In case it was not obvious from the flurry of press releases that flooded inboxes earlier this week, on Tuesday, The American Lawyer released the 2019 Am Law 100. This yearly thorough examination and ranking of Biglaw financials provides a chance for many firms to crow about record-breaking revenues while others demur and talk about economic headwinds. While being at the top of the Am Law 100 is obviously what many, if not all, firms strive for, merely being included can be a tremendous achievement. Though admittedly, It is rare to see such rejoicing when ranked 87th in anything — the inverse of Ricky Bobby’s famed axiom.
Unlike the more black box nature of law school rankings, the Am Law 100 is rather straightforward, sorting firms based on gross revenue and profits per equity partner (PEP) while also collecting the data on revenue and profits per lawyer. While it is plausible that some manipulation can take place by limiting the number of equity partners, such a practice is unlikely considering the amount of money those non-equity partners would be losing as well as the simple fact that the Am Law 100 lacks the ubiquity of its law school ranking counterparts, where manipulation can be rampant.
So how is this relevant for law students or practicing attorneys seeking to make a change? As I have previously written, when law students gear up for the “Fall” (it really starts in July, if not earlier) interview cycle, researching various employers is a necessary method of not only standing out in an interview but also beginning to determine which employer might be the best destination. The Am Law 100, and its soon to be released Am Law 200 counterpart, can be part of that research effort, along with a litany of other sources including Above the Law’s own law firm rankings.
So, what should one focus on? Gross revenue gives you a sense of the largest players in the Biglaw game. As someone who graduated law school in the midst of the Great Recession, I am always wary of the economic cycle, knowing that a down turn will eventually come and it will likely have at least some impact on legal employment. With revenues over $3 billion, it is hard to believe that Kirkland & Ellis (#1 in Gross Revenue) and Latham & Watkins (#2) are going to be in dire straits during the next recession, though a look at the two firms’ debt levels would assuage any lingering doubts. It is also doubtful that those members of the three-comma club are going to be fail to pay market salaries or bonuses to their attorneys.
But it is not just overall numbers that are worth examining. Year-over-year revenue changes can provide a sense as to firms that are flourishing and those that while not necessarily floundering, perhaps should be looked at with a bit more caution by prospective candidates. The ability of Nelson Mullins to increase their gross revenue by 27.5 percent should make any candidate, be it entry-level of lateral, excited about the future of the firm. The 7.3 percent revenue drop for Baker Botts, sending it from 50th in the Gross Revenue rankings last year to 58th this time around, could be potentially worrisome.
While Gross Revenue figures can tell you part of the story with regards to economic health and vitality in Biglaw, it does not tell the whole story. Perhaps a better metric is PEP. To understand why, think about international economics for a moment. The simplest way to measure the relative economic strength of various countries is to look at their Gross Domestic Product (GDP). Not surprisingly, per the World Bank’s 2017 figures, the countries with the two largest economies are the United States and China. But those countries are home, respectively, to the thirdlargest and the largest populations in the world. Having a large economy makes sense if you have a lot of people. A better metric is GDP per capita. The World Bank shows Germany and India as having the fourth and fifth largest economies in the world, as measured by GDP. However, India has more than 16 times the population of Germany. So Germany’s per capita GDP is $50,715 while India’s is $7,056. It is clear which country’s residents have the higher standard of living.
How does this apply to Biglaw? Well, BakerMcKenzie sits at third in the Gross Revenue rankings, but they also have 4,720 attorneys firm wide. With that big of a firm, they better have a lot of revenue coming in the door to deal with what has to be remarkably high overhead. PEP provides us with the Biglaw equivalent of GDP per capita. When looking at these numbers, the biggest takeaway is the sheer dominance of Wachtell, Lipton, Rosen & Katz. With a PEP of $6.53 million, the gap between Wachtell and second place Kirkland at $5.037 million is the roughly same as the gap between Kirkland and #12 Latham at $3.452 million. To borrow an analogy, Wachtell is playing a different sport than the rest of Biglaw, which probably helps explains its famed compensation structure that can see associates rake in bonuses that are 100 percen of their base salary. Wachtell’s dominance is not limited to PEP; their revenue per lawyer this past year was $3.207 million. Second place is Sullivan & Cromwell at $1.739 million, while 25th place is Goodwin Proctor at $1.255 million. The gap between Wachtell and the #2 firm in revenue per lawyer is MORE THAN TRIPLE the gap between #2 and #25. That’s absurd. The obvious takeaway is that if you want to make as much money as possible in the practice of law, try to get a job at Wachtell. Though that’s easier said than done.
Outside the revenue figures, the Am Law 100 also contains some interesting nuggets which can provide some insight, or at least a healthy chuckle. For example, someone at Fox Rothschild claimed to have billed 4,200 hours last year, which is either what I will call some creative billing or evidence that robots truly have started taking over the associate ranks. While 4,000+ billable hours is unique and thus not a particularly valuable data point for job seekers, the fact that Fish & Richardson clocked in with the highest billable hours per lawyer at 1,916 is worth knowing. On the one hand, it is often better to be busy than slow at a law firm if you are concerned about your long-term job security. On the other hand, 2,000 billable hours is target throughout much of Biglaw for associates to ensure a bonus. If that’s the average at a firm you are considering, be prepared for a lot of long nights and weekends.
The Am Law 100 provides a valuable service by crunching the numbers and showing readers how various law firms stack up financially, benefiting not only the curious amongst us but also those who seek to make an informed employment decision.
 See, e.g., U.S. News measures law school expenditures not on a per-student basis, but on a per J.D. student basis. Thus, hypothetically, schools can use non-J.D. students as veritable ATMs, pumping money into the school via tuition, which is then spent by the school, but never counting toward the denominator of the expenditure equation.
Nicholas Alexiou is the Director of LL.M. and Alumni Advising as well as the Associate Director of Career Services at Vanderbilt University Law School. He will, hopefully, respond to your emails at email@example.com.
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