Boom or bust? Go figure

Panic on Wall Street? You wouldn’t think so from the top law firms’ financial results. But as The Lawyer US Top 50 graphically demonstrates, it takes a while for a downturn to affect the revenue pipeline.

So what do these figures tell us? That Simpson Thacher & Bartlett continues to power onwards; that Davis Polk & Wardwell – regarded by some as having lost momentum recently – has returned to form; and that Skadden just can’t help putting on weight.

The magic circle firms keep a very wary eye on their transatlantic cousins. These results won’t spook them unnecessarily. In a world where major law firms chase each other’s tails, the new average PEP figures to beat are those posted by Sullivan & Cromwell (£1.57m), Cravath Swaine & Moore (£1.65m) and Simpson Thacher & Bartlett (£1.44m). (We’ll exclude the force of nature that is Wachtell Lipton Rosen & Katz, which is averaging more than £2.24m.)

No single firm has scaled both twin peaks of London and New York. But the ultimate prize is clear: to be a top-tier firm in corporate, finance or litigation in both jurisdictions – and indeed regulatory work, in the case of Clifford Chance. The UK-headquartered firms have the luxury of being able to strengthen their hands among the global financial institutions via their Middle East, Russia and Asia offerings; Latham’s sudden Middle East expansion with three new offices underlines how belated US firms’ conversion is.

For the elite US firms, the options are fewer. Like the UK magic circle, the battleground is for the attentions of the global financial institutions. But those US firms have no serious competition domestically from the UK leaders and are taking a slower route to the transatlantic market. They are relying on smaller, premium-billing practices outside their New York strongholds.

But there is also pressure from below. Look at the emergence of an exceptionally strong transatlantic mid-tier, which includes DLA Piper, Mayer Brown and Reed Smith. In fact, the top 10 biggest-grossing firms in The Lawyer US Top 50 have all invested in London offices – or in Greenberg Traurig’s case, an alliance with Olswang.

You can’t run a top US practice without reference to London, and vice-versa. These are the glimmerings of a market beginning to take shape.

Click here to see The Lawyer US top 50 2007