The Am Law 50 continues to outperform other segments in revenue and profits. But a group of a dozen or so elite, high-profit firms are “carrying” that cohort, spurred by higher partner productivity and hours, a more private equity-focused practice mix and the most significant lateral plays in the market, according to bank data and interviews.
That subset of the top, as tracked by Wells Fargo’s Legal Specialty Group, saw demand grow 5% through the first nine months of the year. Meanwhile, the rest of the top 50—excluding the elite firms—grew demand 1.5% (altogether the segment grew demand a little more than 3%). In comparison, the Second 50 grew demand by 2.7% through the first three quarters, and the Second Hundred grew it by 2.2%.
Some of the difference in performance comes down to productivity at elite firms. With higher demand, partners and nonequity partners at those elite firms worked roughly 180 more hours, on an average annualized basis, than their counterparts in the rest of the top 50, according to Owen Burman, senior consultant at Wells Fargo. He said in an interview that the difference is “pretty staggering.”
The top 50 as an entire segment saw billing rate growth of about 10%, according to Wells Fargo's data.
“At those high rates, that is a big difference,” Burman said, referring to the difference in partner hours worked. He added: “I’m sure some of the partners prefer not to work that hard. But it’s partners contributing to their own profitability more versus when you go the next step down.”
Elite Firm RPL
The elite subset also grew revenue 16% compared with 9% for the rest of the top 50 through the first three quarters.
One of the distinguishing factors of the high-profit subset tracked by his group is revenue per lawyer, Burman said.
He declined to say what the cut-off is, or specify what kind of RPL growth those elites have gotten, but added that the number “keeps moving up over the years,” and that it’s not simply the firms ranked Nos. 1 through 12 in the Am Law 50 that are growing it the fastest.
Indeed, according to American Lawyer data, the firm with the highest growth in RPL in the top 50 last year was Dechert, No. 36, with a 28.1% increase between 2023 and 2024, followed by Latham & Watkins (No. 2) with an 18.1% bump, and what was then known as McDermott Will & Emery (No. 23) at 17.2%. The top 50 as a whole averaged 8.5% RPL growth.
Firms in the Am Law 50 with the highest RPL overall last year were Wachtell, Lipton, Rosen & Katz, (No. 50) with $4.47 million in revenue per lawyer; Sullivan & Cromwell (No. 25) and Ropes & Gray (No. 7) with $2.33 million; Kirkland & Ellis (No. 1) with $2.3 million and Cravath, Swaine & Moore (No. 49) with about $2.25 million.
Practice Mix
The elite firms aren’t purely transactional. There are some litigation-heavy firms in the mix, Burman said. But they’re generally more focused on capital markets and private equity, relative to the rest of the top 50, which are generally more focused on strategic relationships with companies. Burman said these firms tend to have relationships with private equity giants, like BlackRock or Ares, for example.
“Name your private equity player—whoever has those relationships,” he said, adding that a firm with a more balanced practice mix “typically has more strategic relationships with corporations, and those just have not been as active as the private equity players, and that’s where the demand has been aggregating.”
The top 50, sans this group of elite, high-profit firms, has underperformed the rest of the cohorts for the last two or three years, noted Les Starck, another senior consultant for Wells Fargo's legal group. “That’s becoming a trend,” he said last week.
Burman said he wouldn’t be surprised if part of the reason the Second 50 and Second Hundred have done better than that group is because the top 50 are raising billing rates so significantly.
That group, minus the elite firms, are “a little bit too reliant, I would say, on rate growth relative to demand growth,” he said. And “there’s definitely going to be some percentage of clients that are going to look for a Second 50 or someone else to do comparable work and are not willing to pay the price.”
But he added that he thinks the bigger impact is the lateral market, with the elite firms taking demand directly from the rest of the top 50. He noted that it’s only accelerated since the pandemic.
Lateral activity is broadly up this year, with more and higher-earning partners on the move than in previous years. Among the top lateral moves this year are
David Marriott’s move
to Latham & Watkins from Cravath, Swaine & Moore;
Brian Hamilton’s move
from Sullivan & Cromwell to Willkie, Farr & Gallagher; and Ali Brown, Kristen Fournier and Kim Bueno moving from Skadden, Arps, Slate, Meagher & Flom and King & Spalding to Kirkland & Ellis.
“The highest-profit firms are using their wallets and their success to then target the better-performing and higher-generating partners from that next group of firms,” Burman said, speaking generally on the legal market. “Essentially, in some sense, they’re buying the demand from the ones who have it but don’t have sufficient profitability to pay those people. So the demand is getting aggregated to the people with the deep pockets.”
Firm leaders have noticed, too. Earlier this fall, Willkie chair Matt Feldman told The American Lawyer that one aspect of the firm’s performance, as well as the performance of the industry writ large, heading into the home stretch of the year, was that there had been “a lot of consolidation of the most sophisticated, bespoke work at the top of the industry.” He noted one outgrowth of that is also the recent spate of law firm merger activity.
“That’s in response to a market-driven direction, and more consolidation of work at the top of the most sophisticated law firms,” he said.
Dec 1
Deal Summary
