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New York’s Biglaw firms had a fantastic financial year in 2021, characterized by huge profits, but the year that followed was a stark contrast. The post-pandemic business boom was over, and many firms were left struggling. The American Lawyer’s classification of 19 New York firms showed that only four were in the black on revenue.
Willkie Farr & Gallagher topped the list with a revenue growth rate of 13.1%, followed by Schulte Roth & Zabel with 8.1%, Proskauer Rose with 6.1%, and Fried, Frank, Harris, Shriver & Jacobson with 0.7%. Skadden, Arps, Meagher, Slate & Flom, and Debevoise & Plimpton held their revenue numbers from the previous year, while everyone else saw a decline.
Revenue per lawyer (RPL) also declined in all but three firms. Schulte saw an 8% gain, followed by Paul, Weiss, Rifkind, Wharton & Garrison with 2.6%, and Proskauer with 2%. Willkie grew its revenue by 13.1%, but its RPL declined by 5.4%.
When looking at profits per equity partner, Proskauer was the only firm that saw an increase, with a growth rate of 6.4%. Twelve firms saw double-digit drops in their profits per equity partner, while five saw double-digit declines in their revenue per lawyer. Transactions and capital markets were the main culprits for these financial struggles.
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Alisa Levin, principal at New York-based legal recruiting firm Greene-Levin-Snyder Legal Search Group, commented on the situation. She said that New York firms had benefited from the financial markets, and when the markets went in the other direction, they would be hurt. Janet Stanton, longtime legal consultant, and partner and co-founder of Adam Smith, Esq., agreed with Levin’s assessment, saying that those firms were dependent on the financial sector, and it was not like they did anything wrong.
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While New York’s Biglaw leaders remain optimistic about what 2023 looks like, the placement of these firms in financial surveys is yet to be seen. The following month will bring 2023 Am Law 100 ranking analysis.
These financial struggles are not unique to New York’s Biglaw firms. The legal industry has been tumultuous in the past few years, with law firms feeling the impact of the pandemic and clients demanding more value for their money. Law firms have struggled to adapt to these changes, and many find it challenging to stay afloat.
In this context, law firms must focus on their financial management, operational efficiency, and strategic planning to stay competitive. They need to be more proactive in identifying and responding to changes in the market, as well as finding ways to add value to their client’s businesses.
Many law firms also explore new business models and technologies to remain competitive. Alternative legal service providers (ALSPs) have emerged as a viable option for law firms to outsource their work and reduce costs. AI-powered legal technology also transforms the legal industry, allowing lawyers to streamline their work processes and focus on higher-value work.
In conclusion, New York’s Biglaw firms faced financial struggles in the past year, with only a handful of firms remaining in the black on revenue. Transactions and capital markets were the main culprits for these financial challenges. However, this is not unique to New York’s Biglaw firms, as the legal industry as a whole is facing a period of transformation. Law firms need to be proactive in identifying and responding to changes in the market and explore new business models and technologies to remain competitive.
