Big Law Firms Make Fortune 500 Revenues
It’s an industry maxim that Big Law gets bigger.
Industry leader Kirkland & Ellis last week became the first law firm to break it $6 billion revenue barrier. So not only is he an advisor to many of the Fortune 500, but it’s conceivable that he could find himself named to the illustrious line-up, criteria permitting – Latham & Watkins too, with his own $5.5 billion front row putting him on par with the household names at the junior end of the list.
In his story, Andrew Maloney explains how, following unprecedented demand last year, Kirkland’s average earnings per partner reached more than $7.3 million. A colorful take from Andrew: The company’s 25% increase in gross revenue, a jump of $1.2 billion from last year, is equivalent to adding a revenue share the size of a other company Am Law 50; for example, a Morrison Foerster or an Akin Gump Strauss Hauer & Feld.
This is extraordinary growth.
Due to an unprecedented increase in transactional activity following the post-COVID market revival last year, other businesses are also seeing abundant growth. For example, based on many works in the field of life sciences and technology, DLA Piper checked in its fifth consecutive year of growth, with global revenue up nearly 11% to $3.5 billion. Dan Packel to the story.
Assuming we’re not there already, we’re on the precipice of the age of the mega-firm: a preponderance of law firms with the resources and financial wherewithal to match their venerable clients. Take Kirkland, for example, which, with its $6 billion in revenue, is roughly on par with its private equity client Blackstone Group.
As Kirkland and Latham, and perhaps soon others, enter the realm of the world’s biggest companies, competing trends are emerging. Most notably, the growing number of women moving into positions of influence in Big Law, with a variety of firms raising record numbers to their partnerships.
Last week, Skadden Arps Slate Meagher & Flom and Freshfields Bruckhaus Deringer increased the number of women joining their senior levels, while in both Evershed Sutherland and Connections a record class of women have been reclassified, representing 65% and 59% of the global cohorts respectively.
Over the past few years, law firm executives have said, repeated, how long it will take to get more women into leadership positions. Could it be now, in the age of the mega-firm?
A consultant at a law firm I spoke with believes so.
“The gender diversity bottleneck appears to be widening,” they said. They conceded, however, that the “real test” is how many new partners are able to bridge the chasm between employee and partner status.
“A number of large law firms are increasing the size of their salaried partner classes. But to have real leverage, you need to be in equity, which can be the case in foreclosure firms, but less so in firms adopting modern structures. But again, if you have more women becoming salaried partners, it stands to reason that soon we will have more female partners.
Siobhan Lewington, managing director of Fox Rodney, told me:It’s great to see this pool of female talent emerging, ensuring that there will be more role models and future leaders in law firms.
She cautioned, however, that “companies should also ensure that their lateral hiring does not undermine these good efforts by further diluting the gender composition of the partnership.”
So the signs suggest we’ll see more female leaders at a time when law firms are experiencing seemingly limitless growth. For now, however, these are only signs.
But, to mutilate a line from one of the Spider-Man movies, with unlimited growth comes great responsibility. And Cleary Gottlieb Steen & Hamilton has found that no matter how esteemed its reputation as a litigation leader, you can’t just charge any amount.
In what was one of our best stories read, Hannah Walker reported how a top UK judge censured the company for charging excessively high fees for its role in a dispute between electronics majors LG and Samsung. The judge chastised the firm for submitting a cost schedule for which there was “no justification at all”, and later reduced the bill by almost a quarter.
I suspect we’ll see more stories like this as we continue to examine the many outgrowths of Big Law’s grand ambitions.