The American Lawyer Reports Nation's Largest Law Firms Crest $2 Billion Barrier, but Record Five-Year Economic Run May Be Ending

Business Wire, April 30, 2008

NEW YORK -- The American Lawyer magazine reported today that two law firms, Skadden, Arps and Latham & Watkins, broke the industry's $2 billion gross revenue barrier for the first time. It took industry leader Skadden 51 years to reach the $1 billion gross mark, but only eight more to hit $2 billion. The Am Law 100, the nation's 100 highest-grossing law firms, grew total gross revenue by 13.6 percent last year to $64.5 billion, finishing the best sustained growth spurt since The American Lawyer began tracking law firm financials in 1984. The 2008 Am Law 100 rankings, based on FY 2007 financial performance data, are featured in the May issue of the magazine, available beginning today. Selected Am Law 100 survey results are also available on the Web at www.americanlawyer.com and www.law.com.

For the first time, the firms showed five consecutive years of better-than-average growth in both revenue per lawyer, the key measure of law firm financial success, and profits per partner.

But, the record run may be ending soon. Deal activity has dropped significantly and countercyclical litigation and bankruptcy practices may not be able to compensate for declining deal fees. For the first time since the bust of 2001, growth in head count noticeably exceeded growth in revenue per lawyer, while costs associated with last year's associate salary increases will be fully felt just as demand for high-priced legal help is falling.

"This law firm Golden Age has been fueled by increased demand and unrelenting annual rate hikes," said Aric Press, editor in chief of The American Lawyer. "Partners have reaped record profits, partly by hard work, and partly by pulling up the ladder behind them: the firms are making fewer new equity partners. With the economy turning sour, it's doubtful that the extraordinary run that the big firms have enjoyed can continue."

Among the other highlights of this year's survey:

* Wachtell, Lipton regained the top position in profits per partner with a record-breaking PPP of $4.9 million. Nineteen firms had profits per partner of $2 million or more, four more than last year.

* Since 2003, PPP has jumped by $438,000, to an average of $1.3 million. It had previously taken the Am Law 100 firms 15 years, from 1987 to 2002, to make a similar gain.

* Last year, the average number of equity partners grew by 2.6 percent, or almost five partners, but 37 firms reduced their number of equity partners and four held them flat.

* Head count grew by 6.8 percent to 77,816 lawyers. The fastest-growing category was nonequity partners, which now account for 35 percent of all partners. If these growth rates continue, the number of nonequity partners will exceed equity partners by 2015.

The American Lawyer's Am Law 100 has been recognized as the definitive public ranking of annual financial performance for the nation's largest law firms since its introduction in 1987. Am Law 100/200 metrics are primary benchmarks for law firms seeking to assess their competitive position in the marketplace.

This June, The American Lawyer will publish its rankings of the second hundred largest firms. Am Law 100 spreadsheet data is available for online purchase through the ALM Research Store at www.almresearchonline.com. To subscribe or request back copies 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.americanlawyer-digital.com/. The American Lawyer magazine is published in print and online by ALM.

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