The Top 10 Most Profitable Biglaw Firms
An "average" partner at a top law firm earned more than $2 million last year — and at the most profitable firm, partners earned multiples of that.
Welcome to Original Jurisdiction, the latest legal publication by me, David Lat. You can learn more about Original Jurisdiction by reading its About page, and you can subscribe through this signup page.
"Lawyers are terrible businesspeople." You've surely heard this before. But is it true?
Yes, some lawyers would not do well in the business world. And yes, it’s common to hear in-house lawyers complain that their outside lawyers are not “commercial” in their thinking, or that they don’t know how to balance business considerations against legal risks, instead saying no to everything the client wants to do.
But when it comes to running their own businesses, some Biglaw lawyers are clearly very good — or they’ve at least created a system in which large law firms can reap large profits, alleged lack of business acumen notwithstanding. Just look at how the Am Law 100, the nation's 100 largest law firms by revenue, enjoyed a banner year in 2020, despite a global pandemic and economic downturn that left many of their clients reeling.
Last month, the American Lawyer issued its eagerly anticipated Am Law 100 rankings for 2021, based on 2020 financial performance. As a group, here's how the Am Law 100 fared last year (as noted by Dan Packel in his excellent analysis of the data):
Total revenue: $111 billion, up by 6.6 percent.
Average revenue per lawyer (RPL): $1.05 million, up by 5 percent.
Profits per equity partner (PPEP): $2.23 million, up by 13.4 percent.
Who are you calling a terrible businessperson now? These growth rates exceeded those posted by the Am Law 100 in the far more normal year of 2019 (which were 5 percent, 3 percent, and 5 percent, respectively, for total revenue, RPL, and PPEP).
What drove the dramatic increase in profitability? Yes, cost-cutting played a role; firms used the pandemic as an opportunity to make themselves more efficient, eliminating or reducing various expenses that they were already planning to cut (e.g., certain administrative roles, real estate costs, etc.). But the reductions weren’t as dramatic as they could have been. As Janet Stanton of Adam Smith Esq., a leading law firm consultant, explained to Dan Roe of the American Lawyer, the layoffs “were in our view more measured in this recession than in the last one.”
And at least collectively, the Am Law 100 didn't juice their profits by slashing lawyer or even equity-partner headcount. Total attorney headcount actually grew slightly, rising by 1.7 percent to 105,718, and the number of equity partners remained flat, down by just 12 partners to a new total of 21,258.
Let’s now take a closer look at the three key metrics -- gross revenue, revenue per lawyer, and profits per partner -- and the top 10 firms in each category.