AmLaw 100 and 200 overview: State of the law firm industry (2014)

Top firms remain drivers of growth,

although not all fared as well

June 2014 2014 AmLaw 100 & 200 overview

AmLaw 2014 overview

AmLaw 2014 key findings • Gross revenue across the AmLaw 100 grew by a solid 5.4 percent year-on-year, the fastest rate since 2010. In turn, this brought gross revenue to

another new high: $77.4 billion. The AmLaw 200 hit $19.0 billion, growing at 2.7 percent, half the rate of AmLaw 100 growth.

- The top 10 firms in terms of gross revenue overall raked in $20.2 billion, or 25.7 percent of the AmLaw 100 total. Compared to last year, this represents an increase of 40 basis points. 17.3 percent of AmLaw 200 gross revenue was concentrated in the top segment of the market, indicating a more even distribution.

- These top 10 firms posted profit growth of 8.3 percent year-on-year, 1.5 times faster than the AmLaw 100 average of 5.4 percent. Year-over-year growth averaged 4.9 percent in 2012. On the other hand, the top tier of the AmLaw 200 posted slower-than-average gross revenue growth over the year.

- The top 10 firms in terms of gross revenue increase grew on average by 12.5 percent, 2.3 times faster than the AmLaw 100 average and more than 4.0 times faster than the middle of the pack. The top 10 in the same metric last year saw profits rise 8.2 percent. This was more exaggerated in the AmLaw 200, with the same segment of the spectrum averaging year-over-year growth of 20.0 percent.

- Outside of gross revenue, the AmLaw 100 and 200 posted slower growth than in previous years:

- Profits per partner barely nudged, up just 0.2 percent from 2012 to $1.5 million. For the AmLaw 200, this metric was up by 0.7 percent, but only reached $701,310.

- Revenue per lawyer decreased by 0.4 percent to $840,963. The AmLaw 200 posted far faster growth in comparison – 2.5 percent – although RPL for these firms was $626,784.

• This mixed bag of results indicates segmentation of the top 100 law firms nationally. While revenues are up, this comes on the heels of growth in the uppermost segment of the industry, while the near lack of growth in RPL and PPP signals, at minimum, stagnation in the middle segment and lower end of the market. In general, the AmLaw 100 saw more unequal growth than the AmLaw 200, but both groupings lack uniform improvements.

• Large law firms are witnessing cost pressures increasing. Real estate pricing in law firm-heavy submarkets, particularly in major markets, are up significantly. Class A asking rents are up 4.7 percent year-on-year in Midtown Manhattan, 3.0 percent in the Chicago CBD, 4.8 percent in Downtown Los Angeles, 5.6 percent in San Francisco and 4.6 percent in the Boston CBD. Similarly, salaries for lawyers already stand at $131,990 nationally, breaking $150,000 easily in top law markets. Real estate and labor are the primary costs incurred by law firms and are likely to rise more in the coming years.

2

Source: JLL Research, American Lawyer

AmLaw 100 posting faster gains in gross revenue; AmLaw 200

outpacing in revenue per lawyer and profit per partner…

3


+5.4%

+2.7%

AmLaw 100

Gross revenue

AmLaw 200

Gross revenue

-0.4%

+2.5%

AmLaw 100

RPL

AmLaw 200

RPL

AmLaw 100

PPP

AmLaw 200

PPP

+0.2%

+0.7%

…although AmLaw 100 revenue and profits are significantly

higher in all categories

$77.4

$19.0

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

AmLaw 100 AmLaw 200

4

Gross revenue ($ billions) Revenue per lawyer Profits per partner

$840,963

$626,784

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

AmLaw 100 AmLaw 200

$1,500,000

$701,310

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

AmLaw 100 AmLaw 200

AmLaw 100 gross revenue jumped 5.4 percent to $77.4 billion, a

record high and fastest growth since 2010

$31.1

$35.1

$38.1

$41.7

$46.0

$50.9

$56.8

$64.5 $67.3

$64.4

$67.4

$71.4 $73.4

$77.4

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Gro

ss r

even

ue (

$ bi

llion

s)

5


AmLaw 100 gross revenue was distributed highly unevenly, with

the top 10 roughly equaling the bottom 75

$200.0

$700.0

$1,200.0

$1,700.0

$2,200.0

$2,700.0

1 10 20 30 40 50 60 70 80 90 100

Gro

ss r

even

ue (

$ bi

llion

s)

