ALMResearchBlog

Data Content 09

I've just returned from a conference called Data Content 09 run by Infocommerce Group.  To oversimplify, the gist of the two day conference is how companies can use data to create new products, improve current products, collect additional data or license existing data for others to use.

Being in the research and marketing business - content is king.  I know you've heard that before, so have I.  What made me actually pay attention this time is the new ways companies are using different forms of data to enhance their businesses.  User generated content, was a big topic.  Customer reviews and self-submitted profiles continue to grow - and as one participant pointed out - as they grow, the volume of information that gets collected makes them more valuable, and actually drives more user generated content.  Mobile was another big topic.  It's amazing how many iphone apps exist, and even more amazing how many people pay for them and use them.  The question of the day was not "should we develop an iphone app?  it was "what iphone app should we develop?"

How does content relate to your law firm competitive intelligence and business development? 

Well think about your CRM system;  Are you using it to it's fullest?  Capturing as much information as possible on each contact and centralizing that data so that others in the firm with the same contact can append their info? Making them all search-able by practice area, geography, company, industry etc?

How about billing and collections?  Do you know what your realization rates are?  By practice?  Or office?  That information is available in the market to benchmark and compare.  (Full disclosure:  yes, that is a survey that we sell.)

Compensation is another area. And as the market continues to be difficult, many firms are looking at aggressive compensation plans based on performance metrics other than just hours billed. 

Bottom line is that there are plenty of places to look within a law firm, or company, to find information that will either help you run more efficiently, or will create new opportunities for business.

What Does ‘Non-Equity’ Really Mean?

Jim Cotterman posted this thought-provoking item question on the Altman Weil Blog, and went to explicate the meaning of “equity” and “non-equity.” He noted that 85% of firms with 100+ lawyers use the non-equity structure, and that those “partners” (his use of the quote marks) are “slightly more likely to be treated as W-2 employees for tax purposes, and the range of opinions on the subject ranges from cynicism (the firm is just trying to get their PPEP up) to advocating (an alternative for seasoned lawyers who want to stay, but don’t want to become business owners).

In the annual Am Law 100/200, the following definitions are used in order to distinguish between the two types of partners: “Equity Partners are those who file a Schedule K-1 tax form and receive no more than half their compensation on a fixed-income basis. Nonequity Partners are those who receive more than half their compensation on a fixed basis.”
 

Global 100: Coverage on the Other Side of the Pond

We’ve seen the coverage in The American Lawyer, but it’s interesting to see what they have to say at Legal Week about the recently-released Global 100, a joint reporting effort of the two magazines. Yes, there are few firms that aren’t from the U.S. or U.K. that wind up on the list each year—Canada, Australia, France, Spain, and Holland also have giant-size firms. But the majority of Global 100 firms are based in the U.S. or U.K., with two U.K. “magic circle” firms taking the top spots.

And what was Legal Week’s take on this year’s rankings?  Headline: Global 100: international converts put pressure on Wall Street’s elite. In other words, national U.S. firms that have been in expansion mode (such as Latham & Watkins, Dechert, and Morgan Lewis & Bockius), along with London-based international firms (Clifford Chance, Linklaters, Freshfields Bruckhaus Deringer, and Allen & Overy) are moving into “Skadden” territory. Legal Week quotes Freshfield’s management as explaining it this way: “There are two trends that can explain why the New York firms are not growing as fast as the European and national US firms. Firstly, they are less inclined to follow the international model and, secondly, the growth of London as a financial centre relative to New York.” And Skadden’s executive partner concurred: “London has become an increasing priority to US firms with significant capital markets practices over the past half-a-dozen years and this will continue to be the case.”

The full data set from the 2007 Global 100 is available from ALM Research Online for both subscribers and non-subscribers. Archival data, starting in 1997, is available to subscribers only.

Firm Financials: Baker & McKenzie

The Am Law 200 has barely been assimilated into our archives, and now Baker & McKenzie, which has a different fiscal year cycle than most of the other top firms, has announced that its gross revenue for the 2006-2007 fiscal year has risen by 20% and its profits per equity partner have broken $1 million. Still, though it’s the largest firm in the world based on number of lawyers, Baker will continue to trail AmLaw number-one firm, Skadden Arps, which registered $1.829 billion in revenue for fiscal year 2006.

But all the U.S. firms will have to take a back seat to U.K.’s “magic circle” firms in the upcoming 2007 Global 100 (October issue of The American Lawyer). Using today’s conversion rates, Clifford Chance is destined to take the top spot, with about $2.366 billion in revenue, and Linklaters is not far behind, with $2.222 billion, followed Freshfields with approximately $1.954 billion.

