Global 100 overview: Playing a blinder

In Legal Business’ Global 100 report last year, firms obliterated gloomy predictions to post overwhelmingly positive results, defying fears of the worst economic crisis for more than a decade laying just around the corner.

Across key metrics, the global elite had plenty of reasons to be positive in 2020/21. Gross revenue was up 7% to $128.13bn, but it was the profitability of the top 100 firms that really stood out: $46.98bn, a striking increase of 14% year-on-year. Average profit per equity partner (PEP) at a Global 100 firm shot up 11% to hit the $2m mark; while profit per lawyer (PPL) grew 9% to $360,000.

And yet, despite all this, we said the rhetoric coming from the world’s highest-grossing firms was that 2021/22 was going to be an even stronger year. This has turned out to be an understatement in the extreme. We predicted that Kirkland & Ellis and Latham & Watkins could lead the Global 100 this year with revenues north of $5bn, but Kirkland went ahead and smashed that forecast by turning over more than $6bn in 2021. Records have been casually set aside: the Global 100 now comprises 64 firms with revenues over $1bn; just five years ago the number was half that. Put simply, if revenue and profit growth is not in the double-digits in this year’s report, then you are struggling in relative terms. At the lower end of the Global 100, firms must be turning over more than $550m to even make the cut.

The words of London-based Skadden corporate partner, Pranav Trivedi, sum up the mood: ‘2021 was exceptional. I’ve been in the corporate sector for 30 years, and it was extraordinary. 2022 has seen a bit of a normalisation of the business world. The level of activity we saw in 2021 really wasn’t sustainable.’

Adds Lee Ranson, co-chief executive at Eversheds Sutherland: ‘Broadly the transactional markets were very strong. There were some differences, some markets slightly hotter than others, but generally a benign landscape. Our transactional teams had some best-ever years.’

Golden boot

The key metrics underline just what a phenomenal year 2021/22 was. The gross revenue figure for the group is up 15% to $147.5bn, doubling last year’s 7% increase. This increase in top line was not the result of hiring sprees and mergers either: total lawyer headcount was up 6%, the same increase as in the 2021 report. This means that the Global 100’s 174,007 lawyers were more than punching their weight in 2021, with average revenue per lawyer (RPL) up 12% to $959,000. (Note this RPL figure does not include the four Chinese firms in the Global 100, whose exceptionally high lawyer headcounts have a significant effect on averages across the group.)

And, while profitability saw remarkable gains last year following a muted performance in 2020, this year’s Global 100 breaks new ground. Gross profit across the group stood at $63.44bn, up 35% year on year, while average PEP at a Global 100 firm shot up 19% to $2.37m, and PPL grew 16% to $416,000.

The tremendous performance was evident across all parts of the Global 100, but nowhere more so than the second 25, where PEP jumped a striking 20% on average to $2.92m, while PPL increased 25% to $493,000. In the top 25, the uptick was 14% for PEP to reach $2.63m and 16% for PPL, which reached $451,000. The second half of the Global 100 was no slouch either, seeing PEP grow 12% to $1.67m, although PPL inched up 3% to $310,000.

The positive picture can clearly be seen from the fact that there is so little red (down arrows and negative percentage change) in the main table. As mentioned above, in this year’s report no firm has a turnover below $580m; Kirkland and Latham have revenues above $5bn; while Skadden has joined Baker McKenzie and DLA Piper as firms with revenues above $3bn. The number of firms with turnover greater than $2bn is 15, with Norton Rose Fulbright and Greenberg Traurig the latest to achieve that milestone, leaving a sweet spot of 44 firms in the Global 100 that now turn over between $1bn and $2bn a year.

‘2021 was exceptional. I’ve been in the corporate sector for 30 years, and it was extraordinary.’
Pranav Trivedi, Skadden

In profit terms, more than a third (37) of Global 100 firms now have PEP above $3m, up from 27 last year. Ten firms have PEP between $4m and $5m; while a further eight have PEP between $5m and $6m, including New York trio Debevoise, Milbank and Skadden, which are the latest to join this Manhattan-dominated club. A further two New Yorkers, Sullivan & Cromwell and Paul Weiss, have average partner earnings between $6m and $7m; while Davis Polk and Kirkland are second and third in PEP terms, with partner profits in excess of $7m, leaving Wachtell leading the pack with an eye-watering average PEP of $8.4m.

