The 100 largest law firms in the United States experienced a revenue growth of 6% in 2023, as revealed by a survey conducted by Wells Fargo & Co. This increase was largely driven by higher rates for lawyers’ time and a minor uptick in demand, which managed to offset a general deceleration in deals.
According to the report, the average profits per equity partner at these firms also upward trended, surpassing 5% from 2022. Most noticeably, these firms augmented their hourly rates almost by 9% in 2023 setting a new record, while demand only rose by less than 1%.
The survey by Wells Fargo’s legal specialty group presents the first of three significant year-end financial reports reflective of the state of the Big Law market. Upcoming reports from Citi Private Bank and The American Lawyer are projected to illustrate an invigorated year for Big Law as compared to 2022’s relatively tumultuous period.
Despite the sluggish display of growth in the mergers and acquisitions and capital markets transactions sectors, which generally impact Big Law results drastically, Wells Fargo noted a “strength” in counter-cyclical practices including litigation, restructuring, antitrust, and intellectual property.
Law firms are optimistic about their performance in 2024, indicated Owen Burman, managing director of the Wells Fargo legal specialty group. They anticipate a total hours billed, or “demand”, increase by about 3%. “We think that’s achievable, because the drivers from 2023 are still in place,” said Burman.
As 2024 commenced, firms had an advantage with inventories, or bills to be collected, swelling nearly 11% at the largest 100 firms, added the survey. “There is a belief that all facets of the market should be showing some significant improvement this year versus 2023. We see high single-digit revenue growth for the industry in 2024. So it’s a pretty good outlook,” Burman opined.
Amid challenging cost containment efforts driven by increased associate salaries, technology expenses, and inflation, firms made some headway in 2023, with expenses rising only 6% compared to 8% in 2022. Furthermore, low attrition resulted in 3% growth in lawyer headcount at the largest firms in 2023, down from 6% growth seen in the previous year.
The findings of the survey included data from over 130 law firms, including 70 of the 100 largest by revenue, and another 35 that ranked between the 100th and 200th largest.