The market for the world’s largest law firms remains as reliably turbulent as ever. As this month’s edition of Legal Business shows, top 100 law firms in the world as a whole eked out a 4% hike in revenues to generate $84.9bn, a figure slightly flattering underlying growth due to a handful of sizeable mergers – including the creation of Herbert Smith Freehills and King & Wood Mallesons. Revenue per lawyer was flat. In real terms, the world’s legal elite is once again flat or modestly shrinking and headline income growth slowed in comparison to the 2011/12 year. Conditions remain considerably better than seen during 2009/10 but are a long way from pre-2008 boom years.
It has been another year that has re-enforced the overall dominance of US firms, largely due to the strength of the US economy and a delayed revival in contentious work. Of course, the relevant performance of UK advisers since 2008 looks considerably worse due to the sustained weaknesses of sterling and the euro but by any measure, the Magic Circle has lost some ground. Compared to their mid-2000s’ heyday, the profits gap against key New York rivals has again ballooned out, while a group of broad-service US rivals are now challenging their scale and global reach.
While questions remain about the extent to which DLA Piper has forged a consistent platform, I suspect the dismissive attitude still shown to what is now the world’s largest law firm is a mistake. If this business services juggernaut is regaining its form after a troubled patch, it looks superbly positioned for a market globalised to an unprecedented extent yet conversely focused on value, especially with Tony Angel on board to bring discipline to complement the firm’s traditional flair.
Still, even if it’s been an unspectacular year for London’s elite – aside from a welcome rebound for Freshfields Bruckhaus Deringer – ultimately they are broadly where they need to be. It’s becoming increasingly clear that the global top 50 is the place that all firms outside a very small club of Manhattan-bred outliers have to be if they want a realistic shot at building sustainable cross-border businesses. That’s less about being global elite or whatever the tag of the day is and more about the logistic and economic realities of establishing a practice to serve bluechips across borders. That’s the club everyone wants to join and the Magic Circle are still founding members.
If that is one received wisdom that industry realities are bearing out, how about the widespread expectation that strong positioning in the Asia-Pacific region is essential for this group?
Well, it’s certainly true that leading firms need credible networks in Asia. But intense competition, the web of protectionist Bar rules and the relatively small size of the region’s legal markets mean Asia currently feels more a burden than a land of opportunity. Privately, law firm leaders at top firms have turned sharply bearish on the region over the last two years, particularly at the leading New York firms that have only recently moved into Hong Kong law. If Asia has become a market for followers, the Global 100 is being defined by law firms daring to make their own way, not travel the same path as everyone else.
Click here to access this year’s Global 100 coverage online