Leading the line

Kirkland has set the tone again, with revenues up 25% to shatter the $6bn milestone and PEP up 19% to top $7m, but perennial rival Latham & Watkins has performed better in percentage change terms, with turnover up 27% to $5.49bn and PEP up an impressive 26% to $5.7m.

‘Over the past decade, there has been significant growth in investment funds globally. Large amounts of capital have been or are still to be raised and deployed. Our growth in London has come in part from our specialist focus in the sector,’ says Stephen Lucas, a member of Kirkland’s executive committee.

Lucas attributes much of the firm’s success to encouraging the flow of young partners through the firm. In October, the firm announced 193 lawyers to partner across its global network, and the firm is well known for fast-tracking huge swathes of associates to partner every year.

‘We are always looking to create opportunities for our young lawyers to take lead roles in client relationships and then go on to become partners. With the growth in our office and our clients, we continue to promote significant numbers of incredibly talented partners, with a focus on teamwork and collaboration.’

Such strong numbers were in evidence everywhere. With the exception of Dentons (see Verein feature, page 52) and Morgan Lewis, every firm in the top 25 had double-digit revenue growth. In fact, 77 Global 100 firms had double-digit growth, further proof that finding significant increases in revenue was not exactly difficult in 2021.

But there are those that stand out in a strong-performing group. Goodwin, which we profiled in last year’s report (see ‘No guts, no glory’, LB305), is the strongest top 25 performer, alongside our current US Law Firm of the Year, Cooley, and Ropes & Gray.

Goodwin’s revenue was just shy of $2bn at $1.97bn, up 33% from $1.48bn last year. PEP is $3.69m, up 28% from $2.88m for 2020/21.

Says the firm’s chair, Rob Insolia: ‘We have a very focused strategy. We want to be the go-to firm in five industries: private equity, real estate, technology, life sciences, and financial services. We also want to be at the vortex of what we describe as the convergence of technology into other industries and the disruption that technology causes in these industries, like fintech, proptech, and so forth.

‘If our goal was to be the dominant firm in capital markets, that’s a great goal, but if you’ve got all those eggs in that basket, you’re in a pretty tough spot. Because we’re focused on industries, our clients haven’t gone anywhere, so they may be doing fewer transactions, but what they’re doing we’re doing for them. I think that’s why we’re doing relatively well.’

‘There was an unbelievable breakneck pace in 2021 within the legal industry and a cooling off in 2022. I’m not sure that our calendar year will be quite so robust in 2022, relative to 2021.’
Rob Insolia, Goodwin

However, he warns that this recent performance is not sustainable, for anyone: ‘There was an unbelievable breakneck pace in 2021 within the legal industry and a cooling off in 2022. We just finished our fiscal year, which ended September 30 and we were actually up about 15% or so in revenue and up about 8% in demand. The reality is that things are cooling as we go so, I’m not sure that our calendar year will be quite so robust in 2022, relative to 2021.’

Meanwhile Justin Stock, head of Cooley’s London office, notes: ‘We’ve had a good year in London overall. It’s probably the case for several law firms. It’s been very busy.’

In September, Cooley was named US Law Firm of the Year at the Legal Business Awards, after an extremely impressive run in London that even surpassed the firm’s global growth. This included a 28% hike in turnover to $1.99bn and a 28% increase in PEP to just over $4m.

Meanwhile, the fact that the second 25 was by far the best-performing group in the Global 100 was helped by six firms posting revenue and PEP increases of 20% or higher – Dechert, King & Spalding, Mayer Brown, McDermott Will & Emery, Paul Hastings and Quinn Emanuel.

Ted Greeno, co-managing partner of Quinn Emanuel’s London office, a firm that has been one of the strongest growth stories of the past decade (see ten-year view commentary) notes: ‘The firm is very doing well and continuing to grow, albeit not quite at the rate it did since it was founded in 1986 – we have got to a certain size and maturity now where there is less scope for such exponential growth, for the time being at least. As to performance, our chargeable hours are up on last year and the firm remains very busy.’ Revenue was up 27% to $1.66bn, while PEP grew 23% to $5.7m.