AmLaw 100 rank

6


Top 10

25.7% of

AmLaw

100

revenue

11-25

48.1% of AmLaw

100 revenue

26-100

26.2% of AmLaw 100 revenue

Revenue was more evenly distributed among the AmLaw 200,

with only 17.3 percent concentrated in firms rankekd 101-110

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

101 110 120 130 140 150 160 170 180 190 200

Gro

ss r

even

ue (

$ bi

llion

s)

AmLaw 200 rank

7

Source: JLL Research, American Lawyer – 10th and 11th-ranked firms tied in reveune

Top 11

17.3% of

AmLaw

100

revenue

12-25

18.2% of AmLaw

200 revenue

26-100

64.5% of AmLaw 200 revenue

Rank Firm Gross revenue Year-on-year revenue

growth

Change in AmLaw 100

ranking

1 DLA Piper $2,481,000,000 1.7% -

2 Baker & McKenzie $2,419,000,000 4.6% -

3 Latham & Watkins $2,285,000,000 2.7% -

4 Skadden $2,235,000,000 1.1% -

5 Kirkland & Ellis $2,016,000,000 4.1% -

6 Norton Rose Fulbright $1,904,000,000 - -

7 Jones Day $1,766,000,000 2.9% 1

8 Hogan Lovells $1,717,500,000 5.2% 1

9 Sidley Austin $1,601,000,000 7.5% 1

10 White & Case $1,440,000,000 4.1% 1

Top 10 AmLaw 100 firms $19,864,500,000 8.3%* -

All other AmLaw 100 firms $57,535,500,000 4.5% -

AmLaw 100 overall $77,400,000,000 5.4% -

The highest-grossing AmLaw 100 firms are growing 1.8x faster

than the remaining 90 AmLaw 100 firms

8

Source: JLL Research, American Lawyer – Norton Rose’s addition increases top 10’s earnings; for top nine, increase is 3.5 percent

