The percentage of equity partners shrank at America's big law firms last year. But that's only half the story.
At the same time, the average revenue per lawyer increased. That might be more significant, especially to those associates who will never share in the profits. The decrease in equity partners has been declining steadily. On the other side of the coin, per-lawyer revenue last year saw the biggest bump in almost a decade.
Law Firm 'Arms Race'
The numbers, according to analysts, point to "an arms race" among law firms. Equity partners who have been cut are among the casualties. It wasn't always like that, says Nicholas Bruch, an analyst at ALM Intelligence.
"In the old days where most firms had collegial partnerships where all you had to do was work long enough and you got into the partnership, what that meant was that some people were being subsidized," he said. "As soon as one or two firms decided that they weren't going to do that, then everyone basically had to go to that world." The cost-cutting fueled profits for the other partners. American Lawyer put it this way: "The top-grossing U.S. law firms reported their best financial year since the great recession in 2018. But they aren't exactly spreading the wealth around."
The average profits per equity partner at the top 100 law firms last year were $1.88 million. The average revenue per lawyer was almost $1 million, an increase of 4.2 percent. That was the biggest jump since 2010. However, the percentage of equity partners last year had declined by 78 percent since 2000. Law.com said that percentage "has been steadily contracting for almost two decades."
In other words, the associates are subsidizing the partners. Now tell us something we didn't know. Revenue at the top 100 firms "grew at a muscular 8 percent clip" in 2018. They brought in $98.7 billion, an all-time record. According to reports, it was more evenly balanced among the law firms than in recent years. So in that way, they were spreading the wealth around -- among the partners.