Paul Hastings hailed 2021 as its ‘best financial year ever’, with global turnover jumping 20% from $1.31bn to $1.57bn. This was accompanied by a 20% hike in PEP, which grew from $3.9m to $4.7m. In addition, it surpassed this with eye-catching 41% growth in City turnover from $108.6m to $157.2m.

London chair and tax partner Arun Birla told Legal Business: ‘It’s been a great team effort…clients have trusted us while they’ve been on a rollercoaster ride for the last couple of years, and that’s thanks to our amazing client service. We’ve built up a very strong position on both sides of the Atlantic. We are unique in covering a range of areas, such as structured finance, structured credit, high yield and capital markets in the key jurisdictions.’

For Dechert and Mayer Brown, the 2021 results represent something of a turnaround as both firms were highlighted to be struggling somewhat in last year’s report. Dechert was the worst-performing firm in the top 50 last year but announced a record year for 2021, with revenues up 25% to $1.34bn, while PEP shot up 50% to $4.2m, with chief executive Henry Nassau noting that the year was one for the history books.

Meanwhile, Mayer Brown fell out of the top 25 in last year’s report with a pedestrian 2% revenue increase largely outpaced by many of the firms around it. This stellar growth from rival firms has continued and as such Mayer Brown remains in the second 25, but with a 21% revenue increase to $1.84bn, and a 23% rise in PEP to $2.47m, the firm is among the strongest performers in the top half of the table.

But Dominic Griffiths, managing partner of Mayer Brown’s London office, warns that firms too focused on transactional work could suffer in 2022: ‘High-end capital markets and leveraged finance, these are areas that are struggling. There are rumours around top-end private equity work not having volume too, and that is concerning. Firms like ours are better placed because we are well-hedged, 40% of our lawyers are litigators… For law firms, those better hedged with litigation and restructuring (in particular US-centric law firms) and with broader based mainstream capital markets practices, including structured finance, will be better served by the current environment.’

‘For law firms, those better hedged with litigation and restructuring and with less mainstream capital markets practices will be better served by the current environment.’
Dominic Griffiths, Mayer Brown

In the second 50, there is one firm that stands out having struggled somewhat over the past five years – Shearman & Sterling. In last year’s report, we noted the firm had listed, experiencing a double-digit plunge in its material output, meaning its top line had not moved at all in five years.

In 2021, the picture changed significantly. Shearman posted a turnover increase of 18% and saw PEP soar 58% in the firm’s strongest financial year on record. Shearman has broken the $1bn revenue mark for the first time, while PEP jumped from under $2m in 2020 to just over $3m in 2021.

This needs to be put in context – this only amounts to 11% revenue growth over five years and those year-on-year increases – particularly in profit – can be attributed to a trimming of headcount as part of a stated refocus on corporate and private clients. Total lawyer numbers are down from 833 to 727, while equity partner headcount is down to 113 from 124. Nonetheless, this is firmly a step in the right direction for a firm that was 22 places higher in the table just five years ago.

‘Winter’s coming and world peace is not and those are both good for the strength of our restructuring practice.’
Kim Koopersmith, Akin Gump

Senior partner, David Beveridge, says: ‘As a firm, we had a clear strategy throughout 2021 and we were able to deliver on this and begin to realise our growth aspirations. We have continued our growth momentum by focusing on the right business mix and reshaping the firm to align with market opportunities – this delivered significant growth in profitability. Nevertheless, we should recognise that the market was helpful in delivering these results.’

Struggles in the midfield

As mentioned earlier, in what is a standout year for the Global 100 as whole, anything less than double-digit growth can be seen as taking a step backwards relative to peers. K&L Gates, for example, may have recorded 16% year-on-year revenue growth and yet is the only firm that appeared in the Global 100 table five years ago that has not recorded any overall revenue growth at all since then.

A weak pound against the dollar will account for much of the story for many of the UK-based firms, which overall have done well (see box, ‘The currency effect’, below), but there are some US firms that have struggled, including Akin Gump. The firm fell seven places in the table after registering just a 1% increase in revenue to $1.22bn, while PEP barely moved (up 2%) to $3.1m.

