, Robins Kaplan, Benesch, and Spencer Fane.

“Now, as this year’s Second Hundred stare down another major financial crisis, one that will likely be worse than the last, they can learn from the lessons of the past: focus on strong leadership; stay nimble; capitalize on their smaller size; stick with growth strategies; and diversify services when appropriate. Faced with a daunting future, it could mean the difference between success and failure,” (as quoted in The American Lawyer).

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

Contact Bill Sugarman for more information.

The American Lawyer released their 33rd annual Am Law 100 report, which includes data and rankings for the nation’s 100 highest grossing law firms. Overall, gross revenue grew by 5 percent in 2019, coming in at a record breaking $104 billion. Additionally, net income increased by 4 percent, profit per equity partner grew by 5 percent, and revenue per lawyer rose by 3 percent.

According to the report, forty-two firms posted gross revenue over $1 billion in 2019, four more law firms than in 2018. Additionally, eighty-six firms reported gains in revenue and increased profits per partner in 2019. The results revealed that Kansas-city based Polsinelli reported the greatest increase in average profit per equity partner, up 28.3% from 2018.

Like in 2018, the 10 highest-grossing firms ranked in roughly 26% of the revenue the Am Law 100 generated last year, the report revealed. The next 16 firms accounted for another quarter of the year’s revenue, meaning that half of the revenue generated by the Am Law 100 came from the top 26 law firms. In terms of parity, it was a step forward after the top 10 firms alone brought in 38% of the group’s total revenue just two years ago, (as quoted in The American Lawyer).

For the third straight year in a row, Kirkland & Ellis landed the No. 1 spot as the highest grossing law firm in 2019, with $4.154 billion in revenue, up 10.6% from 2018. Latham & Watkins remained in the No. 2 spot, rising 11.3% in total revenue to $3.767 billion. DLA Piper moved up one spot from last year coming in at No. 3 with $3.112 billion. Baker & McKenzie claimed the No. 4 spot, with $2.920 billion in revenue. Skadden Arps retained the No. 5 spot, down 1.5 percent to 2.632 billion in 2019.

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

Contact Bill Sugarman for more information.

In a recent article, “The Rise of the Non-Equity Partner: Short Term Gain for Long Term Pain?,” James Willer, writing for Law.com, reports on the rise of non-equity partnership in today’s lateral market. According to ALM Intelligence, the number of non-equity partners across the Am Law 200 over the past ten years has increased by 36% from 17,086 to 23,166. On average, non-equity partners now represent a 44% share of the overall partnership at Am law 200 firms. This contrasts with 38% in 2009. In 2018 alone, 46% of Am Law 200 firms increased the proportion of non-equity partners within their overall partnership. By increasing non-equity numbers, while keeping equity partners relatively flat or at least growing incrementally, firms can maintain high-levels of Profits Per Equity Partner (PEP) and therefore bolster retainment of its top-performing equity partners, the article notes.

Accordingly, law firms in the top echelons of the legal market have come to realize how useful PEP can be as a competitive advantage in the lateral hiring market. For these firms, PEP is now not only one of the most important metrics at their disposal but provides the primary means to maintain a business model built largely on talent management, recruitment, and retention. This weaponizing of PEP has since trickled down to the rest of the market, as more firms begin to grapple with issues of retainment and retention of top performers. The result has been a market-wide shifting of the partnership model. Partnership adjustments are one of the few remaining mechanisms at the disposal of firms that can be reliably utilized to increase PEP expeditiously, (as quoted in Law.com).

The shift towards more non-equity partners is only likely to accelerate as the lateral hiring market’s requisite need for strong PEP growth intensifies, Willer notes. However, Willer cautions that firms should be wary of placing too much short-term emphasis on tweaking partnership structures. To do so runs this risk of losing sight of the need to ensure that more organic measures of long-term sustainability such as RPL growth and costs management still need to be adhered to. According to Willer, firms need to have in place clear strategies from the outset to secure and retain talent not just at the equity level, but across the full spectrum of partnership. This could include ensuring contributions to firm profitability or business development are effectively incentivized or having in place clear pathways of professional development, (as quoted in Law.com)

See highlights from the full article on Law.com.

Contact Bill Sugarman for more information.

The American Lawyer reports that more than 3,100 lateral partners moved between Am Law 200 firms in 2019, with corporate partners accounting for 25% of those moves, according to recent data released by ALM Intelligence. The total is 14.5% higher than last year’s lateral total of 2,754, largely as a result of an improved methodology used to collect this year’s data, which affects the year-over-year comparison. Over the past two decades, the number of lateral partner moves, tracked by The American Lawyer since 2000, has ranged from just above 2,000 to more than 3,000 a year, the article adds.

The article reported that at least 580 corporate partners joined the ranks of the Am Law 200, while 469 departed, which adds up to a net gain of 111 partners. Litigation partners accounted for another quarter of the past year’s laterals. Banking and Finance partners were the third-most-transient practice, comprising nearly 14% of all laterals. Interestingly enough, given the warnings of a recession, bankruptcy attorneys were the least transient, accounting for just a small fraction of the year’s lateral moves, at 2.4%, ALM Intelligence reports.

