The Am Law 100 2017: warning signs for the UK market as America's biggest get bigger

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For the many UK law firms to have seen star partners drift towards the dollar signs of US rivals such as Latham & Watkins and Kirkland & Ellis in recent years, this year’s Am Law 100 rankings - which show the pair in the top spots by revenue – will make for uncomfortable reading.

What is more unusual this year, however, is that the rankings now raise questions about the long-held dominance of the global vereins in revenue terms.

For the first time since 2008, neither Baker McKenzie or DLA Piper sit within the top two by revenue in the core ranking, which is compiled from The American Lawyer‘s research into the financial performance of the largest US firms over the 2016 financial year.

Instead, the research highlights how the investment that Latham and Kirkland have made over the last decade has paid off, as they pull away from the rest of the group. Kirkland in particular had a stellar financial year during 2016, with revenue rising 15% and profits per partner (PEP) climbing by 14% to clear $4m.

Latham and Kirkland now lead a group of five US firms with revenue above $2bn (£1.55bn), with Bakers, Skadden Arps Slate Meagher & Flom and DLA completing the rest of the group.

Of the other transatlantic vereins, Hogan Lovells has nudged up one place to eighth, with Norton Rose Fulbright staying in tenth place with turnover of $1.685m based on its pre-Chadbourne figures. Eversheds’ merger partner, legacy Sutherland Asbill & Brennan, does not make the rankings, while Dentons is not included due to the high proportion of its lawyers based outside of the US.

The rankings continue to highlight the fragmentation of the US market, with an increasingly profitable elite setting themselves apart from less wealthy rivals – a trend that is expected to continue, raising concerns for UK firms already feeling the strain of trying to compete for the best partners and associates in London.

Only a very quick glance at the rankings is required to highlight the disparity between the elite firms in the UK and those in the US. While the competition for talent is influenced far more by profitability than size, the revenue rankings highlight the room for consolidation within the UK market if firms want to make a larger impact by scale.

Twenty-seven firms at the top of the Am Law 100 brought in at least $1bn in revenues in 2016, a performance matched by only the top eight of the current UK top 50.

And the profit gap is starker still.

Two Am Law 100 firms have PEP of more than $5m – Wachtell Lipton Rosen & Katz and Quinn Emanuel Urquhart & Sullivan – with six above $4m, 16 above $3m and 34 above $2m (£1.5m). A huge 73% of the top 100 US firms by PEP have partner profits of more than $1m.

And the falling sterling/dollar exchange rate will only heap more pressure on UK firms, where last year just 12 of the UK top 50 posted PEP above $1m (£775,000).

While attention is beginning to turn towards profit per lawyer and revenue per lawyer as more relevant measures of success, PEP is still a metric that has huge clout in the London lateral market. Money may not be the sole factor when partners decide to switch firms – a clearly defined market position and culture also remain key – but it definitely still matters.

Top five US firms by revenue

  • Latham & Watkins: $2.823bn
  • Kirkland & Ellis: $2.651bn
  • Baker McKenzie: $2.620bn
  • Skadden Arps Slate Meagher & Flom: $2.495bn
  • DLA Piper: $2.47bn

Top five US firms by partner profits

  • Wachtell Lipton Rosen & Katz: $5.8m
  • Quinn Emanuel Urquhart & Sullivan: $5.015m
  • Paul Weiss Rifkind Wharton & Garrison: $4.38m
  • Cravath Swaine & Moore: $4.195m
  • Kirkland & Ellis: $4.1m

Full coverage of the Am Law 100 2017 is available on The American Lawyer. Click on the links below to read more.

The Charts

Features and analysis

  • Overview – Choppy Seas: The largest US law firms are dealing with increased volatility and slowing growth in revenue per lawyer, but they are still managing to increase profits.
  • Redefining the Super Rich: Am Law upped the requirements for inclusion in the Super Rich, with a slightly different crop of firms rising to the top.
  • Distinct or Extinct: The second half of the Am Law 100 has some soul-searching to do in an effort to identify their differentiators.
  • By the Numbers: The data on law firm finances makes for some interesting comparisons.
  • A Note From the Editor: Law firms need to know what they are, and what they’re not, and own it.

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