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the financial crisis — and what it could look like in 2025 — is to analyze market data from 2007
until today. However, rather than overly focusing on each firm’s turnover and profitability on a
year-to-year basis through endless listings, we prefer to compare movements of certain groups of
firms. This is not a new method of looking at legal markets.4 While John Doe may feel
comfortable observing his national market, the global market is part of the industry analysis that
John Doe must carry out to determine his strategic position.
In 2007, following an analysis carried out by McKinsey, one could identify five different
groups of law firms:
(i) The global elite (e.g., Wachtell, Slaughter and May);
(ii) The challengers (a group of firms spanning the spectrum of Sullivan and Simpson
Thacher to Ashurst and Herbert Smith);
(iii) The middle field (e.g., Orrick, White & Case, Mayer Brown);
(iv) The Magic Circle (including U.S. firms such as Latham & Watkins or Skadden);
and
(v) The global law factories (e.g., Baker McKenzie, DLA Piper).
By 2013, the legal market had changed significantly, with the market for international
law firms seemingly split up in two major segments: the elite segment and the global law factory
segment. In 2014, we predicted that the challengers would drift farther apart, with the top
performers joining the global elite and bottom performers joining the middle field. This would
leave the existing middle-field firms “stuck in the middle.” We repeated this strategic mapping in
2017 for the same groups of law firms. Looking at each group in turn, let’s see what has
changed…
The global elite continue to be the strongest-performing group, with the highest-earning
firm, namely Wachtell Lipton Rosen & Katz, recording a staggering $6.6m PEP.5 It may,
however, be a case of the richer getting richer and the poorer getting poorer, as the difference
between the highest and lowest performers now stretches to some $3m.
As predicted, the challengers are drifting farther apart,6 with the top performers (firms
such as Paul Weiss Rifkind Wharton & Garrison, Sullivan & Cromwell, or Simpson Thacher &
Bartlett) joining and even outperforming some of the global elite, while the worst performers
(Ashurst, Herbert Smith Freehills) are dropping below some of the middle-field firms.7
The middle field (firms such as O’Melveny & Myers and Orrick Herrington & Sutcliffe)
has remained stable in terms of average PEP and average partner numbers. Although not as
extreme as the global elite or the challengers, the gap between the highest- and lowest-
performing middle-field firms is widening rapidly.8
4 Markus Hartung & Arne Gaertner, Game Over?, MANAGING PARTNER MAG. (Feb. 2014) (a discussion in which the reader will find some tables
and more data relating to the dynamics of the global legal market), available at
http://www.worldservicesgroup.com/presentations/927/927_4_2.pdf.
5 Average PEP increased some 21% from $3.8m to $4.6m between 2013 and 2017, while the average number of partners remained almost
constant. Global 100: By Partner Profits, THE AMERICAN LAWYER & LEGAL WEEK (Sept. 2016), available at
http://www.almcms.com/contrib/content/uploads/sites/378/2016/09/Global-100-by-profits.pdf.
6 The difference between the highest- and lowest-performing challenger firms has increased dramatically from $1.2m (2007) to $2m (2013), with
the difference between Paul Weiss and Ashurst standing at $3m in 2017. Id.
7 This performance change may also be related to recent mergers.
8 While in 2007 there was just a $0.6m difference between the group members, in 2017 the gap between the highest-earning firm (Gibson Dunn
& Crutcher) and the lowest-earning firm (Mayer Brown) has increased to $1.6m. Supra note 5.
195
until today. However, rather than overly focusing on each firm’s turnover and profitability on a
year-to-year basis through endless listings, we prefer to compare movements of certain groups of
firms. This is not a new method of looking at legal markets.4 While John Doe may feel
comfortable observing his national market, the global market is part of the industry analysis that
John Doe must carry out to determine his strategic position.
In 2007, following an analysis carried out by McKinsey, one could identify five different
groups of law firms:
(i) The global elite (e.g., Wachtell, Slaughter and May);
(ii) The challengers (a group of firms spanning the spectrum of Sullivan and Simpson
Thacher to Ashurst and Herbert Smith);
(iii) The middle field (e.g., Orrick, White & Case, Mayer Brown);
(iv) The Magic Circle (including U.S. firms such as Latham & Watkins or Skadden);
and
(v) The global law factories (e.g., Baker McKenzie, DLA Piper).
By 2013, the legal market had changed significantly, with the market for international
law firms seemingly split up in two major segments: the elite segment and the global law factory
segment. In 2014, we predicted that the challengers would drift farther apart, with the top
performers joining the global elite and bottom performers joining the middle field. This would
leave the existing middle-field firms “stuck in the middle.” We repeated this strategic mapping in
2017 for the same groups of law firms. Looking at each group in turn, let’s see what has
changed…
The global elite continue to be the strongest-performing group, with the highest-earning
firm, namely Wachtell Lipton Rosen & Katz, recording a staggering $6.6m PEP.5 It may,
however, be a case of the richer getting richer and the poorer getting poorer, as the difference
between the highest and lowest performers now stretches to some $3m.
As predicted, the challengers are drifting farther apart,6 with the top performers (firms
such as Paul Weiss Rifkind Wharton & Garrison, Sullivan & Cromwell, or Simpson Thacher &
Bartlett) joining and even outperforming some of the global elite, while the worst performers
(Ashurst, Herbert Smith Freehills) are dropping below some of the middle-field firms.7
The middle field (firms such as O’Melveny & Myers and Orrick Herrington & Sutcliffe)
has remained stable in terms of average PEP and average partner numbers. Although not as
extreme as the global elite or the challengers, the gap between the highest- and lowest-
performing middle-field firms is widening rapidly.8
4 Markus Hartung & Arne Gaertner, Game Over?, MANAGING PARTNER MAG. (Feb. 2014) (a discussion in which the reader will find some tables
and more data relating to the dynamics of the global legal market), available at
http://www.worldservicesgroup.com/presentations/927/927_4_2.pdf.
5 Average PEP increased some 21% from $3.8m to $4.6m between 2013 and 2017, while the average number of partners remained almost
constant. Global 100: By Partner Profits, THE AMERICAN LAWYER & LEGAL WEEK (Sept. 2016), available at
http://www.almcms.com/contrib/content/uploads/sites/378/2016/09/Global-100-by-profits.pdf.
6 The difference between the highest- and lowest-performing challenger firms has increased dramatically from $1.2m (2007) to $2m (2013), with
the difference between Paul Weiss and Ashurst standing at $3m in 2017. Id.
7 This performance change may also be related to recent mergers.
8 While in 2007 there was just a $0.6m difference between the group members, in 2017 the gap between the highest-earning firm (Gibson Dunn
& Crutcher) and the lowest-earning firm (Mayer Brown) has increased to $1.6m. Supra note 5.
195
