September 29, 2014
In 2013, the 100 largest law firms in the world took in almost $89 billion in revenue, which is 4.3 percent more than they collected in revenue in 2012, according to new data released by The American Lawyer (subscription required).
That is good news, but how good? That might depend on whether one is more optimistic or pessimistic by nature.
If one is the optimistic sort, here is what he or she might focus on:
- A “wave” of corporate mergers, according to DealBook, meant new business for the very biggest firms. It is good to see at least one healthy revenue stream paying dividends.
- Exploration into new markets, particularly Europe, seems to be paying off.
- Profits per equity partner increased 5.4 percent.
Now, a more pessimistic person might point out the following:
- A 4.3 percent increase in revenue is quite modest. Any increase in revenue is good, of course, but this is not exactly champagne-worthy.
- Revenue per lawyer (not equity partner, just lawyer) rose only .4 percent in 2012, which is statistically stagnant. In fact, when adjusted for inflation, the $787,000 per lawyer is below the $795,000 collected in pre-recession 2007.
- A lot of the increase in revenue can be attributed to mergers between firms. Many legal industry observers feel that law firm mergers are stop-gap or short-term solutions that cannot keep paying off forever.
At the moment, it might be okay for Large Law firms to breathe a sigh of relief. Even though this increase in revenue is good news, however, does not mean the calls for Large Law firms to innovate and try new business models or methods of attracting and develop clients should go unheeded. That is still sage advice.