According to the report, Philadelphia-based Fox Rothschild saw the greatest percentage growth via lateral moves, as its partnership ranks grew by 60, or roughly 18%, on the back of 102 lateral hires, offsetting 42 departures. The firm has been growing steadily since it first cracked the Am Law 200 in 2015, the article notes. Additionally, the article noted that Winston & Strawn saw the greatest net defections among the Am Law 200, losing 52 partners and adding 17, for a net loss of 35, (as quoted in The American Lawyer).

Nearly three-quarters of Am Law 200 firms have had a lateral partner leave within the past five years due to an issue with personality or law firm culture, according to data released by ALM Intelligence. A lawyer’s business is easier fixed than their character, notes Polsinelli’s CEO Chase Simmons. And while there’s no one lateral partner who can affect a law firm’s revenue numbers on their own, a toxic partner could ruin a firm’s culture, he adds. “Culture is more permanent. Everything derives from the culture,” Simmons says. “If you mess with that, the dollars aren’t going to follow.”

“Law firms are constantly on the hunt for top talent, and they have recently began building programs focused on lateral integration. The reasons for doing so are interconnected. For one thing, firms use their programs as a selling point in their recruitment efforts. They also lead to better retention rates. Nearly every law firm The American Lawyer spoke with for this story touted a higher five-year retention rate than the 60% average that ALM Intellection reported last year among Am Law 200 firms,” (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 the U.S. law firm industry had another strong year in 2019 and revenues for 2020 are predicted to continue growing at a healthy rate, according to a new report from Citi Private Bank’s Law Firm Group and Hildebrandt Consulting. The report found that after a slow start to the year, firms progressively improved their financial performance, and are expected to grow revenues between 5.5% and 6.5% over the course of the full year.

As in other post-recession years, the primary driver of revenue growth was an increase in billing rates, rather than demand growth, the report revealed. During the first nine months of 2019, billing rates had the highest growth rate since before the recession, growing by an average of 4.7 percent. By contrast, demand grew far less than in 2018 at a rate of 0.9 percent. The most significant impact on revenue growth was the continued trend of a lengthening of the collection cycle, which was largely driven by clients delaying payment of their bills, the report revealed.

The report also identified an active lateral recruiting market as a key trend in 2019, combined with a majority of firms hoping to grow the size of their equity partnership in the coming years.“The success rate of laterals has improved. In the past, half the laterals weren’t really accretive to the firm,” explains Brad Hildebrandt, Chairman of Hildebrandt Consulting. “But firms have become much more cautious about who they’re hiring.”

The key reason for the better success rate is even greater rigor on the lateral hiring process, Hildebrandt argues. Firms are aligning hiring with their overall strategy, improving their due diligence, and working harder to integrate new partner hires. “This eagerness to add talent at the top of the leverage pyramid will likely continue, with 61% of leaders surveyed saying they aim to add equity partners in the next two years,” Hildebrandt adds.

“Looking ahead, we expect that the most successful firms will continue to expand and innovate—despite ongoing geopolitical and macroeconomic uncertainty and volatility, and a challenging talent market. For those firms, expansion will be closely aligned to the firm’s business strategy—more so than pursuing opportunistic growth,” Gretta Rusanow, Head of Advisory Services at Citi Private Bank concluded. “For many firms, the steps they are taking to do more with existing clients and broaden their client base, focus on growth practices, industries and regions, and introduce further efficiencies in the way they deliver legal services will go a long way to ensuring that 2020 is a successful year.”

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer released its annual Global 100 report, a ranking of the world’s 100 largest law firms by gross revenue, profits per partner, and total attorney headcount. Overall, gross revenue grew by 8.1 percent to $114.2 billion, and profits per equity partner increased, on average, by 4.6 percent. Attorney headcount also saw an increase this year, with an annual growth of 5.7 percent. According to the report, law firm mergers, rapid growth among Chinese law firms, and a healthy American market coalesced to turn 2018 into a spectacular year.

The report revealed that a total of 46 firms cracked the $1 billion mark, up from 34 firms two years ago. Of those 46 billion-dollar firms, United States accounted for 77 of the world’s top-grossing firms, followed by 12 from the United Kingdom, and five from China. Additionally, this is the fourth time in the history of Am Law’s global ranking that U.S.-based firms occupied the top five spots. The top five firms in their respective order were Kirkland & Ellis, Latham & Watkins, Baker & McKenzieDLA Piper and Skadden Arps.

“Globally, most key practice areas were subject to brisk demand. The merger and acquisitions environment was active, albeit stronger in some markets than others. Disputes work, particularly international litigation and arbitration, kept practitioners busy. And an anticipated dip in investigations did not materialize, with sanctions, the Foreign Corrupt Practices Act and money laundering matters dotting the headlines. Other factors, beyond growing demand, also helped boost the numbers including two significant mergers between U.S.-based firms and two significant trans-Atlantic mergers: Nelson Mullins combination with Broad and Cassel and Hunton & Williams merger with Andrews Kurth Kenyon on the domestic side, and the creation of Womble Bond Dickinson and Bryan Cave internationally,” (as quoted in The American Lawyer).

