Only $10m separates top two firms as The Lawyer reveals full impact of global recession on US firms’ turnovers.

Bakers snaps at the heels of <a class=Skadden in US top 30 rankings” />Baker & McKenzie is only $10m away from becoming the largest US law firm by revenue and snatching the title long held by elite firm Skadden Arps Slate Meagher & Flom.

Bakers posted a 20 per cent rise in revenue last year, taking turnover from $1.83bn in 2007 up to $2.19bn in 2008. In contrast, Skadden managed only a 1 per cent rise in revenue last year, taking global turnover to $2.2bn.

The Lawyer has been unveiling ;the ;results throughout January and February on its online Revenue Counter, but today’s table offers the first official overview of the impact of the global recession on the leading US law firms.

Of the top 30 firms, eight posted flat or reduced incomes, while 19 saw a reduction in average profit per equity partner (PEP).

Despite the apparent ­vindication of Bakers’ longstanding global strategy, the firm’s delight at securing the number two spot could be short-lived. Bakers has a 30 June year-end, meaning its most recent fiscal year avoided ;the ;harshest months of the recession and the corresponding impact on deal flow.

Latham ;& ;Watkins secured third place, slipping one place after posting a 4 per cent revenue drop. ­Latham also posted one of the sharpest PEP falls, down 21 per cent from $2.27m to $1.8m.

Several other elite US firms also saw their positions drop last year as they battled the global downturn. Sullivan & Cromwell slipped one place, Shearman & Sterling dropped five, Simpson Thacher & Bartlett fell seven and Davis Polk & Wardwell went down two places to take the number 30 slot.

“There’s been gigantic, dramatic and sudden change in the world,” said Orrick chairman Ralph Baxter. “That’s the story. We don’t yet know how this is all going to shake out, but in five years’ time the world’s leading law firms will be those that are best orientated to adapt to that change.”

The impact of the widespread drop in PEP has already been seen among the top US firms in their focus on reducing costs. This ;sea-change ;has ­accelerated rapidly since the fourth quarter of last year.

“At the absolute best the market’s tanked since mid-November,” said Tony Williams of legal market consultancy Jomati. “The reality is, it’s probably going to continue to drift.”

Other significant movers in the revenue table include Reed Smith, which rose eight places, and K&L Gates, which jumped 10 ­following a 27 per cent rise in income. K&L Gates’ increase, by far the largest among US firms last year, was primarily due to the firm’s ongoing strategy of aggressive expansion and acquisitions.

Last year alone K&L Gates bolted on 150-lawyer Texas-based firm Hughes & Luce, 175-lawyer Charlotte-based Kennedy Covington Lobdell & Hickman and Taiwanese ;firm ;J&J ­Attorneys-at-law, which had nine lawyers.

In the current financial year the firm also acquired Chicago-based Bell Boyd & Lloyd, which has around 250 lawyers across its offices in Chicago, San Diego and Washington DC.

“Now is not the time to be timid,” argued K&L Gates chairman Peter Kalis. “If you’re in a position to invest, you should do it. There are so many opportunities for a firm like ours.”

DLA Piper lost its place at the head of last year’s table as a result of the firm’s US and non-US revenues being treated as separate income streams. Last year DLA Piper topped the chart when it was treated as a combined firm, but it has since decided to abandon its efforts to merge its two financial systems.

The Lawyer’s US top 30 was compiled using figures provided by firms in the majority of cases. Where firms declined to provide ­figures The Lawyer has used ­estimates after speaking to sources close to those firms.

For more on this story, see today’s feature and the leader.