For the longest time, the story of Biglaw has wavered between muted confidence and abject despair. While most firms claimed they saw modest success on the horizon for themselves, they also envisioned looming woes for everyone else in the sector. Discounting for self-assurance and then watching quarter after quarter of sagging demand for legal services, the whole thing didn’t paint an inspiring picture.
But 2018 managed to prove everyone wrong! According to Citi Private Bank’s most recent report, well, the first line of this article says it all: “The law firm industry last year posted its best results in more than 10 years.”
That’s right. After a morose decade and hand-wringing over a mid-year salary bump, revenue still outpaced expenses and firms posted the best net income and profits per equity partner growth since 2007. These are pre-recession numbers.
While the rich continued to get richer, the gap wasn’t as pronounced as in recent years:
Am Law 50 firms and niche/boutique firms outperformed the rest of the industry on average, and the Am Law Second 50 were not far behind. And while dispersion remained, the good news is that we saw a larger proportion of firms enjoy demand growth. Even among the Am Law Second Hundred firms, whose performance as a group lagged the other segments, an increased proportion of firms saw demand improvement. With strong inventory growth at year-end, the industry is well-positioned for a strong start to 2019.
Perhaps no one is happier than White & Case, who smashed through the $2 billion revenue barrier last year. The White & Case story, while maybe more extreme than the rest of the industry, reflects the broad trends of 2018 — strategic lateral expansion, key contributions from new offices, and taking advantage of a hot M&A market. But as impressive as the $2 billion objective sounds, the firm’s looking to bust through another more formidable obstacle soon: besting $1 million in revenue per lawyer.
Basically, everything’s up across the board. Expenses grew, but revenue outpaced it. Billing rates increased, but increased demand made up for it. The only thing that’s really “down” is volatility which is great news too.
But are these 2018 numbers across the industry sustainable? The aggressive upper-income tax cuts kicked off a furious round of activity at the top, but those have more or less run their course as 2019 dawns. Is demand really back or was it just temporarily buoyed by a short-term stimulus package for the corporate set? The legal industry isn’t always on the forefront of shifting economic winds, but the next few quarters could be telling. If demand creeps back sharply, we could be looking back at 2018 as the year we all got just a little too cocky.
Inside Law Firms’ Best Results in a Decade [American Lawyer]
White & Case Breaks $2 Billion in Revenue as Profit Growth Continues [American Lawyer]
Biglaw Made A Boatload Of Money Last Year curated from Above the Law
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