In Legal Business’ last Global 100 issue, as firms enjoyed financial years almost entirely untainted by the economic chaos wrought by Covid-19, we said the strain would start to show in this year’s report. It meant last year’s results were all the more important, as they would be the platform upon which Global 100 firms would face their worst economic crisis in over a decade.
We added that across key metrics, the global elite had reason to be optimistic – gross revenue was up 5% to $119.72bn – but the dent many saw to their profitability was only anticipated to get worse, as average profit per equity partner (PEP) at a Global 100 firm shrank 4% to $1.8m across 2019/20.
So much for predictions. While Global 100 leaders made all the right sounds in public about cautious optimism last year, behind closed doors their firms simply got on with business. In doing so, they didn’t just defy gloomy predictions, they shattered them. And, if the whispered rhetoric coming from Boston, Chicago, London, New York and Silicon Valley is to be believed – and only a fool would dismiss it – the financial results for 2021/22 are going to be even stronger.
While last year Kirkland & Ellis became the first law firm in the world to hit $4bn, in 2021 it announced revenues were up 16% to $4.83bn, edging closer to the $5bn landmark it should comfortably break when it unveils its next results in April 2022. And long-time US rival Latham & Watkins shouldn’t be far behind – as long as it matches the 15% turnover hike this year to reach $4.33bn. In 12 months’ time, the Global 100 could well be led by two firms with revenues north of $5bn.
‘We are ambitious and looking at scale in Europe with five to seven partners over time. It will act as a catalyst for potential growth in the US.’ Jason Glover, Simpson Thacher
David Walker, the London-based global vice chair of Latham’s corporate department, sums up the view: ‘The 2020 financial year was incredibly strong and perhaps surprisingly, given what happened. We were in the beginning of the Covid pandemic and things weren’t looking so clever, but then things picked up very strongly towards the end of the year. That continued this year in a furiously busy period.’
Gold standard
Across key metrics, the global elite have reasons to be cheerful. The gross revenue figure for the group is also up 7% to $128.13bn, ahead of last year’s 5% hike. This increase in top line wasn’t the result of hiring sprees and mergers either: total lawyer headcount was up 6%. This means that the Global 100’s 164,006 lawyers are paying for themselves with average revenue per lawyer (RPL) up 3% to $855,000.
However, it is profitability where the remarkable gains have been made, rebounding from the muted performance last year. Gross profit across the group stood at $53.49bn, a striking increase of 14% year-on-year and more than enough to make up for the increase in total lawyers and a 4% increase in equity partner numbers to 28,070. Average PEP at a Global 100 firm shot up 11% to hit the $2m mark, while profit per lawyer (PPL) grew 10% to $360,000.
The surge in profit was evident across all parts of the Global 100, but nowhere more so than the top 25, where PEP jumped a striking 16% on average to $2.3m and PPL increased 13% to $387,000. In the second quarter, the uptick was 10% for PEP to reach $2.4m and 6% for PPL. The second half of the Global 100, meanwhile, also performed well, seeing PEP grow 13% while PPL increased by 10%.
Evidence that the dial has moved considerably can be seen in the revenues of the group as a whole. In this year’s report no firm has a turnover below $500m, with two firms having revenues above $4bn and Baker McKenzie joining DLA Piper as the firms with revenues above $3bn. The number of firms with turnover greater than $2bn moved up to 17, with Linklaters and Freshfields breaking that threshold again for the first time in a while and Ropes & Gray, on the back of a 15% rise in turnover to $2.19bn, joins the club. More than half of the firms making up the Global 100 (51) now turn over in excess of $1bn, up from 49 last year – Perkins Coie and Wachtell, Lipton, Rosen & Katz are the latest additions to the $1bn club.
In profit terms, more than a quarter (27) of Global 100 firms now have PEP above $3m, with a heavyweight handful of firms – White & Case, Cooley, Sidley, Ropes & Gray, Akin Gump, Wilson Sonsini, Fragomen – all reaching this benchmark at the same time. Nine firms have PEP above $4m; New York trio Simpson Thacher, Sullivan & Cromwell and Paul Weiss now top $5m in average partner profits, while an astonishing 41% leap in PEP at Davis Polk sees it break the $6m barrier alongside Kirkland. PEP at Wachtell is now $7.5m – comfortably ahead of the chasing pack.
