LawFuel contributor Ben Boman writes on law firms profitability and statistics
Profits per equity partner (PEP) growth for big law firms is increasing for US law firms and exceeding the revenue growth for law firms.
The trend demonstrates significant changes within the US law profession as some firms – for instance, such LawFuel prestige law firms list members as Akin Gump Strauss Hauer & Feld, Hogan Lovells, Milbank, Quinn Emanuel Urquhart & Sullivan, and Paul Weiss Rifkind Wharton & Garrison who show double-digit revenue growth and PEP growth for 2023.
The changes indicate that firms are focused on their profitability even when revenues have been variable. That, in turn, will be reflected on other strategic moves the firms make in terms of the law jobs outlook and their lateral hires and other moves.
The PEP growth was higher at the big law firms than their revenue growth. But, perhaps even more intriguing is that PEP growth was also higher even for the firms with slower revenue increases.
For instance, Akin Gump and Hogan Lovells saw PEP increase by around 20 percent, compared to a 10 percent increase in revenues.
Reuters recently reported that Hogan Lovells PEP, which had declined from 2021 to 2022, increased by about 20 percent to $2.74 million in 2023, Global revenue reached $2.68 billion last year, the firm said, after a dip to about $2.43 billion in 2022.
Similarly, King & Spalding, Paul Hastings, White & Case, and McDermott, Will & Emery experienced PEP growth exceeding 12 percent, despite single-digit revenue growth.
And the PEP story doesn’t stop there.
Firms like Cooley, Bryan Cave Leighton Paisner, and O’Melveny & Myers saw either stagnant or declining revenue, yet managed to sustain PEP growth
DLA Piper exhibited a similar pattern of PEP increase surpassing revenue growth alongside a reduction in equity partners.
Of the top 15 international firms disclosing their results in recent weeks, only three saw revenue surpassing PEP growth: Willkie Farr & Gallagher, Proskauer Rose, and Greenberg Traurig. However, the margins were marginal in each case.
Watching the way firms adjust to the current legal landscape will see some interesting developments as 2024 continues to provide challenges and surprises in equal measure.