For those who want to get a jump on how the Global list will play out, financials for The Am Law 200 are available through the ALM Research Store. Our sister publication in London, Legal Week, has their Top 50 available in PDF format. 

Legal Week Top 50

After weeks of reporting piecemeal on the 2006-2007 financials for various U.K.-based firms, Legal Week today released its annual Top 50 rankings in a story that rang of just a bit of braggadocio (“Big four secure world-beater status as top 50 breaks £10bn”).  Perennial front-runner Clifford Chance remained unseated, with turnover (gross revenue from fee income) of £1,194 million (almost US$2.5 million). But second-ranked Linklaters had a record year—revenues rose almost 20%--and by next year, LW proposes, there just might be a new Number One. Related stories include: Associate fears grow as firms stretch leverage, Strong pound helps City elite outpace U.S. rivals, and Mid-tier join chasing pack in LW £100m club.

Law Firm Financials: More on U.K. Firms

Ashurst's PEP soared 36%, according to a recent report by LegalWeek.com, and wound up just short of the "magic" £1 million mark, at $1.9 million average profits per equity partner. In comparison, LW reported, PEP (or PPP, as The Am Law 200 puts it) at Clifford Chance for the last fiscal year was $2.03 million, and $2.07 million at Freshfields Bruckhaus Deringer.

At another U.K. firm, however, profits took a nosedive. Newcastle's Watson Burton hit by 52% profits collapse, according to another LW report. The results follow a major slowdown in work generated by the Government's coal miners compensation scheme, to which the 41-partner firm had previously dedicated a team of around 60 lawyers. Adding insult to injury, the results were announced shortly after regional rival Ward Hadaway last week recorded a 9% rise in PEP to reach $809,547 for 2006-07 and a 16% rise in revenue almost $50 million.

Law Firm Financials: U.S. and U.K. Firm Reports

Though it will be four months before the 2007 Global 100 list is published (The American Lawyer’s October issue), it doesn’t take rocket science to see how things are beginning to stack up. Global rankings are based on revenues of the most recent fiscal year. For U.S. firms, the story’s already been told in The Am Law 200. For U.K. firms, the results have been gradually leaking out in various reports.

A report from American Lawyer focused on the financials of mid-market Brit firms, versus those of two magic circle firms, mentioning CMS Cameron McKenna, Simmons & Simmons, Taylor Wessing, Clifford Chance, and Freshfields Bruckhaus Deringer. London’s LegalWeek.com has been delivering almost-daily reports, recently covering the year-end financials for DLA Piper, Freshfields, Camerons, Stephenson Harwood, Taylor Wessing, and Dundas & Wilson.

Revenues: Pennsylvania Firms

The Am Law 200 was released earlier this month, and is now available in spreadsheet format via ALM Research Online. Interestingly enough, much attention was focused on Philadelphia firms this month. One of The American Lawyer's key articles accompanying the list was Fox Rothschild's growth spurt breaks all the rules, in which Amy Kolz reported that the firm "seeks to be one-stop shop for the middle market, providing clients with a range of legal services at a reasonable price." "Fox has added seven new practice areas -- including gaming, franchising, biotech and premises security -- to bring its total to 40," Kolz wrote. But meanwhile, Philly's The Legal Intelligencer reported that the number of Pennsylvania firms among the Am Law Second Hundred had dwindled this year - but that was because many had moved into the ranks for the Am Law 100, including Buchanan Ingersoll & Rooney and Ballard Spahr Andrews & Ingersoll.

Partner Compensation: A “Fascinating Article”

While they trade news and gossip about the latest associate salary raises on Abovethelaw.com, the usually snarky contributors to the web site stopped to comment about what they called a “fascinating article” by Andrew Longstreth, reporter for The American Lawyer. The article, Firms Hunting for Stars Re-Examine Partner Compensation, was published earlier this month, and examines Am Law 200 firms’ pay scales for partners (the ratio between the highest and lowest paid) and how that effects their lateral partner recruiting. The article can be accessed in its entirety by clicking on the article title.

The Am Law Second Hundred: Mind the Gap

The overall message that The American Lawyer sent out with its publication of The Am Law 200 (June 2007 issue) is that the gap between the Am Law 100 and the Second Hundred is growing wider. This year’s coverage includes an interesting take on how the 200 law firms would look as investment vehicles. The result includes a chart ranking firms based on a growth and profit index. The top five “blue chip” firms are Wachtell, Cravath, Sullivan & Cromwell, Simpson Thacher, and Paul Weiss.

As a reminder, all the data from The Am Law 200 is now available to subscribers of ALM Research Online in the database, and a spreadsheet with all the data is available for sale. Click here to purchase and download a copy.