The American Lawyer's Am Law 100 Issue Reports Revenue, Personnel Increases, But Flattening Profits for Largest Law Firms

Business Wire, July 1, 2002

Business Editors/Legal Writers

The American Lawyer(R) reported today that, in a year of financial contradictions, the nation's 100 largest law firms, the Am Law 100, managed to post an average 13 percent increase in gross revenue.

However, because top-line growth was driven primarily by a record increase in staffing, profits per partner grew by only 2 percent. Results tumbled at many high-profile Silicon Valley firms, and revenue per lawyer, a key growth measure, increased by less than 1 percentage point. The 2002 Am Law 100 rankings are based on 2001 financial performance data and are featured in the July issue of the magazine. Selected Am Law 100 survey results are available on the Web at www.americanlawyer.com.

Chicago's Baker & McKenzie became the second U.S. firm, and the third global firm, to post $1 billion in annual revenue. The first was New York's Skadden, Arps, which broke the $1 billion barrier in 1999. In addition, eight new firms moved onto the Am Law 100 this year

In large part, the driver of gross revenue gains was head count, the result of hiring undertaken by law firms during the waning years of the boom market. Last year, the number of lawyers at Am Law 100 firms grew 11 percent, to an average of 621 lawyers. It was the biggest single-year percentage increase in head count since The American Lawyer began chronicling law firm finances in 1985. The increase in bodies, combined with rate increases that many firms implemented after the associate salary hikes of 2000, allowed the nation's 100 highest-grossing law firms to take in a combined total of more than $35 billion last year--another record.

Unfortunately, revenue per lawyer, which grew by an average of 6.4 percent over the course of the previous five years, increased only 0.5 percent last year.

"It's ironic that the winners in 2001 were well-diversified firms with strong counter cyclical practices--exactly the sort of firm that was derided during the capital markets boom as `lacking focus'," said Aric Press, editor in chief of The American Lawyer. "Firms with active bankruptcy and litigation practices, such as Paul, Weiss, saw strong bottom line growth last year, while high-profile tech firms saw profits per partner drop by up to 44 percent, with some firms dropping off the list entirely."

Harder times were not entirely confined to Silicon Valley. Last year's pain was shared by many firms among New York's elite, due to the drop-off in merger activity and capital markets work. Other highlights of the survey include the following:

- Eighteen firms posted average profits per equity partner exceeding $1 million last year, down from 20 firms in 2000.

- Sixty-six Am Law 100 firms posted increases in pro bono hours, contributing to a 17.9 percent increase in total pro bono hours for The Am Law 100 as a whole. Pro bono hours per lawyer increased 6.8 percent. The leaders in The American Lawyer's pro bono rankings continue to be firms in New York, San Francisco, and Washington, D.C., with three exceptions: Chicago's Jenner & Block, Richmond's Hunton & Williams, and Los Angeles' Latham & Watkins.

"Perhaps the only silver lining in the gathering clouds has been the abrupt increase in pro bono work, although that's probably small consolation to the partners who saw their take-home profits shrink last year" added Press, "Some firms dodged the bullet, through conservative business plans or aggressive hiring and mergers, but it's doubtful that these strategies will continue to pay off indefinitely."

This August, The American Lawyer will publish its rankings of the second hundred largest firms. To subscribe or request back issues of The American Lawyer, including copies of the Am Law 100 issue, please call (800) 755-2773 or (212) 545-5990 outside the U.S. An electronic edition of the magazine can also be purchased online at www.qmags.com/amlaw. The American Lawyer magazine is published monthly by American Lawyer Media, Inc. (ALM).

Headquartered in New York City, ALM is a leading integrated media company, focused on the legal industry. ALM currently owns and publishes 24 national and regional legal magazines and newspapers, including The American Lawyer and The National Law Journal(R). ALM's other businesses include book, custom and newsletter publishing, production of legal trade shows and conferences, educational seminars and distribution of content related to the legal industry. ALM's law.com(R) site (www.law.com) is the Web's premier destination for legal professionals. ALM also operates the nation's most comprehensive court verdict and settlement reporting system, available online at www.verdictsearch.com. ALM was formed by U.S. Equity Partners, L.P., a private equity fund sponsored by Wasserstein & Co., LP. More information on ALM, its business and services is available on the Web at www.americanlawyermedia.com.