It has long been a peccadillo of business publishers to measure financial performance in five-year increments and for this, our final issue of the year, it seems churlish to break with tradition now.
Revisiting our Global 100 coverage from 2018 calls to mind a time capsule, with some of the contents uncannily familiar and others belonging almost to a bygone era.
Five years ago we assembled a group of senior lawyers at a dinner debate to impart their views on what an elite law firm would look like ten years from then (again with the five-year increments).
On the metric of turnover, the group came to as much of a consensus as it’s possible for a roomful of lawyers to reach and took a punt that a global elite firm in 2028 would generate a minimum of $2bn in revenue and $7bn, perhaps $8bn, at the top end.
At the halfway point in that forecast, assessing the Global 100 now makes for perverse – and unsettling – reading. Back in 2018, Kirkland as the world’s highest-grossing law firm was blazing a trail of creative disruption with revenue of $3.17bn. Since then, the powerhouse has more than doubled its turnover to $6.51bn – in simplistic terms – approaching the zenith the industry was predicted to reach several years ahead of schedule.
And what of the lower end of the elite range? Five years ago, it was a notable observation that the prevalence of US players boosted the band of firms with turnover of more than $2bn by three to 11. Since then, the $2bn+ club has more than doubled to 23 firms, with blue-blood stalwarts Freshfields, Linklaters, Allen & Overy and Clifford Chance now rubbing shoulders with new pretenders such as Goodwin, Cooley and Simpson Thacher.
Now, of course, we have four firms billing more than $3bn a year in the form of DLA Piper, Baker McKenzie, Dentons and Skadden, with Sidley knocking on the door with its 5% revenue increase this year to reach $2.922bn. There are currently no firms in the $4bn bracket at all, with the table progressing upwards to Latham & Watkins’ $5.321bn and, if 2022/23’s inert performance is to be repeated, we probably won’t see any next year either.
We predicted the music would have to stop eventually. However much we were braced for it, the numbers still
hit hard.
Other metrics on a five-year track show the Global 100 in rude health. The group has swelled its collective turnover by 43% to $149.24bn, its total lawyer headcount by 32% to 173,385 and its equity partners by 14% to 28,136.
Profit per equity partner (PEP) has grown 30% in five years to $2.29m and revenue per lawyer (RPL) has increased 20% to 955k. The most accurate measure of success, profit per lawyer (PPL) has also had reasonable double-digit growth over five years, bolstered 18% to 394k.
After last year’s show-stopping performance which saw revenue for the group surge a huge 15% to $147.5bn, doubling the previous year’s 7% turnover increase, a 35% hike in gross profit to $63.44bn and a 19% uptick in PEP to $2.37m, we predicted the music would have to stop eventually, even as the deal market dried up and even before this year’s fresh geopolitical crises reared their heads. However much we were braced for it, the numbers still hit hard.
This year, gross revenue increased by a torpid 2% and PEP dropped by 4% to $2.28m. The figures are depressing across the board, with RPL dropping 3% to $932k and, crucially, PPL declining 5% to $394k.
It is clear that doing nothing is not an option any more. Perhaps consolidation in the lucrative areas of life sciences, technology, energy and infrastructure is the answer, or maybe a return to good old-fashioned hustle.
Whatever fresh reversals mount in the coming year, fire in the belly will be essential.
As Hamid Yunis, managing partner of McDermott’s London office, notes: ‘We’re never comfortable. Our strapline is being ambitious, always better. Our trajectory is about pushing, being dynamic, energetic and always better.’ Words to live by as the record changes.