Lift and press
Kirkland’s pacesetting form shows little sign of waning. In becoming to all intents and purposes the world’s first $5bn firm, it is easy to run out of superlatives. Kirkland has the strongest growth track over five years (110%) and is only just behind Cooley as the fastest-growing firm of the past decade. Between 2011 and 2021, Kirkland has grown revenue 197% from $1.6bn to $4.8bn. Just recently, the firm announced internally that it would be shortening its track to equity partnership in a bid to attract and retain more talent. The move means that its most-talented lawyers will now be considered for equity partnership nine years out of law school, rather than ten. And in October, Kirkland again broke its own partnership promotion record, making up 151 globally.
Latham has kept pace in terms of year-on-year growth: revenues grew 15% to $4.33bn while PEP was up 20% to $4.52m. Over five years, the firm has grown 64% putting it just outside the five best-performing firms in the Global 100 in this regard.
‘It may be that if inflation continues to increase and interest rates go up, that may slow things down a bit,’ says Walker. ‘But there’s still been huge amounts of capital raised and there’s a massive appetite for debt providers to finance deals and lots of participants. You’ve got traditional private equity, some US funds who’ve not been active in the UK coming over, sovereign wealth funds, real estate funds, infrastructure funds, family offices. The amount of private capital globally is staggering. For firms like ours, that make a real focus of that, the outlook is bright.’
‘Things picked up very strongly towards the end of last year. That continued this year in a furiously busy period.’
David Walker, Latham & Watkins
He adds: ‘We’ll see a continued war for talent as we’ve experienced over the last 18 months. I also believe that we’ll see continued success of the US firms at the expense of the Magic Circle. That trend is only increasing in pace. If you look at the hires, not just that we have made, but Simpson, Kirkland and Weil, and the deals these firms are doing, it’s only moving in one direction.’
Latham and Kirkland were among the 27 firms in the Global 100 to record double-digit revenue increases for the year, up from 23 last year. Among the standout performers was Simpson Thacher, which picked up the crown of US Firm of the Year at the Legal Business Awards in September. The traditionally conservative firm surprised many by launching a European restructuring practice and announcing a Brussels office within a couple of days of each other at the start of the year.
The addition of a London restructuring practice to serve Europe was seen as something of a coup, with Simpson Thacher hiring Freshfields heavyweight partner Adam Gallagher. The Wall Street giant surged to the top of US M&A rankings by deal volume in the first half of the year, working on 104 US deals worth $349bn – a four-fold increase compared to the same period in 2020, according to Mergermarket.
On the restructuring push, London managing partner Jason Glover told Legal Business: ‘There is a desire to create a top-three player for restructuring. We are ambitious and looking at scale in Europe with five to seven partners over time. It will act as a catalyst for potential growth in the US. We are definitely planning to add to the restructuring practice, so watch this space.’
Two firms in particular continue to perform strongly in recent years and this year was no exception. Bay Area firms Wilson Sonsini and Cooley are exceptional global performers: Cooley moves into the top 25 for the first time on the back of a 17% increase in revenue to $1.55bn and a 25% jump in PEP to $3.2m. Indeed, Cooley is the best-performing firm of the past decade, even outperforming Kirkland, growing turnover 200% from $517m in 2011, and is one of the five strongest-performing firms of the past five years, having added more than $500m to its top line during that period.
Wilson Sonsini is no slouch either, outdoing Cooley for year-on-year performance, moving up seven places in the table to comfortably enter the top 50, with revenue up 18% to $1.13bn and PEP up 26% to $3.1m. On a five-year track, its performance is also impressive, with turnover up 54% and PEP up 38% over that period.
Add to all this the entry of Fenwick & West to the Global 100 this year and it is clear to see where there’s money to be made. We commented on the extraordinary extended period of boom in Silicon Valley in our 2019 report (see ‘Letter from Silicon Valley’, LB292) where we said: ‘If the tech and life sciences sectors utterly define California’s economy, their impact on activity levels spans almost every practice area, from capital markets, venture capital and private equity through to litigation, regulatory, data privacy, tax and employment’. This boom shows no sign of slowing down and the area is attracting even more Global 100 firms.
