The Am Law 100 doesn’t drop with the same fanfare as the U.S. News rankings of law schools, which is a shame because there’s actually a lot more interesting data lurking in the annual law firm rankings. The “classic” Am Law 100 figure based on gross revenue revealed a whopping 52 law firms topping $1B in revenue last year, but there are some hidden goodies in the companion partner profit ranking.
Profits Per Equity Partner, or “the artist formerly known as ‘PPP’ before law firms started assembly line minting income partners out of what used to be ‘Counsel,’” isn’t really a measure of partner compensation — firms use some profits to reinvest and, of course, we’ve officially reached the twilight of the era of lockstep partnership (that said, we have notable holdouts). But it’s still a useful window into overall firm success.
So here are the big takeaways we found perusing the Am Law PEP data.
That Looks Better!
The Am Law 100 revenue numbers may be the preferred Sorting Hat for law firm prestige, but they produce some janky results. Firms can elbow themselves into the top echelon of firms simply by getting very, ver(ein) big. Throw enough satellite offices at the problem and you can build a massive money-making Death Star that doesn’t necessarily reflect the firm’s gravitas in the legal market.
Likewise, the revenue numbers bury firms like Wachtell at 45 and Cravath at 52. No offense to the other firms in the 40s and 50s but, um, they’re not Wachtell or Cravath.
PEP shakes a lot of that out. Here are the top 10 in partner profits:
|3. Davis Polk||$7.01M|
|4. Sullivan & Cromwell||$6.366M|
|5. Paul Weiss||$6.162M|
|6. Simpson Thacher||$5.980M|
|8. Quinn Emanuel||$5.746M|
That looks a lot more like it.
Just How Good Was 2021?
The answer is pretty, pretty, pretty, pretty good. Average PEP was up 19 percent across the Am Law 100 in 2021 and some firms really blew it out of the water last year.
Cadwalader was up a whopping 71.6 percent, Dechert is up 49.6 percent, Fenwick up 31.5 percent, and Shearman is listed as up 58.4 percent. The Baker McKenzie verein is up 35.8 percent and Akerman is up 36.1 percent.
It wasn’t as good for a few firms that went backward, though. Crowell Moring took a 25.1 percent dip, however that may be more of a reversion to the mean after posting the biggest jump in PEP among the whole Am Law 100 last year. The other firms posting negative year-over-year numbers were firms with specialist identities, IP firm Fish (down a mere 6 percent) and immigration giant Fragomen (down 14.4 percent).
The Big Bucks
A total of three firms have a PEP figure over $7 million, with only Wachtell topping $8 million. The top five firms are all over $6 million, top 14 over $5 million, 23 over $4 million, 38 above $3 million, 56 over $2 million, and 91 clock in over $1 million. The smallest PEP to make the top 100 is Littler with $621K.
Speaking of Lockstep
There may be a hot lateral market right now, but notable lockstep partnership firms are still out there and still doing reasonably well for themselves. Wachtell is obviously doing just peachy and Debevoise sits at 14 with PEP of $5,011,000.
Finally, you have to go all the way down to 18th to find a firm with a profit margin below 50 percent and to 35th to find one below 40 percent (or 30 percent as Orrick is at 26 percent). Just going to show that when everyone frets about rising associate salaries, there’s still a LOT of slack at the top of Biglaw to cough up an extra few grand.
Anyway, there’s a lot more in these charts to unlock. Take a look.
The 2022 Am Law 100: Ranked by Profits Per Equity Partner [American Lawyer]
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.