‘2022 started with a bang because the year before was a record year for us. But then there was Ukraine, inflation really became a concern and the capital markets have been quite disrupted.’
Stephen Kensell, Latham & Watkins

Nonetheless the firm’s chair, Kim Koopersmith, is upbeat despite the muted financial performance: ‘2021 was a very good year for us. There was overall strength in a variety of areas that are important to our practice. Activity across our international trade capabilities, corporate work, funds work was all quite strong. Overall, we and others had a quieter financial restructuring year, at least in the second half of 2021, but I was pleased with what we were able to do, even in a slightly slower restructuring market.’

One of the reasons that she is upbeat is that the firm’s wheelhouse, its restructuring practice, is set to come into play. ‘Winter’s coming and world peace is not and those are bothgood for the strength of our practice. We are seeing an increase in financial restructuring activity, we have invested in our private equity capabilities and we are a firm of choice in where credit is going because we see that traditional sources of capital are no longer sufficient and there is a pivot to alternative capital sources which plays right into our sweet spot.’

She continues: ‘The market has definitely turned. For a highly volatile market with a great deal of uncertainty and with industries that are clearly feeling the heat in a difficult economic environment, you have the formula for an increase in restructuring activities.’

This point is picked up by Kirkland partner Kon Asimacopoulos: ‘In the distressed and restructuring world, investors are being opportunistic in terms of taking advantage of distressed prices, both in secondary debt markets, and asset prices generally. There is a real opportunity for investors to acquire assets at discounted valuations and this process is just starting. We see the peak hitting during the first half of 2023.’

Attack into defence

There is clear consensus that the frothy post-Covid conditions that created a highly successful 2021 for most Global 100 firms has cooled significantly through 2022 and tougher times lie ahead. Cautious optimism, the bland and overused cliché that dominated management speak over the last couple of years, has given way to cheerful pessimism.

Says Freshfields Bruckhaus Deringer’s global managing partner Rick van Aerssen: ‘H1 2022 has been more difficult, compared to H1 back in 2021, which was crazy. It was one of the busiest periods probably ever for us. What’s currently going on in the market is a development that helps firms who are positioned like we are. When there is more volatility and trepidation in the market, that is when people turn to quality and firms that are very broad in terms of being able to do things that really do matter now.’

‘We are hearing anecdotally that many firms may be down this year just because last year was such a high spike for so many.’
Mary Kuusisto, Proskauer

Adds Stephen Kensell, Latham London managing partner: ‘2022 started with a bang because the year before was a record year for us. But then there was Ukraine, inflation really became a concern and the capital markets have been quite disrupted. But the counter to that is that the business has broadened. We’ve seen a huge rise in private credit, for example. Traditional lending has been quieter and private credit has become much more active to fill that void.’

The point is echoed by Jason Glover, London managing partner for Simpson Thacher: ‘It has been a challenging year for most firms. The first half of 2022 was pretty good, but when you look at year-on-year performance, the second half of 2021 was very strong indeed and when you are comparing like-for-like to have the same strength in the third and fourth quarters in 2022 is always going to be challenging. There is clearly a recessionary impact and uncertainty in the M&A markets due to volatility. You have seen banks remove or reduce the amount of credit and debt they are willing to provide.’

But Melissa Fogarty, joint head of Clifford Chance’s London corporate practice, says that things on the transactional side are not as bad as some have feared: ‘Coming out of the summer it felt a little quieter than normal initially, but it’s picked up again which, given everything that has happened in the UK recently, we’re pleased by. There have been moments in recent weeks where you wonder what’s happening with the economy and whether it is going to paralyse M&A and corporate work, but at the moment work levels are holding up.’

Mary Kuusisto, head of Proskauer’s London office, also observes that a firm’s success in a tougher corporate and banking market this year lies in the diversity of its offering. ‘We are hearing anecdotally that many firms may be down this year just because last year was such a high spike for so many,’ she says. ‘We expect to have an up year this year. We have continued with a lot of interesting growth and activity. Our clients are quite countercyclical in themselves. Our work is based on core industries that are very innovative. So, when our clients are confronted with some softness in the market, they have to pivot and do different things or the money has to go in different places.’

The other issue that law firms are coping with is the continued tussle for talent, which has continued to intensify since lockdowm was lifted – see ‘Stories of the year’ for a summary of the partner movement among Global 100 firms in the past 12 months. Goodwin, which has been prolific for lateral hires in the past few years, continues to lead the pack – again among the top three firms for partner promotions and partner hires relative to size.