In a bold Bay Area play, Cleary Gottlieb announced in November that it is opening in California with the arrival of renowned antitrust trial lawyer Heather Nyong’o and the relocation of a team of partners and associates from its New York and Washington DC offices to Palo Alto and San Francisco. Having acted for Google on its acquisition of Fitbit at the start of the year (opposite Fenwick & West), for example, such a move makes sense. On announcing the new launch, managing partner Michael Gerstenzang said: ‘We have long advised California clients on their most complex, sophisticated matters. The shifting regulatory environment and evolving needs of businesses across sectors adds compelling reasons to provide these clients with on-the-ground support… We will build on this strong foundation by expanding our Bay Area presence with additional exceptional talent in the coming months.’
This move follows the audacious launch by Freshfields in Silicon Valley in 2020 and, more recently, Allen & Overy (A&O) made an eye-catching move for seven White & Case technology partners to establish a new Silicon Valley presence. The team will offer a combined strength in technology disputes, transactions, patent litigation and intellectual property. As well as a new Silicon Valley hub, the team transfer will also provide A&O with a new San Francisco office.
A&O senior partner Wim Dejonghe said: ‘All businesses are technology businesses now. Our clients have been asking us when we will have a presence in Silicon Valley and now we are adding an offering that we will grow to serve as the firm’s centre of excellence in a range of technology areas.’
Struggling for grip
While the resilience of the group as a whole is a thing to behold, there are a handful of firms that continue to struggle with Shearman & Sterling, which has listed somewhat in the past five years, having the misfortune of recording a double-digit plunge in its material output. Revenue was down 11% to $861m, meaning Shearman’s top line has not moved at all in five years, while PEP fell 23% to $1.9m and has only inched up 4% since 2016. Meanwhile, K&L Gates is the only firm in the Global 100 to be have an annual revenue that is lower than it was a decade ago.
For both firms, the reduction in top line is down to a drop in headcount consistent with a refocusing of strategy. In announcing muted results last year, Shearman’s senior partner David Beveridge told Legal Business: ‘We are reshaping the business to focus on corporate and our private client base. That means moving some people along and engaging in a strong lateral recruitment strategy.’ Like turnover, headcount at Shearman is almost exactly the same as it was five years ago and, as a consequence, RPL was practically the same in 2016 as in 2021.
K&L Gates, meanwhile, has seen total lawyer numbers fall by 15% over the past five years but RPL has grown 13%, demonstrating that top line performance often only tells half the story. PEP is up 11% this year to $1.15m. In 2011, the firm was ranked 20th in the Global 100 table and had 1,763 lawyers with an RPL of $599,000. This year, it is ranked 49th, with 1,623 lawyers and an RPL of $628,000. So while it has been surpassed by much faster-growing firms in the past decade, its RPL is actually up 5%.
Elsewhere, Mayer Brown fell out of the top 25, dropping five places in the table, despite growing revenue 2% – underlining some of the huge gains made by firms in the top quarter of the table.
Mayer Brown grew global revenue to $1.52bn from just shy of $1.5bn last year when the firm recorded 7% revenue growth. PEP numbers were more heartening, climbing 11% to $2m from $1.8m in the context of a 2% uptick in partners to 657 from 646 last year. Total lawyer headcount increased 3% to 1,685 from 1,632.
Chair Paul Theiss was bullish despite the slower pace of growth, commenting: ‘For Mayer Brown, 2020 was first and foremost about taking care of our clients as their trusted adviser and business partner, and about taking care of one another and our families during a difficult year. Against that backdrop, from a financial standpoint 2020 marked our eighth consecutive year of revenue growth, with a 75% increase in PEP during that period.’
The biggest fall among the top 50 came at Dechert, which saw revenue drop 6% to $1.07m and PEP dip by the same amount to $2.83m. RPL saw a 4% decrease to $1.12m from $1.17m last year, as the number of equity partners remained flat at 154 and total lawyer headcount stood at 960 compared with 974 the year before.
Dechert chief executive Henry Nassau nevertheless defended the firm’s position when the results were announced: ‘We have seen ten years of steady growth at an average annual rate of 5%. 2019 stood out with 11% revenue growth. 2020 was the third year with revenue greater than $1bn. The second half of 2020 was spectacular and this continued through into early 2021, with year-to-date revenue up 12%, and billings are up 16%. The 2020 drag was down to a couple of issues in the first half of the year. Over 20 matters were postponed due to court closures and two huge litigation matters drew to a close at the same time. We reloaded, but not in time for the snapshot when these figures were taken.’