Rank Firm Gross revenue Year-on-year revenue

growth

Change in AmLaw

ranking

101 Sutherland $310,000,000 -1.4% -3

102 Shook Hardy $308,500,000 -2.7% -4

103 Cozen O’Connor $306,500,000 -1.3% -2

104 Husch Blackwell $302,000,000 7.1% +6

105 Fox Rothschild $301,000,000 8.7% +6

106 Wilson Elser $300,000,000 2.4% -1

107 Ballard Spahr $299,000,000 -0.3% -4

108 Akerman $298,000,000 4.4% -

109 Baker Donelson $297,000,000 7.2% +2

110 Chabourne $282,000,000 -2.9% -4

110 Womble Carlyle $282,000,000 -0.7% -1

Top 11 AmLaw 200 firms $3,286,000,000 1.9% -

All other AmLaw 200 firms $15,715,000,000 2.8% -

AmLaw 200 overall $19,001,000,000 2.7% -

On the other hand, the highest-grossing AmLaw 200 firms posted

slower year-on-year growth than the AmLaw 200 average

9


+12.5%

+3.1%

-8.3%

10 fastest-growing AmLaw 100 firms saw gross revenue jump

2.3x faster than AmLaw 100 average

10


Change in gross revenue year-on-year

among 10 fastest-growing firms in the

AmLaw 100

Gross revenue growth of middle

sector of the AmLaw 100


among 10 slowest-growing firms in the

AmLaw 100

+20.0%

+2.0%

-11.3%

Meanwhile, the disparity is greater in the AmLaw 200: fastest-

grossing firms growing 7.4x faster than average

11



among 10 fastest-growing firms in the

AmLaw 200

Gross revenue growth of middle

sector of the AmLaw 200


among 10 slowest-growing firms in the

AmLaw 200

Rank Firm Profits per

equity partner Year-on-year growth

1 Wachtell $4,755,000 -4.4%

2 Quinn Emanuel $4,485,000 1.1%

3 Cahill Gordon $3,780,000 6.3%

4 Sullivan & Cromwell $3,675,000 6.5%

5 Paul Weiss $3,620,000 8.1%

6 Cravath $3,290,000 -4.2%

7 Kirkland & Ellis $3,280,000 0.9%

8 Simpson & Thacher $3,165,000 18.8%

9 Boies Shiller $2,975,000 9.2%

10 Gibson Dunn $2,945,000 4.8%

Top 10 AmLaw 100 firms $3,597,000 3.7%

AmLaw 100 overall $1,470,022 0.2%

New York-based firms dominate profits-per-partner rankings; top

segment on the up despite flat growth across the AmLaw 100

12


Rank Firm Profits per

equity partner Year-on-year growth

1 Irell $3,355,000 -1.9%

2 Munger Tolles $1,770,000 13.1%

3 BuckleySandler $1,705,000 -5.3%

4 Choate Hall $1,670,000 12.8%

5 Curtis Mallet-Prevost $1,610,000 2.2%

5 Jeffer Mangels $1,610,000 3.9%

7 Patterson Belknap $1,575,000 3.6%

8 Lowenstein Sandler $1,495,000 3.5%

9 Kasowitz $1,450,000 -14.7%

9 Loeb & Loweb $1,450,000 -3.3%

Top 10 AmLaw 200 firms $1,767,000 1.4%

AmLaw 200 overall $701,310 2.5%

Irell far surpasses the rest of the AmLaw 200 in terms of profits

per partner, highest PPP firms are seeing below-average growth

13


Business litigation; corporate, energy and real estate law; M&A;

and tax-specializing firms lead AmLaw 100 RPL growth…

18.0%

14.9%

13.4%

10.9%

9.6% 9.4% 9.1% 8.1%

7.5% 7.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

QuinnEmanuel

SimpsonThacher

Shearman &Sterling

Vinson &Elkins

Proskauer Polsinelli Fried Frank Willkie Cravath Dorsey &Whitney

Rev

enue

per

law

yer

year

-on-

year

cha

nge

14


Business

litigation

Business

litigation/

corporate

services

Litigation/

international

work

Energy,

environ.,

M&A,

restructuring

Corporate,

M&A, real

estate, tax,

litigation

Corporate,

real estate,

investment,

M&A

Varied

Corporate,

litigation,

M&A, VC,

bankruptcy

Corporate,

internat’l,

tax, antitrust

Self-described specialties

Corporate,

litigation

…although 10 AmLaw 100 firms saw revenue per lawyer shrink

by at least 3.9 percent

-8.6%

-7.8%

-6.6% -6.3%

-5.4% -5.4%

-4.9%

-4.2% -4.2% -3.9%

-10.0%

-9.0%

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

O'Melveny Jenner &Block

Locke Lord Wachtell FishRichardson

KilpatrickTownsend

K&L Gates Finnegan EdwardsWildman

Weil

Rev

enue

per

law

yer

year

-on-

year

cha

nge

15


-5.7%

The contraction in RPL among AmLaw 100 firms, despite strong

top-firm growth, indicates muted gains in the middle of the pack

16


+10.8% Change in revenue per lawyer

year-on-year among 10 fastest-

growing RPL firms

-0.4% AmLaw 100 overall revenue per

lawyer change since 2012

Change in revenue per lawyer

year-on-year among 10

fastest-contracting RPL firms

A similar trend emerged in the AmLaw 200, with more of a focus

on intellectual property

79.9%

14.9% 11.8% 9.9% 8.4% 8.3% 8.3% 8.0% 7.9% 7.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

RobinsKaplan

Shumaker MungerTolles

McElroyDeutsch

Dinsmore Choate Hall Goulston &Storrs

Strasburger PattersonBelknap

Kenyon &Kenyon

Rev

enue

per

law

yer

year

-on-

year

cha

nge

17


Litigation,

antitrust,

intellectual

property

Corporate,

intellectual

property,

trusts

Corporate,

litigation,

real estate,

labor, tax

Varied

Corporate,

labor,

intellectual

property,

regulatory

Varied

Litigation,

tech,

M&A,

finance

Energy,

varied Varied

Self-described specialties

Intellectual

property

Declines in RPL were more prominent among the AmLaw 200

than the AmLaw 100; 15 saw decreases of more than 1.0 percent

-12.4%

-10.2%

-8.4%

-7.2%

-5.4%

-3.4% -3.1% -3.0%

-2.7% -2.5% -2.4% -2.4% -2.3% -1.8%

-1.1%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

Rev

enue

per

law

yer

year

-on-

year

cha

nge

18


+8.5%*

+2.4%

-3.4%

Compared to the AmLaw 100, the middle of the pack played a

larger role in AmLaw 200 RPL growth

19

Source: JLL Research, American Lawyer – *excludes Robins Kaplan’s 79.9 percent increase



fastest-growing RPL firms

AmLaw 100 overall revenue per

lawyer change since 2012



fastest-contracting RPL firms

53.7 percent of AmLaw 100 gross revenue came from firms

headquartered in New York, DC, Chicago and Los Angeles…

20

Atlanta: $2,319.0

Boston: $3,545.0

Chicago: $9,701.5

Cleveland:

$540.0

Dallas: $726.0

Houston: $1,539.5

Indianapolis:

$344.0

Source: JLL Research, American Lawyer (figures in $ millions)

Kansas City: $324.5

Los Angeles: $7,148.0

Miami: $1,230.5

Milwaukee: $644.5

Minneapolis: $778.0

New York: $18,973.0

Philadelphia: $3,571.5

Pittsburgh:

$2,234.0 Richmond: $1,154.5

San Francisco: $3,614.5

Seattle: $635.5

St. Louis: $643.0

Washington, DC: $5,760.0

…even though they are home to only half of all AmLaw 100

firms

Rank Market Number of AmLaw 100 HQs Gross revenue of HQ-ed firms

1 New York 25 $18,973,000,000

2 Washington, DC 10 $5,760,000,000

3 Chicago 8 $9,701,500,000

4 Los Angeles 7 $7,148,000,000

5 Boston 6 $3,545,000,000

5 Philadelphia 6 $3,571,500,000

7 Atlanta 4 $2,319,000,000

8 San Francisco 5 $3,614,500,000

9 Houston 3 $1,539,000,000

10 Dallas 2 $726,000,000

10 Minneapolis 2 $778,000,000

10 Pittsburgh 2 $2,234,000,000

10 Richmond 2 $1,154,500,000

14 Cleveland 1 $540,000,000

14 Indianapolis 1 $344,000,000

14 Kansas City 1 $324,500,000

14 Miami 1 $1,230,500,000

14 Milwaukee 1 $644,500,000

14 Seattle 1 $635,500,000

14 St. Louis 1 $643,000,000

21


Law firm mergers are also keeping pace with 2013; YTD 2014 at

one quarter of 2013 levels

60

70

53

39

60 60

88

22

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2011 2012 2013 2014

Law

firm

mer

gers

22

Source: JLL Research, Altman Weil

Employment and economy

Legal employment key findings

• Legal services employment growth continues to be below average, posting growth of only 0.4 percent year-on-year, just one-quarter of the total non-farm growth rate: 1.6 percent. Law firms increasingly seek to maximize employee productivity and efficiency, which has lowered potential job growth in this subsector.

- This is not a new trend, as legal services has yet to see improvements since averaging 12-month growth of around 40,000 jobs in the 1980s. This rate was halved in the 1990s and has seen an even sharper decline in the 2000s and 2010s.

• From a geographic perspective, legal services employment is highly concentrated in key markets. The top 10 markets, all of which have more than 20,000 legal services employees, account for 32.7 percent of the subsector’s jobs.

- Interestingly, these markets witnessed a combined net loss of 1,000 legal services jobs, while 5,000 were created outside of major markets, indicating a geographical diversification of legal services employment.

- Secondary markets such as Miami, Philadelphia, Silicon Valley, Charlotte and Pittsburgh are posting gains in legal services employment, while many others (Houston, Seattle and Denver, for example) saw no net new legal services jobs year-on-year.

• Looking at occupation, lawyers and paralegals combined represent 83.0 of those who work in law-related occupations. The largest fields outside of these two are title examiners and abstractors, other legal support and magistrate judges and magistrates.

24

Legal services employment growth across the country continues

to be muted, well below average compared to the 1980s and even

the 1990s

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

12-m

onth

net

cha

nge

(tho

usan

ds)

25

Source: JLL Research, Bureau of Labor Statistics

1980s average:

+40,200 jobs

1990s average:

+13,100 jobs

2000s average:

+7,400 jobs

2010s average:

+2,400 jobs

average year-on-year growth

Nationally, legal services is growing at only one-quarter of the

rate as the economy as a whole

26


+0.4% 12-month %

change in legal

services jobs

+1.6% 12-month %

change in total

non-farm jobs

While other traditional industries are also seeing below-average

growth, law is even slower

0.4%

0.7%

1.1%

2.0%

3.6%

4.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Legal services Financial activities Accounting Management of companies PBS overall Management and consulting

12-m

onth

% c

hang

e

27


U.S. average (+1.6%)

Market Legal

employment

12-month

change

New York 75,400 -1,300 (-1.7%)

Los Angeles 48,700 +500 (+1.0%)

