Law firms have been gleefully watching profits climb new Everests – up by over 9 per cent in 2004 according to one survey. And which firms top the Vault’s Prestige Rankings this year?

No need to brace yourself — yet — for the reappearance of the hostile-takeover sharpies of the 1980s or even the foosball-and-flip-flop gazillionaires of the late-’90s tech boom, but recently law firms have been gleefully watching their profits climb of late to levels not seen in years.

Plumped up by healthy litigation practices, Sarbanes-Oxley work and an upswing in corporate and financial business — including big mergers and bankruptcies — law firm revenue grew 9.6 percent in 2004, according to a survey by consulting firm Hildebrandt International. The revenue increase translated into a 10.1 percent rise in profits per partner at the firms surveyed — oops, make that profits per equity partner, and remember that the pollsters couldn’t exactly talk to those firms that didn’t survive the legal market’s resurgence in mergers and consolidations.

These days a law firm has got to get creative in cutting its costs and aggressive in expanding its reach. Forty-seven law firm mergers were consummated in 2004, and Chicago’s Piper Rudnick LLP, California’s Gray Cary Ware & Freidenrich LLP and the U.K.’s DLA rang in 2005 by combining forces, setting a heady pace for the year to come. Law firms have also been expanding into Asia, particularly China, in a bid to establish beachheads in a potentially vast new market for legal services. At the same time, firm managers have been reining in expenses at home.

A National Law Journal survey of the 250 biggest U.S. law firms found attorney payrolls inched up by only 1.5 percent in 2004, the smallest increase in 10 years, and the number of associates sank by 3.5 percent. The signs point to a rebound in recruitment in 2005, however, with summer associate hiring up and lateral hiring booming. Still, the long-term picture is uncertain, as law firms looking to shore up the bottom line even further take a page from the corporate playbook and turn to outsourcing.

Many of the big cases that filled law firm coffers over the last year aren’t exactly new to the headlines: Enron (represented in its bankruptcy by Weil, Gotshal & Manges LLP), WorldCom (ditto), Adelphia (Willkie Farr & Gallagher LLP), Parmalat (Weil and Quinn Emanuel, Urquhart Oliver & Hedges LLP).

Fortune has not been kind to disgraced CEOs, however: Adelphia’s John and Timothy Rigas got 15 and 20 years, respectively, for committing securities fraud, Dennis Kozlowski was finally convicted of stealing from Tyco and Bernard Ebbers was sentenced in July 2005 to 25 years(!) for his role in the $11 billion accounting fraud at WorldCom.

Check the Vault’s prestige law rankings here:

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