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The Economist January 1st 2022
Business
Global law firms
Soliciting success
NEW YO RK
As big law gets bigger, it looks ever more like its corporate clients
A
messy world is great news for those whose business it is to sort through a mess. One group in particular has had a fabulous time of late. “Business demand across every market has been strong,” beams Elliott Portnoy, chief executive of Dentons, the world’s fourthbiggest law fi rm by revenues. In 2021 Dentons, a pro duct of a series of combinations, including one six years ago with Dacheng, a large Chinese practice, may bring in over $3bn in gross billings. In the past 12 months it has added 1,000 or so lawyers to its head count, which now numbers over 12,000, and opened offi ces around the world. It has to turn away business for lack of capacity. Dentons is not an isolated exhibit. Big law is on a tear. The 100 biggest global fi rms look on track handily to surpass their com bined revenues of $128bn in 2020 (see chart on next page). Kirkland & Ellis, an American giant which has topped the rank ings in recent years, is expected to rake in annual billings of more than $5bn, more than twice as much as in 2015. Profi ts for each equity partner, an industry bench mark, have risen by more than 6% at over
half of the 300 biggest global fi rms, esti mates Peter Zeughauser, a consultant who advises many of them. At the fastestgrow ing 75 they have shot up by double digits. Equity partners at America’s top 100 fi rms could take home as much as $2.5m each on average. “Every law fi rm I know, every one, has had a record profi t,” marvels David Wil kins of Harvard Law School, whose semi nar on the legal business is popular with biglaw chiefs. And this breakneck growth is coinciding with signifi cant changes in the profession’s timehonoured ways. The bonanza is the result of ballooning demand for legal services and falling costs. Thanks to pandemicera restrictions, vari able expenses such as travel and entertain ing clients have plummeted. Despite their → Also in this section 49 Metaverse landlords 49 Business and the Uyghurs 50 Bartleby: Apology inflation 51 Schumpeter: The coal question
starchy reputations many fi rms have dis played managerial fl exibility. The accou trements of the legal professions—from leatherbound tomes and yellow pads to dark suits—were readily discarded in fa vour of Zoom, Google docs and sweat pants. Working from home became a con venient pretext to bill around the clock. Even as overheads have declined, de mand for lawyerly advice has swelled. Firms bracing for a repeat of the drought that followed the global fi nancial crisis of 200709, when only bankruptcy practices did brisk business, have instead found themselves swamped. Mergers and acqui sitions (m&a), the biggest moneyspinners for lawyers, will exceed $5trn in value in 2021, obliterating the previous record of $4.2trn in 2015. Privateequity deals, from fundraising to divestments, are booming. So are stockmarket listings (including via complex specialpurpose acquisition com panies, or spacs), as well as delistings (par ticularly of Chinese companies from American exchanges) and relistings (of those same companies in Hong Kong or Shanghai, at the tacit behest of the Com munist Party). At the same time the law fi rms’ non transaction business, which has histori cally been more placid, is picking up. Gov ernments around the world are preparing to regulate areas from data and diversity to climate. The European Union may soon pass two sweeping laws governing digital markets and services, which could ensnare rich clients such as Apple, Alphabet and
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