Big deals, different deals and a ton of legal work is continuing to drive the growth of the largest US law firms during 2021.
The Economist reports that almost 16,000 deals involving at least one American party were announced during the first six months of this year, which is half as many again as the same period in 2016-20 according to the report.
More than the deal volume has been the novelty of some of the structures being used, which has also driven the growth of the law firms, the work rate of the lawyers working the deals and the ongoing pay rates for the lawyers.
Some law firms are so busy that they are declining legal work to handle the deal flow. They are also adapting to the lockdown reality – like conducting due diligence via Zoom, working remotely and developing novel legal structures for equally novel deals.
The result has been increased profits for the major US law firms and many of the other major UK law firms, with profit margins moving beyond 40 per cent and profits-per-partner numbers also surging.
Certainly the growth in profits for Big Law – and many boutique specialist firms working in the booming tech and tech-deal area – have resulted in some of the best profits they have every enjoyed.
In the UK, the major circle law firms, Slaughter and May, Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters and Allen & Overy, have all enjoyed profit increases.
The profits per partner – a measure of how much partners are paid – hit £1.82m at Freshfields in 2019-20, the most recent year for which figures are available. For Clifford Chance it was £1.69m , £1.63m at Allen & Overy and £1.61m at Linklaters.
The growth for the major firms is hardly slowing, either. Notwithstanding the surging COVID outbreaks, the UK ‘freedom day’ release and ongoing deals ensure that on both sides of the Atlantic law firms are adjusting with great profitability to ‘the new norm’.