They may lament that they are the poor cousins of hedge fund managers and private equity stakeholders, but law firm partners are hardly suffering.
In 2006, for the first time since The American Lawyer started measuring the financial performance of law firms 22 years ago, a majority of America’s 100 top-grossing firms had profits per equity partner of $1 million or more. And one, Washington, D.C.’s Wiley Rein, notched the highest profits per partner ever recorded by the magazine.
In fact, almost all indicators were on an upswing in 2006, according to just-released results from The Am Law 100, The American Lawyer’s annual survey of law firm finances. (Full results appear in the May issue of the magazine.)
Compared to 2005, average revenue per lawyer went up 7.3 percent (to $779,000, from $726,000), and average gross revenue shot up 11.4 percent (to $567 million, from $509 million). Lawyer head count also grew by 3.9 percent.
More Am Law 100 lawyers are making megabucks than ever before. Of the 59 firms in the $1 million-plus category, 15 had profits per partner of $2 million or more (in 2005, there were 10 such firms). And in the $3 million-plus club, Wachtell, Lipton, Rosen & Katz — whose average profits per equity partner have exceeded $3 million since 2004 — got some company: Cravath, Swaine & Moore ($3 million) and Wiley Rein ($4.4 million).
How did firms hit such sky-high profits per partner levels? Contingency fees helped fuel the incredible profit growth at Wiley Rein (which posted a 465 percent increase), as well as at Akin Gump Strauss Hauer & Feld (a 34.2 percent increase), Quinn Emanuel Urquhart Oliver & Hedges (a 27.6 percent increase), and Finnegan, Henderson, Farabow, Garrett & Dunner (a 21.8 percent increase).
There was also more work on everyone’s plate. Litigation, transactions (including private equity and hedge funds), and real estate were all very busy. “It was secular growth everywhere,” says Cravath presiding partner Evan Chesler. “It’s not attributable to any one factor; we were very busy in litigation and corporate.”