Revenue: practices growing too fast, says American Lawyer

Average profits per partner at the 100 largest US law firms broke through the $1 million (£550,000) barrier last year, while the US arm of DLA Piper Rudnick Gray Cary has leapt into the top ten, new figures have shown.


However, the annual Am Law 100 - produced by American Lawyer magazine - found that the big firms are growing too fast in size to sustain their own long-term revenue expansion.


Some 44 of the firms had profits per partner of $1 million or more in 2005, while ten firms racked up more than $2 million, with Wachtell Lipton Rosen & Katz way out in front with $3.8 million. Cravath Swaine & Moore was next with $2.6 million.


Skadden Arps Slate Meagher & Flom maintained top place on gross revenue, with a 12% rise to $1.6 billion. Latham & Watkins leapfrogged Baker & McKenzie to reach second place, while White & Case and Weil Gotshal & Manges (sixth and seventh respectively) joined the $1 billion club. DLA's US arm - the merger of two US firms on 1 January 2005 - came in tenth with $891 million.


However, behind the big numbers was the finding that revenue per lawyer - which the survey described as the 'barometer of Am Law 100's overall health' - is not keeping pace with headcount, which has increased almost three-fold since the survey started in 1986 to 70,161 lawyers in 2005).


It said firms have continued to improve profitability 'by cutting costs, boosting efficiency and making equity partnership more exclusive'. Some 28 of the 100 firms reduced headcount in 2005, and 16 of them managed above-average increases in revenue per lawyer. On the other hand, those that expanded significantly in size struggled to translate it into revenue.


Average billable hours also 'provide convincing evidence that last year the Am Law 100 had too many lawyers', it said - a relatively low 1,850 hours a year even at the most profitable firms.


'Growing, it turns out, is easy,' the survey concluded. 'Growing profitably is what's hard... there is a limit to the growth of the Am Law 100: client demand for the highest-end legal services.'