Three down, but US firms defiant

The AmLaw 100 figures show that US law firms are battling bravely to ride out the downturn despite three going under

Elite Wall Street firm Cravath Swaine & Moore has posted a 22 per cent drop in revenue per lawyer and an 8 per cent drop in profits per equity partner, according to The AmLaw 100, published by The American Lawyer this month.
However, despite the collapse of three US law firms this year – Brobeck Phleger & Harrison, Altheimer & Gray and Arter & Hadden – The AmLaw 100’s findings are not as apocalyptic as might be expected.
US law firms fared well across the board, with gross revenue for the top 100 practices increasing by 8.5 per cent. However, The AmLaw 100 points out that Wall Street and Silicon Valley suffered the most. Of the 15 firms where revenue per lawyer declined last year, seven were New York firms and two were Silicon Valley firms.
After Cravath, Cleary Gottlieb Steen & Hamilton and Debevoise & Plimpton were the New York firms which suffered the biggest drops in revenue per lawyer. California firm Wilson
Sonsini Goodrich & Rosati recorded the second-largest decline in revenue per lawyer, at 6.5 per cent.
Few of the big name firms posted sharp increases in profits per equity partner. Shearman & Sterling‘s strong showing (profits were up by 34 per cent) was more to do with the fact that 2001 had been an exceptionally weak year. The biggest slump in profits per equity partner came from the now defunct Brobeck Phleger & Harrison, which showed a decrease of nearly 37 per cent.
The AmLaw 100 also reveals that an increasing number of firms have pruned their equity partners. This has had an immediate effect on the bottom line: Boston-based Mintz Levin Cohn Ferris Glovsky and Popeo’s average profits per equity partner leapt by nearly 30 per cent, while its equity partnership shrunk by 12 per cent.
Overall, the size of the equity partnership declined or remained flat at 34 firms in the top 100.

Profits per equity partner – gainers
Firm Change from 2001 (%) Explanation
Dickstein Shapiro 82.1 Contingency fees from a big antitrust suit
Shearman & Sterling 34.2 Benefited from comparison to a weak 2001
Kelley Drye 29.6 Strong results from litigation
Mintz Levin 29.4 Equity partnership shrank by 12 per cent
Jenner & Block 27.2 Strong results from litigation

Profits per equity partner – decliners
Firm Change from 2001 (%) Explanation
Brobeck -38.6 A crushing expense load that killed the firm
Womble Carlyle -16.8 End of a multiyear contingency fee payout
Gray Cary -10.7 Slow collections and high overheads
Thelen Reid -8.9 The equity partnership grew by 20 per cent
Cravath -8.2 Hit hard by the M&A drought

Revenue per lawyer – gainers
Firm Change from 2001 (%) Explanation
Dickstein Shapiro 36.4 Contingency fees from a big antitrust suit
Brobeck 26.5 Lawyers defected from the dying firm
Shearman & Sterling 21 Benefited from comparison with a weak 2001
Akin Gump 13.7 Strong results in litigation and employment work
Kilpatrick Stockton 13.4 Busy with a big arbitration case

Revenue per lawyer – decliners
Firm Change from 2001 (%) Explanation
Cravath -22.3 Hit hard by the M&A drought
Wilson Sonsini -6.5 As goes the tech sector, so goes Wilson
Cleary Gottlieb -5 Less leverage than many similar firms
Debevoise & Plimpton -3.4 Expanded headcount during 2002
Covington & Burling -3.3 Financial year ends 30 September, excluding late collections

Source: AmLaw 100