When we first published the gross fees of 35 leading firms with revenues over £20m in 1992, we were approaching the peak of the information age: the exponential rise of e-mail, the web and the mobile phone. Suddenly the way we went about our daily lives changed forever and we have rarely looked back. But as technology changed everything over the past two decades, the legal profession has remained a constant.
Looking at our original top 20 now, one of the most striking aspects of this table is how many of the elite firms have remained intact. Of the top ten firms, only Freshfields and Lovell White Durrant have altered dramatically through mergers-of-equals since 1992: becoming Freshfields Bruckhaus Deringer and Hogan Lovells. The others, with the exception of Nabarro, have grown significantly over the last two decades by acquiring international offices and taking over other firms.
Just over half of the original LB100 have survived intact today, and another 34 firms have only disappeared because they’ve merged into another LB100 firm. Given the dramatic changes we’ve witnessed over 20 years, this demonstrates some remarkable longevity among the top players in the profession.
There has been some notable consistency in areas such as profitability and leverage.
This consistency extends to the numbers as well. If you look at the 20-year revenue compound annual growth rate (CAGR) of the top nine firms in 1992 (again, leaving Nabarro to one side) the average hasn’t fluctuated too wildly. The average yearly growth is 10%, and the two extremes of that range aren’t far from the average: Simmons & Simmons’ and Slaughter and May’s 20-year revenue CAGR is 7%, while Norton Rose managed 13%.
As we point out in our retrospective, while the LB100 firms as a whole have outperformed the UK economy over the past 20 years and top-line growth has been consistently strong, there has been some notable consistency in areas such as profitability and leverage. In 1992 the average profit margin was 33% and in 2012 it was 30%.
What of the next 20 years? Don’t expect to see the upper echelons of the LB100 change all that radically. The gap between the haves and the have-nots will probably widen as the unstructured, full-service firms in the middle of the pack are either consumed by the upper quartile or see breakaways to form more boutique firms with focused service lines and superb profitability.
Yes, we may see The Co-operative Legal Services appear in the table and Irwin Mitchell may get larger and more powerful as both firms take advantage of ABS opportunities. There will be some firms with over 5,000 lawyers and revenues of £3bn. But they will probably still be called DLA Piper or Clifford Chance.