The Global 100: the world's top-ranked law firms by revenue, lawyers and partner profits

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The world’s 100 top-grossing law firms continued a post-recession trend of slow and steady growth in 2015, with revenue hitting a new high after a sixth consecutive year of top and bottom-line gains, according to the latest Global 100 rankings, compiled by The American Lawyer and Legal Week.

Revenue for the world’s 100 largest law firms increased by 3.1% in 2015, to $96.6bn (£75bn), a record for the group. And average profits per equity partner rose 4.9%, to 
nearly $1.6m (£1.2m). At current growth rates, total Global 100 revenue in next year’s survey will almost reach $100bn.

Despite these gains, average revenue per lawyer (RPL) – a key measure of a law firm’s health and efficiency – dipped 2.1% to $812,700. It is only the third decline in group RPL this millennium, after the financial crisis caused drops in 2008 and 2009, and the first time that Global 100 RPL has fallen without the US economy being in recession.

But this surprising result was heavily skewed by the massive expansion at Dentons. The firm’s combination with 4,000-lawyer Chinese giant Dacheng, which has a significantly lower RPL than the rest of Dentons, was so large that it dragged down not only Dentons’ RPL but that of the entire Global 100. Without Dentons, RPL for The Global 100 would have increased 
0.2%, to $841,300.

Global-100-at-a-glanceIndeed, more than half of Global 100 firms saw an increase in RPL in 2015, with 23 recording an increase of over 5%. More than a third of the group suffered a decline in RPL last year, however – the highest number since the Great Recession.

But this is again slightly misleading, as the results of non-US-based firms were significantly affected by the strengthening of the dollar against the British pound and the euro in 2015. (The American Lawyer converts all law firm financial results to US dollars for the purposes of this survey.)

Of the 11 UK law firms with RPL declines in our charts, six actually recorded increases in that metric in sterling terms: Clifford Chance (CC), Eversheds, Freshfields Bruckhaus Deringer, Herbert Smith Freehills, Linklaters and Simmons & Simmons.

That still leaves three global and 20 US-based firms that experienced drops in RPL last year, however, with some of the biggest declines seen at Hunton & Williams (down 5.6% to $760,000), Locke Lord (down 4.7% to $705,000) and Cleary Gottlieb Steen & Hamilton (down 4.7% to $1.01m).

Several of those US firms have European practices and therefore generate revenues in foreign currencies, of course. But former CC managing partner Tony Williams, now a management consultant at Jomati, says “jittery” market conditions and unpredictable client demand are putting increasing pressure on RPL.

“It’s becoming harder to predict work flows throughout the year, which makes keeping people utilised more challenging,” Williams says. “The fact that this is happening when there isn’t a recession should be a bit of a wake-up call for firms to ask whether their current staffing model is appropriate going forward.”

Global-100-revenue-SMALLThe billion dollar club

The continued consolidation of the upper echelons of the legal industry has led to The Global 100 becoming increasingly top-heavy. A total of 35 law firms now have revenues exceeding $1bn, up from 30 last year.

At the turn of the millennium, just one Global 100 firm was in the billion-dollar club: Skadden, Arps Slate Meagher & Flom. The New York-based firm’s revenue has more than doubled since then, to $2.41bn – up 4.1% from last year – but that hasn’t been enough for it to maintain its position at the top of the rankings.

In a repeat of last year’s Global 100, Skadden is now fourth, behind Latham & Watkins, Baker & McKenzie and DLA Piper. Latham retains its title as the world’s largest law firm by revenue, thanks to a 1.5% increase to its top line, to $2.65bn – the most revenue a single law firm has ever generated in a financial year. Baker & McKenzie overtook DLA Piper in the number two position, with a sizeable revenue increase of 7.8%to $2.62bn. Meanwhile, DLA Piper increased its revenue by 2.5% to $2.54bn.

While all four of the top-ranked firms grew, some other firms managed to post huge gains despite the turbulent conditions. Fish & Richardson and Wachtell Lipton Rosen & Katz, in particular, had outstanding years, with both managing double-digit increases across all key metrics.

Fish & Richardson returns to The Global 100 for the first time since 2012, thanks to a 10.5% increase in revenue to $395m. Much of this growth was driven by the firm’s 200-lawyer IP litigation practice, which accounts for almost two-thirds of its total revenue and was “booming” in 2015, according to CEO Peter Devlin.

Wachtell’s performance was even more impressive. The M&A powerhouse was the only Global 100 firm to increase its net income, RPL and profit per partner (PEP) by more than 20% each. Moreover, its 18% increase in revenue was comfortably the highest of any firm that didn’t merge during the 2015 financial year; the next-placed firm, Jenner & Block, achieved a 14% top-line gain.

