Few legal industry watchers can say this came as a surprise: Yesterday’s release of the always anticipated The Am Law 100 rankings by The American Lawyer showed that while the largest law firms in the country still enjoyed growth in traditional measurements — total revenue, net income, profits per partner (PPP), etc. — in 2015, there were very troubling tea leaves which the industry cannot afford to ignore any longer.
“The continued flattening of demand for legal services and patchy conditions in core markets, particularly in Europe, saw growth slow to its lowest level since the Great Recession seven years ago,” the report stated, noting that while it was the sixth consecutive year of overall growth across all those key metrics in 2015, the future was not exactly rosy.
“Indeed, it was a middling year for much of this group in 2015, and signposts aren’t necessarily pointing to dazzling days ahead,” the report suggested.
Of course, many legal pundits and bloggers have predicted for a while that slowing demand for legal services overall would finally catch-up to the biggest of the big firms. The data suggested it. Other noted reports blared the news. And the forward-thinking expounded on ways that this slowdown was going to impact firms and urged them to be ready.
Still, the overall numbers were slightly positive for Large Law, despite the thunderclouds gathering:
- Gross revenue was up 2.7% for the year to $83.1 billion;
- Net income increased 3.3% to $32.8 billion;
- Revenue per lawyer was up 2.6% to $894,253; and
- Profits per partner (PPP) was up 4% to $1.61 million.
The report referred to what these numbers showed as “A Year of Small Gains.”
In fact, the report pointed out that profits per partner “improved in part because there were fewer equity partners.” Indeed, almost half of the 77 firms that showed PPP gains in 2015 also saw a decrease in the number of equity partners at the firm last year, the report noted.
Other notable observations in the report included:
- The gap between the top strata of The Am Law 100 and the bottom continues to grow wider;
- A booming Silicon Valley-based tech market helped West Coast law firms while New York-based firms struggled with growth;
- The overall composition of the ranking changed little with just three new names (Interestingly, Dentons was dropped off the list after its merger last year with Chinese firm Dacheng disqualified it from being thought of as a US law firm.)