Cooley is another firm that has been highly active in the lateral recruitment market in recent years but as Stock observes: ‘We are not the only firm that is continuing to look into the lateral market. We are certainly aware that several other US firms are also in the lateral market, and the areas that get targeted are quite competitive.’

But Kuusisto says that there are some firms that have been excessively active in the lateral recruitment market post-pandemic that may be now regretting being so aggressive: ‘There was something of an overreaction to the frothiness of the market in 2021 and there was a significant war for talent. While it was competitive and we did really well in hiring the people we wanted to hire, there are some firms that looked at this more aggressively and now we’re seeing those firms coming out with layoffs.’

It could be that Global 100 law firm leaders are erring on the side of caution as usual, avoiding looking complacent or even arrogant ahead of uncertain economic times. But this is a narrative that we have become accustomed to, none more so than this year when subdued predictions gave way to record results.

Unquestionably, 2022 has been tougher for law firms than 2021 and next year’s report is expected, at this stage, to reflect a more austere market. However, things are perhaps not as bad as they may seem. Says Tom Thesing, managing partner of Sidley’s office in London: ‘The market will be able to factor in the financial implications of rising interest rates and rising inflation a little bit better by the time we get to the early part of next year. Even recently, we saw US inflation numbers coming off a little bit. The market very much rallied on that news. The Bank of England also has indicated that it may not have to go as high as the US in terms of ultimate interest rate rises. The markets will benefit a lot from clarity and once we get into the first quarter of next year, we’ll have a bit more clarity.’

Concludes van Aerssen: ‘We will continue to invest. These are the times where there is opportunity. While lawyers are always cautious people, with every crisis, we’ve been stronger after the crisis than before the crisis. That’s just the empirical data and that is what makes us very confident going through this and standing by the side of the clients who are trying to weather the storm.’ LB

mark.mcateer@legalease.co.uk

Legal Business would like to thank SSQ for its sponsorship of the Global 100.

Best and worst: Global 100 growth 2017-22

REVENUE

BEST

Firm	2017	2022	Change
Kirkland & Ellis	$2,651m	$6,042m	128%
Goodwin	$912m	$1,973.4m	116%
Cooley	$974m	$1,986.8m	104%
Latham & Watkins	$2,823m	$5,488.8m	94%
McDermott Will & Emery	$908.7m	$1665.2	83%

WORST

Firm	2017	2022	Change
Baker Botts	$846.5m	$723.2m	-15%
K&L Gates	$1,179.1m	$1,179.3m	0%
Shearman & Sterling	$912m	$1,012.1m	11%
Cleary Gottlieb	$1,271.5m	$1,418.8m	12%
Wilmer Hale	$1,130.5m	$1,297.1m	15%

PROFIT PER EQUITY PARTNER

BEST

Firm	2017	2022	Change
Ropes & Gray	$2,025k	$4,333k	114%
McDermott Will & Emery	$1,601k	$3,415k	113%
Debevoise & Plimpton	$2,414k	$5,011k	108%
Cadwalader	$2,116k	$4,382k	107%
Cooley	$1,970k	$4,072k	107%

WORST

Firm	2017	2022	Change
Baker Botts	$2,465k	$2,031k	-18%
Gowling WLG	$511k	$549k	7%
Clyde & Co	$881k	$975k	11%
Venable	$1,100k	$1,235k	12%
Quinn Emanuel Urquhart & Sullivan	$5,017k	$5,746k	15%

These tables shows the best-performing firms for revenue and PEP that featured in our 2017 and 2022 reports. For a longer term perspective, please see the ten-year review.

Diversity champions: five firms with the strongest gender diversity statistics

Firm	% equity partners female	% partners female	% lawyers female
CMS	34%	35%	56%
Pinsent Masons	23%	30%	56%
Herbert Smith Freehills	24%	29%	49%
Morgan Lewis	29%	29%	43%
Goodwin	23%	31%	43%

Diversity champions: five firms with the strongest BAME representation

Firm	% equity partners BAME	% partners BAME	% lawyers BAME
Paul Weiss	17%	17%	28%
Morrison & Foerster	21%	21%	32%
Orrick	16%	17%	27%
White & Case*	N/D	23%	38%
Bryan Cave Leighton Paisner	21%	16%	13%

* White & Case does not differentiate between equity and non-equity partners for the purposes of ethnicity

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