The Wells Fargo Legal Specialty Group’s nine-month 2024 survey paints a bright picture for Biglaw, showcasing exceptional growth fueled by robust corporate practices and strategic rate increases. Here’s an in-depth look at the numbers and trends reshaping the legal industry this year.
Biglaw Growth Surpasses Expectations
According to Owen Burman, senior consultant for the Wells Fargo Legal Specialty Group, the performance of Biglaw firms in 2024 has been nothing short of extraordinary. Firms across the industry are witnessing significant revenue surges, with Burman describing the success as “pinching themselves” good.
The growth is largely driven by corporate transactional practices, which continue to serve as the engine of the legal market. Burman noted that these practices are now expanding into the middle market, allowing firms of all sizes to benefit.
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Revenue on a Historic Rise
The numbers tell a compelling story: revenue for all reporting firms jumped 12.8% in the first nine months of 2024, marking a notable acceleration from the 11.4% growth reported mid-year. Compared to the same period in 2023, when revenue increased by only 4.6%, this year’s growth is almost unprecedented, second only to the record-setting 14.4% growth in 2021.
A Breakdown of Revenue Growth by Firm Tier
- Am Law 1-50: The largest firms led the charge with an impressive 14.6% revenue growth.
- Am Law Second Fifty: Firms in this tier experienced a solid 9.3% increase.
- Am Law Second Hundred: Growth here reached 10.1%, showcasing strength even among smaller firms.
Rate Increases Drive Financial Success
While demand (up 3.7%) and attorney productivity (up 2.4%, averaging 1,583 hours per lawyer) contributed to the positive outcomes, the real driver of revenue growth has been billable rate increases. Across the board, the average standard rate climbed by 9.0% year-over-year.
Rate Increases by Tier
- Am Law 1-50: Rates rose by an average of 10%, reflecting these firms’ dominance in premium markets.
- Other Tiers: Both the Second Fifty and Second Hundred raised rates by an average of 7%, maintaining strong financial health.
Equity Partners Reap the Rewards
This financial momentum is translating into significant gains for equity partners. Despite the typical seasonality of collections and the nuances of cash-basis reporting, Wells Fargo’s survey reveals remarkable increases in profits per equity partner (PEP):
- Am Law 1-50: PEP surged 23.4%.
- Am Law Second Fifty: Partners saw a 16.4% increase.
- Am Law Second Hundred: PEP rose by 18.1%.
On average, PEP across the industry climbed by 21.5%, with net income figures reflecting similar upward trends.
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Net Income Growth by Tier
- Am Law 1-50: Up 24.5%.
- Am Law Second Fifty: Increased 16.7%.
- Am Law Second Hundred: Rose 18.8%.
Outlook for Year-End Growth
Burman predicts that while bottom-line growth may not reach the 20% mark for the full year, “mid- to high-teens” growth remains a realistic expectation by December.
Implications for Year-End Bonuses
With such exceptional financial results, Biglaw firms face mounting pressure to deliver on year-end and special bonuses. As profits soar, the industry has little room to justify holding back when it comes to rewarding its workforce.
Conclusion
Wells Fargo’s latest survey underscores a banner year for Biglaw, marked by revenue surges, strategic rate hikes, and booming profits. As firms ride this wave of financial success, the industry is poised to maintain its strong trajectory heading into 2025. Whether through expanded bonuses or continued investment in talent, this period of growth promises benefits for firms and their attorneys alike.
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