Brace yourselves
With the prognosis for the 2021/22 financials set to be even stronger than ever, it is fair to say firms across the Global 100 have, for the most part, shown resilience and fortitude throughout a uniquely challenging period. But there are challenges ahead without doubt that will have a direct impact on financial performance.
‘The UK has been well ahead of the US in ESG so we have really taken the lead from our UK partners.’
Kim Koopersmith, Akin Gump
The first is the war for talent, which has just intensified since lockdown restrictions eased – see ‘Moves of the year’ for a summary of the partner movement among Global 100 firms in the past 12 months. Latham’s Walker commented above that he believes this war for talent will continue and the recent move by Kirkland to shorten the track to its considerably lucrative equity partnership is further evidence of that. On the evidence so far, it would appear Goodwin is winning this particular battle, ranking among the top three firms for partner promotions and partner hires relative to size (for more on Goodwin, see ‘No guts, no glory’).
But in winning the war for talent, which includes attracting and retaining the next generation of partners, the Global 100 will have to do more than throw money about. Increasingly mobile talent and increasingly demanding clients want to align themselves with firms that do business the right way, not necessarily the most successful financially. And there is an increasingly strong belief that in future that financial success and ethical behaviour will be mutually inclusive.
As our feature on ESG earlier this year articulated (see ‘We good corporate citizens’, LB302), we are supposedly moving towards more enlightened times, where good corporate governance, saving the planet, being inclusive and caring about the wellbeing of those who work with us and for us are more important than the culture of ‘greed is good’. Corporates are putting their best foot forward. Vodafone unveiled a new panel this year, selecting eight firms based on a commitment to shared diversity and ESG best practice. Law firms are now expected to walk the talk for clients and potential recruits. With that, the benchmark of a successful law firm now, and even more so in the future, will be so much more than eye-catching leaps in PEP.
Says Kim Koopersmith, chair of Akin Gump: ‘The UK has been well ahead of the US in ESG so we have really taken the lead from our UK partners. The next generation of lawyers cares a great deal about whether firms are committed to this, so not embracing it as important is a missed opportunity in making sure you are connecting with everyone at the firm.’
Her point is picked up by Sebastian Rice, partner in charge of Akin Gump’s Hong Kong and London offices: ‘You need to practice what you preach and make sure you’re consistent with your values across the board. When we interview people, they ask what kind of clients we act for. If you want to recruit and retain great talent, you have to be conscious of that.’
It is no coincidence that Pinsent Masons, ranked 83rd in the table with modest (at least by Global 100 standards) revenue growth over the past five years, was named Law Firm of the Year for the third time at the Legal Business Awards in September. The general counsel that make up the judging panel are not looking for striking profits. Unusually perhaps for a firm winning this title, Pinsents did not post financials that blew competitors out of the water – far from it. Speaking to Legal Business in 2020, managing partner John Cleland said: ‘We firmly believe that if we continue to do business in the right way and for the right reasons, our business will come through this year strong, united and better than before.’
The firm has made a point of no longer determining its success based on numbers alone, holding itself to account against metrics that it feels truly reflect the health of its business: trust among colleagues; and among clients; working better among the communities within which it operates; and purpose-led business growth. It has put its commitment to ESG principles on the line, hitting its environmental sustainability targets one year ahead of time, creating a 30% reduction in energy consumption across its UK network. It also appears among the leading firms for gender diversity in the Global 100.
It is early days, but many Global 100 firms did not have to hand or chose not to provide any information on diversity or their carbon footprint. We hope that will change for next year – clients are certainly demanding it and many firms will find that potential recruits and their own talent will begin to ask those questions if they are not doing so already.
For our part, we will place a much greater focus on analysing firms’ performance in a more holistic fashion. With that mind, credit goes to White & Case, Goodwin, Paul Weiss and Willkie – firms with considerable financial punch in the Global 100 that have been named as diversity champions in this report. We hope that with greater transparency across the board, the numbers upon which we will analyse firms will be multi-dimensional. LB
Legal Business would like to thank SSQ for its sponsorship of the Global 100.
