Herewith our last two charts of the weekend.
First, we have the cumulative "market share" (revenue) of the AmLaw
100 in rank order, showing that the top 28 or so firms have 50% of the
market. Antitrust 101 tells us this is a very fragmented
industry, still—especially when you add in the fact that we’re
only talking about the AmLaw 100. On the other hand, the market
for corporate legal services from the Fortune 500/1000 is arguably a
distinctive market in its own right, so we may be justified in excluding
all the law firms in the country and the world.
Still, no reputable economist believes any single firm has any market
power until concentration levels reach something like a handful of firms
controlling 50+% of the market. No matter how rapidly consolidation
may be proceeding, we’re not at risk of that during the working careers
of most of us.
Now let’s look at something else—another "performance"
metric.
This bar chart shows, for each and every firm, the extent
to which its share of total AmLaw 100 revenue exceeds or falls short
of its share of total AmLaw 100 lawyers (headcount). For example,
if your firm has 2.00% of total AmLaw 100 revenue and 2.00% of total
AmLaw 100 lawyers, your score on this chart is 0—you’re right on
the X axis.
On the other hand, if you have 3% of revenue and only
1.5% of lawyers (cf. Skadden, more or less), your score will be +100%;
1% of revenue and 2% of lawyers, -100%, and so forth. First the
chart, then the call-outs:
Since this is wickedly difficult to read at the resolution
required to make it fit into a typical browser window, let me read off
the firms that I’ve labeled, in order left to right, first above the
line:
- Skadden
- Latham
- Weil-Gotshal
- Kirkland & Ellis
- Sullivan & Cromwell (the highest single bar of all)
- Shearman & Sterling
- Cleary Gottlieb
- Gibson Dunn
- Simpson Thacher (Cleary, Gibson, and Simpson are bunched immediately
adjacent to each other) - Davis Polk
- Paul-Weiss
- Cravath, and
- Wachtell
Now, the same exercise for the labeled firms below the
line (and to all those readers with loved ones in these firms, all I
can say is that I’m only the messenger):
- Baker & McKenzie
- Jones Day
- White & Case
- Holland & Knight, and
- Wilson Elser
Let me conclude with this: The most fascinating thing about this
table to me is not that it should be read to mean all the firms above
the line are doing brilliantly and those below are suffering. Not
at all. What it means to me is that firms above and below the line
have drastically different strategies and market positionings. Just
as Tiffany can co-exist with Zales, each profitable and sustainable for
the presumed long run, so may be the case in our industry.
But it does bring to mind the most shop-worn high school yearbook
entry of all time: "Know thyself."
In closing, a word of thanks to my (prefers-to-remain-anonymous) friend, a former banking executive who is embarked on becoming a student of the legal industry, who was extremely helpful in generating ideas for this analysis.