Despite having just 261 lawyers, Wachtell generates more net profit than 3,371-lawyer Norton Rose Fulbright

Wachtell continues to expand the limits of law firm profitability. Having become the first Global 100 firm to break through the $5m PEP barrier in 2014, it added more than $1m to average equity partner profits last year. Its $6.6m PEP is more than $2m greater than any other Global 100 firm, with second-place Quinn Emanuel Urquhart & Sullivan at $4.4m. Despite having just 261 lawyers, Wachtell now generates more net profit than 3,371-lawyer Norton Rose Fulbright.

In total, 16 firms achieved increases of more than 5% in revenue, RPL and PPP. That list includes Cooley and Wilson Sonsini Goodrich & Rosati, which continue to profit from a booming tech sector. The pair each posted revenue increases of almost 14% and were among just eight Global 100 firms to increase net income by more than 20%, while Wilson Sonsini’s RPL rose 9.3% to top $1m for the first time.

london-city-web_616x372At the other end of the performance spectrum, British firms were among The Global 100′s worst performers, with only one of the 13 UK-based firms present in the rankings managing to increase its revenue in the last financial year: Clyde & Co. The insurance specialist firm, which has developed a leading claims practice in the US and now has six offices across the country, saw its top line climb 4.9%to 
$683.5m. The firm’s PEP fell 6.8% to $1.02m, however, while its RPL plummeted 30% to $365,000 – the second-lowest among The Global 100, after Dentons, at $325,000.

The UK firm figures were distorted by a significant slide in currency exchange rates, however, with the British pound slipping more than 7% against the dollar last year, from $1.65 to $1.53. In sterling terms, the top UK firms actually recovered from a disappointing 2014-15 to report largely solid financials in the financial year ending 30 April 2016, with most seeing gains in both revenue and profits.

Freshfields Bruckhaus Deringer had a particularly strong year, with its revenue increasing 6.6% to £1.33bn ($2.03bn) and PEP climbing 7.5% to £1.47m ($2.25m). But when its results were converted to dollars for our survey, it suffered contractions across all key metrics.

This currency effect is likely to be compounded in next year’s Global 100, with the UK’s Brexit vote in June causing a sharp decline in the value of the British pound. As of mid-September, the pound was trading at just $1.32. If that exchange rate was applied to this year’s results, Berwin Leighton Paisner and Taylor Wessing would drop out of The Global 100 entirely. As it is, the two firms just scrape into the rankings in joint last place, with revenue of $389m each.

Global-100-profits-SMALLFor Ashurst, on the other hand, the currency conversion merely made an already bad year look even worse. The London-based firm’s revenue fell for the second consecutive year in 2015-16, dropping a full 10% to £505m ($772m, while its PEP crashed 19% to an 11-year low of £603,000 ($923,000). In dollar terms, that equates to a 16.4% fall in revenue and a 27.7% fall in PEP – the steepest decline in both metrics among The Global 100. Ashurst has suffered a series of partner departures since its results were announced in July and recently modified its compensation system, extending its lockstep and introducing a bonus pool, in an attempt to attract and retain talent.

While the top of The Global 100 remains unchanged, the dynamic market conditions have resulted in considerable change at the other end of the rankings, with. eight firms joining The Global 100 this year.

Hellos and goodbyes

Like Fish & Richardson, Drinker Biddle & Reath has rejoined The Global 100, having exited the rankings in 2013, capping an excellent first year for the firm’s new leadership. Drinker Biddle’s revenue increased 7.5%to $409.5m, in its last financial year, which, unlike most US firms, ended on 31 January.

The other six new firms are all first-time entrants: Lewis Brisbois Bisgaard & Smith; Ogletree Deakins Nash Smoak & Stewart; Polsinelli; Canadian pair Blake Cassels & Graydon and Osler Hoskin & Harcourt; and Korea’s Kim & Chang, which becomes the first Korean firm to be featured in The Global 100.

The eight firms gain entry at the expense of Hughes Hubbard & Reed; Pepper Hamilton; Australia’s Minter Ellison; and a quartet of European firms: Bird & Bird; France’s Fidal; Garrigues of Spain; and Dutch outfit Loyens & Loeff. Fidal and Loyens were longstanding members of The Global 100, each having previously remained within the rankings for more than a decade.

The eighth and final firm didn’t just drop out of The Global 100: It fell out of existence entirely. Bingham McCutchen, a Global 100 ever-present since 2002, dissolved in late 2014, with the bulk of its lawyers joining Morgan Lewis. The mass addition boosted Morgan Lewis’ revenue by 40% to $1.84bn, with the firm climbing four places in the Global 100 rankings, to 13, as a result.