The Global 100 ten-year view
Our 2011 Global 100 report was a recovery year for the highest-billing law firms in the world as many recorded modest gains in revenue and profit as their recovery began from the preceding years where the Global Financial Crisis hit hard. The early part of the past decade was about rebuilding and the resilience of the top tiers of the legal profession has been very much in evidence since. Of the 67 firms that were in the 2011 Global 100 and remain today in largely the same form as they were then (removing any firms that went through transformative mergers in that period), all but one (K&L Gates) have recorded revenue growth over that decade. The average revenue in 2011 of those firms was $878.5m; in 2021 that has risen 63% to $1.43bn.
Four of the five fastest-growing firms in the Global 100 over the past decade have had their rise clearly documented: Quinn Emanuel, Kirkland, Cooley and Ropes & Gray have been the quartet of thrusting firms that have dominated headlines on and off over the past year. Just outside the top five is Wilson Sonsini (with a growth rate of 129%), which, like Cooley, has made great strides for tech giants in Silicon Valley and beyond. Sheppard Mullin, meanwhile, has quietly gone about its business, growing financially and spreading its geographic footprint year on year for some time. Veteran chair Guy Halgren stepped down in October after leading the firm since 2001. During that time, he saw headcount move from around 300 lawyers to 833 in 2020, while he oversaw 20-years of consecutive revenue growth, up from $149m in 2001 to $867.4m last year.
The ten-year view makes for continually painful reading for the UK firms in the Global 100. The currency effect has played an inevitable role over the decade: the $2-£1 rate of 2007 is a distant memory; back in our 2011 report, £1=$1.5452 compared to £1=$1.2829 this year. The four prominent London-based international firms only managed 30% or less growth over the past decade, but it is better news for the firms outside the supposed UK elite: Bird & Bird and Simmons & Simmons have managed 53% and 48% growth in dollar terms since 2011.
Revenue growth 2011-2021
BEST
| Firm | 2011 | 2021 | Change |
|---|---|---|---|
| Cooley | $517m | $1,552.1m | 200% |
| Kirkland & Ellis | $1,625m | $4,830m | 197% |
| Ropes & Gray | $822.4m | $2,192.8m | 167% |
| Quinn Emanuel Urquhart & Sullivan | $550.5m | $1,301.1m | 136% |
| Sheppard Mullin | $367.8m | $867.4m | 136% |
WORST
| Firm | 2011 | 2021 | Change |
|---|---|---|---|
| K&L Gates | $1,055.6m | $1,019.7m | -3% |
| O’Melveny & Myers | $782.4m | $835.1m | 7% |
| Linklaters | $1,873.5m | $2,147.4m | 15% |
| Freshfields Bruckhaus Deringer | $1,779.9m | $2,041.1m | 15% |
| Cleary Gottlieb | $1,050m | $1,223.1m | 16% |
The currency effect
The dominance of the US dollar against sterling has affected the ranking of Global 100 firms that report in sterling. However, 2020 saw the pound rally marginally against the dollar – in the 2020 report, the exchange rate was £1=$1.2768. This year, the exchange rate used was £1=$1.2829. The table below shows the actual year-on-year growth in home currency for these firms.
| G100 rank | Firm | Revenue | % change | PEP | % change |
|---|---|---|---|---|---|
| 10 | Clifford Chance | £1,828m | 1% | £1,850,000 | 9% |
| 12 | Allen & Overy | £1,771m | 5% | £1,900,000 | 17% |
| 16 | Linklaters | £1,673.9m | 2% | £1,772,000 | 10% |
| 17 | Freshfields Bruckhaus Deringer | £1,590m | 5% | £1,910,000 | 5% |
| 31 | Herbert Smith Freehills | £1,038m | 5% | £1,099,000 | 28% |
| 61 | Ashurst | £711m | 10% | £1,038,000 | 15% |
| 62 | Slaughter and May | £690m | 3% | £3,200,000 | 3% |
| 70 | Clyde & Co | £639.6m | 2% | £714,000 | 7% |
| 83 | Pinsent Masons | £503.3m | 2% | £630,000 | 15% |
| 92 | Simmons & Simmons | £437.2m | 12% | £988,000 | 31% |
| 99 | Bird & Bird | £401.2m | 6% | £610,000 | 10% |
Global 100 headcounts
Global 100 total gross profits and revenues
Partnership growth
In total 60 firms in the Global 100 reported making partner hires at an average of 18 – down from 23 last year. However, partner promotions are up on average – the 60 firms that reported promoting partners averaged 27 each, compared to 24 in 2019/20.
