US top 50's £46.8bn haul makes 2007 the best year ever
24 March 2008
The top 50 US firms last year generated a total of $46.8bn (£23.4bn) in revenue - an increase of more than 16 per cent on the 2006 total of $40.27bn (£20.14bn).
The exclusive findings reported today in The Lawyer confirm that 2007 was one of the strongest on record for the majority of US firms, despite the turbulence that rocked the market in the summer and which continues to do so.
The average profit per equity partner (PEP) at the leading group of US firms showed smaller, although still significant, growth. In 2006 the average PEP among the top 50 US firms was $1.55m (£842,391). Last year that rose by 11 per cent to $1.72m (£860,000).
A succession of strong results from US firms in recent weeks had hinted at 2007 being a standout year for the majority of US firms. One of the most remarkable came from Debevoise & Plimpton, which took the market by surprise when it reported a 27.2 per cent rise in PEP, from $1.8m (£978,261 ) to $2.29m (£1.15m).
The firm's involvement in deals such as ABN Amro's £50.2bn takeover by a Royal Bank of Scotland-led consortium and Phelps Dodge's $26bn (£13bn) merger with Freeport-McMoRan Copper & Gold kept the cash registers ticking over last year.
But the New York firm was also one of the big winners in terms of growth. It posted an increase in revenue of 23.5 per cent to $710m (£355m). Other strong performers include Reed Smith (up 38.2 per cent), Latham & Watkins (up 23.5 per cent) and DLA Piper (110 per cent due to its first combined Europe, Middle East and Africa and US figures).
DLA Piper aside, Kirkpatrick &?Lockhart Preston Gates Ellis (K&L?Gates) and Reed Smith topped the charts for growth among US firms last year. Both were powered by the additional income from mergers. Reed Smith merged with Richards Butler in the UK and acquired Chicago's Sachnoff & Weaver.
Reed Smith European managing partner Roger Parker said: "The rise of course reflects the mergers, but also the success we've had with cross-selling between the offices, which hit a new high of $40m [£20m] last year."
Reed Smith's rate of expansion showed no signs of slowing this year when in January it secured a long-awaited deal to ramp up in New York with the hire of 55 lawyers from 120-lawyer Anderson Kill & Olick.
For other firms the market's turbulence is evident in their 2007 results.
Cadwalader Wickersham & Taft was second only to Akin Gump Strauss Hauer &?Feld in terms of posting the biggest fall in PEP. The former was down by 6.2 per cent, although despite this drop it hung on to its place in the top five best performers on PEP overall, with $2.72m (£1.36m). Here, Wachtell Lipton Rosen & Katz remains out of reach of any other US firm with a PEP of $4.48m (£2.24m).
In the main table, Cadwalader slipped eight places from 39 to 47. Other major fallers include Pillsbury Winthrop Shaw Pittman (down 11 places), Holland & Knight (also down 11) and King & Spalding (down six).
West coast-based Heller Ehrman was the only firm to lose its place in the top 50, with its spot being taken by Wachtell.
Ward Bower of US legal market consultancy Altman Weil says the numbers confirm that 2007 was the best ever for top firms in terms of both productivity and profitability.
"Don't expect to see that in 2008," he added. "Some of those same firms are off 10 to 15 per cent on the revenue side for the first two months of this year."
Bruce?MacEwen,?the founder of US legal market website Adam Smith Esq, warned that, while the record results were partly down to increased levels of work across most practices last year, a large portion of the increase in revenues was driven by rate hikes.
"On the extremely plausible assumption that activity cools this year, additional rate hikes are essentially the only tool firms have left if they expect to generate year-on-year revenue growth," said MacEwen. "One has to question whether corporate clients will have the stomach for additional rate increases in this economic environment."
Last year the average size of firms in the top 50 was $936m (£468m), a rise of 16 per cent from $805m (£437.5m) in 2006. The average increase in revenue was 16.2 per cent, while the average increase in PEP was 11.1 per cent.