Chicago 47,300 -600 (-1.3%)

Washington, DC 46,400 -100 (-0.2%)

Philadelphia 38,600 +900 (+2.4%)

Boston 24,400 -1,000 (-3.9%)

Houston 23,800 +0 (+0.0%)

Atlanta 23,700 -100 (-0.4%)

Miami 22,500 +800 (+3.7%)

Dallas 21,200 -100 (-0.5%)

Top law markets 372,000 -1,000 (-0.3%)

Rest of U.S. 765,400 +5,000 (+0.7%)

U.S. overall 1,137,400 +4,000 (+0.4%)

While major markets still hold a significant portion of legal

services employees, a few markets are seeing net gains

28


Markets with more than 20,000

people employed in legal services

Around one in three legal services employees is in a top market

Secondary law markets are posting increases in legal services

employment, however

29


Philadelphia: +2.4%

Miami: +3.7%

Silicon Valley: +2.9%

Austin: +1.3%

Charlotte: +4.7%

Baltimore: +2.4%

Pittsburgh: +0.7%

Occupation Employment Annual

mean wage

Lawyers 592,670 $131,990

Paralegals 271,320 $51,170

Title examiners et al 53,640 $47,340

Other support 45,700 $61,560

Magistrates et al 27,190 $105,380

Court reporters 19,200 $54,760

Administrative judges 14,270 $89,360

Judicial law clerks 10,890 $53,890

Arbitrators et al 6,830 $76,840

U.S. overall 1,041,700 $99,620

From an occupational standpoint, lawyers and paralegals

represent around 83.0 percent of those in legal occupations

30


Lawyers Paralegals and legal assistants

Title examiners and abstractors Other legal support workers

Magistrate judges and magistrates Court reporters

Administrative law judges Judicial law clerks

Arbitrators, mediators and conciliators

Lawyers’ salaries in nearly all large markets exceed the national

average

$169,340

$165,690 $164,620

$158,430 $156,640

$151,510

$144,970 $144,000

$140,050

$135,710

$131,990 $131,860

$120,000

$130,000

$140,000

$150,000

$160,000

$170,000

$180,000

Ann

ual m

ean

wag

e

31


Office landscape

Rental growth is fastest in CBD Class A space, which

disproportionately affects law firms compared to other industries

33

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

2010 2011 2012 2013 2014

Ave

rage

ask

ing

rent

s ($

p.s

.f.)

Class A (CBD) Class A (suburban) Class B (CBD)

Class B (suburban) Class C (CBD) Class C (suburban)

Source: JLL Research

Additionally, the premium for Class A space increased to $4.97

per square foot during the first quarter

34

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

2010 2011 2012 2013 2014

Cla

ss A

pre

miu

m (

$ p.

s.f.)


Demographics and technology are driving productivity and

utilization and the next evolution of office space use

35

15%

space reduction by

U.S. law firms and

financial services

relocating

72%

of global CREs plan

to aggressively

increase density in

next 3 years

150

Square-foot-per-

employee average

target density, down

from 225 in 2009

50%

of the U.S.

workforce was

baby boomers in

2010. Gen Y will

be 50% by 2020


Many of these changes show stark pre- and post-recession

contrasts

36

Floor plates

Floor plates are up

from 25,000

square feet before

the recession to

60,000 square

feet.

Personal space

Before the

recession,

employees had

around 300 s.f. per

person; now they

have 200 s.f.

Interaction

Employees have

gone from rarely

running into others

to a nine-in-ten

change of bumping

into a coworker.

Building features

Aesthetic and

building features

such as increased

roof heights and

floor-to-ceiling

windows are “in.”


And, as a result, law firms are shifting

37

15.2% Giveback by law firm

across the U.S. when

relocating


across the top seven U.S.

markets when relocating


across DC when

relocating

• Going digital

• Elimination of law libraries

• One-sized fits all office

• Higher administrative ratios

• Migration to glass boxes

• Migration to long and lean

• Migration to smaller floorplates


New supply coming to market is slowly increasing, but still well

below historic norms

38

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Com

plet

ions

(s.

f.)

Average annual completions


And while the vast majority of new product is top-quality, most

of it is now coming to the suburbs rather than CBDs

39

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2010 2011 2012 2013 YTD 2014

YT

D c

ompl

etio

ns (

s.f.)

Class A (CBD) Class A (suburban) Class B (CBD)

Class B (suburban) Class C (CBD) Class C (suburban)


COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

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