See the full rankings and highlights from The Global 100 on The American Lawyer.

Contact Bill Sugarman for more information.

In a recent article, “Being a Law Firm Partner Was Once a Job for Life. That Culture Is All but Dead,” Sara Randazzo, writing for the Wall Street Journal, reports on recent trends in Big Law partnership and profitability over the past decade. According to data collected by ALM Intelligence, the percentage of equity partners across the Am Law 100 has been declining for the past ten years, with the percentage of nonequity partners steadily increasing. ALM Intelligence’s data revealed that the equity tier was roughly 78% larger than the non-equity tier in 2008. Now, it’s only 27% larger. The conventional explanation for the growth of the two-tier system is that it produces higher profits per equity partner, thus solidifying the prestige of the law firm and improving its ability to attract the best legal talent, the article highlights.

As Randazzo reports, the newly demanding and data-driven model of the law firm has changed the culture of the business entirely. “Being named a partner once meant joining a band of lawyers who jointly tended to longtime clients and took home comfortable, and roughly equal, paychecks. Job security was virtually guaranteed, and partners rarely jumped ship. That model, and the culture that grew up around it, is all but dead. Law firms are now often partnerships in name only,” Randazzo notes. “At the modern law firm, not all partners are created equal, and data and billings rule. In the new paradigm, lawyers are expendable, and partners may jump to a competitor for the right amount of money, taking clients with them on the way out,” Randazzo adds.

According to the article, the rise of non-equity partnerships has been criticized on a number of grounds. Most significantly, as noted in the article, it lets equity partners jack up the billing rates of non-equity partners, often to north of $1,000, without having to share the wealth with them (or take a hit in their “profits per partner” rankings, which consider only equity partners). “No firm embodies the changes more than Kirkland & Ellis,” Randazzo reports. “Over the past decade, Kirkland has become known for making high-price offers to rising stars at competitors, for $10 million a year or more in some cases. It has embraced the two-tiered partner system, made up of a junior class paid a set salary and an inner circle of equity partners, who split the firm’s profits. The changes have pushed the spread between Kirkland’s highest- and lowest-paid partners to 43-to-1. Among its equity partners, the spread is nearing 9 to 1,” (as quoted in The Wall Street Journal).

According to another article by Law.com, some law firms are still holding on to the old partnership ethos even as the world changes around them. A handful of law firms including New York-based Cleary Gottlieb and Cravath Swaine & Moore still operate under a lockstep compensation system, which pays partners in a relatively tight band based on seniority, rather than how much revenue they bring in. At the same time, some law firms are new to the idea of a two-tier partnership. Simpson Thacher & Bartlett and Willkie Farr & Gallagher both reported the presence of non-equity partners—seven and 10, respectively—for the first time this year. Law firm leaders said the move is intended to reward promising young lawyers earlier and make the firm more competitive in recruiting,” (as quoted in Law.com).

See highlights from the full article on The Wall Street Journal.

Contact Bill Sugarman for more information.

The National Law Journal released its annual NLJ 500 rankings, which analyzes headcount data on the nation’s largest 500 law firms. According to the report, the number of lawyers in the NLJ 500 grew 2.5% in 2018 to 169,477, and the average firm size rose by eight lawyers last year to 339. By comparison, the NLJ 500 grew by 1% in 2017 and by about 2% in 2016. Partnerships expanded by just over 1% last year, driven by nonequity partnership growth of 3.8% in 2018, the report also revealed.

According to the report, three firms in the top ten saw upward movement including Latham & WatkinsKirkland & Ellis, and Morgan Lewis. New York, Washington D.C., Chicago, Los Angeles and Boston were the top cities with the most lawyers in this year’s NLJ 500. Additionally, one group that showed unexpected growth in the 2019 NLJ 500 was the category of “other” lawyers, which encompasses counsel, senior attorneys, of counsel and staff attorneys. This cohort showed a net gain of 1,171 lawyers—up 6.4% in 2018. That’s compared to a net gain of 99 lawyers, or just 0.5%, in 2017.

“The 2019 NLJ 500 tells the story of more growth in 2018 than we saw in the previous two years,” said Lisa Helem, Editor-in-Chief, The National Law Journal. “Overall, the 2019 NLJ 500 findings, especially at the top of the list, along with profit increases for much of the Am Law 200, reflect an industry enjoying rising demand and faster growth. The average head count increase—still in the low single digits—is a far cry from the 4% or 5% growth firms saw in the pre-recession period from 2005 to 2008. But given the ugly contraction that followed, there’s something to be said for this year’s more modest gains,” (as quoted in The National Law Journal).

See more highlights from NLJ 500 rankings on The National Law Journal.

Contact Bill Sugarman for more information.