Top three partner hirers relative to size
1. Goodwin
2020/21 hires: 64
% of partnership: 15%
2. Duane Morris
2020/21 hires: 40
% of partnership: 11%
3. King & Spalding
2020/21 hires: 54
% of partnership: 11%
Top three partner promoters relative to size
1. Kirkland & Ellis
2020/21 promotions: 145
% of partnership: 12%
2. Willkie Farr & Gallagher
2020/21 promotions: 21
% of partnership: 10%
3. Goodwin
2020/21 promotions: 40
% of partnership: 10%
Global 100 averages
The Ins and Outs
In
| Rank 2021 | Firm | Turnover 2021 |
|---|---|---|
| 94 | Fenwick & West | $543.1m |
| 100 | Crowell & Moring | $514.4m |
Out
| Rank 2020 | Firm | Turnover 2021 |
|---|---|---|
| 98 | Locke Lord | $482.1m |
| 95 | Nixon Peabody | $488.8m |
Best and worst: Global 100 growth 2016-21
Revenue
BEST
| Firm | 2016 | 2021 | % change |
|---|---|---|---|
| Kirkland & Ellis | $2,305m | $4,830m | 110% |
| Covington | $743m | $1,321.3m | 78% |
| Goodwin | $866m | $1,486.3m | 72% |
| Cooley | $912m | $1,552.1m | 70% |
| Lewis Brisbois | $406m | $676.8m | 67% |
WORST
| Firm | 2016 | 2021 | % change |
|---|---|---|---|
| K&L Gates | $1,065m | $1,019.7m | -4% |
| Shearman & Sterling | $860.3m | $861m | 0% |
| Freshfields Bruckhaus Deringer | $2,028.2m | $2,041.1m | 1% |
| Cleary Gottlieb | $1,215.5m | $1,223.1m | 1% |
| Baker Botts | $704.5m | $710.8m | 1% |
Profit per equity partner
BEST
| Firm | 2016 | 2021 | % change |
|---|---|---|---|
| Davis Polk | $3,305k | $6,350k | 92% |
| Weil | $2,522k | $4,522k | 79% |
| Fragomen | $1,850k | $3,233k | 75% |
| Debevoise & Plimpton | $2,624k | $4,566k | 74% |
| Kirkland & Ellis | $3,605k | $6,200k | 72% |
WORST
| Firm | 2016 | 2021 | % change |
|---|---|---|---|
| Clyde & Co | $1,029k | $916k | -11% |
| Pinsent Masons | $841k | $808k | -4% |
| Vinson & Elkins | $1,888k | $1,840k | -3% |
| Baker Botts | $1,802k | $1,843k | 2% |
| Shearman & Sterling | $1,835k | $1,903k | 4% |
Breakdown of fee income by practice area
Diversity champions: five firms with the strongest gender diversity statistics
| Firm | % equity partners female | % partners female | % lawyers female |
|---|---|---|---|
| CMS | 34% | 34% | 55% |
| Pinsent Masons | 24% | 29% | 54% |
| Morgan Lewis | 29% | 29% | 43% |
| Herbert Smith Freehills | 22% | 28% | 50% |
| Goodwin | 20% | 37% | 42% |
Diversity champions: five firms with the strongest BAME representation
| Firm | % equity partners BAME | % partners BAME | % lawyers BAME |
|---|---|---|---|
| Paul Weiss | 20% | 20% | 33% |
| Morrison & Foerster | 17% | 22% | 30% |
| Orrick | 15% | 16% | 26% |
| White & Case* | N/D | 22% | 34% |
| Willkie Farr & Gallagher | 15% | 15% | 25% |
See note on diversity stats, below. * White & Case does not differentiate between equity and non-equity partners for the purposes of ethnicity
Diversity: Gender
Around 60 Global 100 firms provided gender diversity data of some kind. The majority of data applies to US/UK only lawyers, although some international firms provided global data, as requested.
Diversity: Ethnicity
Fewer than half of the Global 100 firms provided lawyer ethnicity data of some kind. The majority of data applies to US/UK-only lawyers, although some international firms provided global data, as requested.