Business of Law Firms
US law firm performance slackens in FY 22-23​

By Jake Rickman

What do you need to know this week?

This week’s Business of Law Firms series will take a general look at how law firms performed last year.

A new report by The Lawyer on the performance of US firms in FY 2022-23 reveals a new trend: for the first time since The Lawyer started tracking the top 50 US firms in terms of revenue, 20 firms posted either flat revenue growth or negative revenue figures. Only 12 firms posted double-digit figures.

Compare these trends to last year’s, where all the 50 largest firms posted revenue increases, with 34 posting double-digit revenue increases.

Altogether, the US 50’s revenue growth in FY 2022-23 was a modest 3.5%, growing from $7.94bn to $8.21bn. In real terms, this is arguably a decrease in revenue because inflation figures have hovered around 10% in the last 12 months.

Why is this important for your interviews?

This seems like bad news only because, compared to the last decade, law firms — especially those at the top of the list in terms of revenue — have enjoyed near-universal increases in their year-over-year (YoY) revenue growth. This reflects more broad growth in the financial markets over the same period, particularly those catering to private capital. As the private capital markets are concentrated in the US, you can see why US firms have been particularly exposed to clients operating in these areas.

Therefore, a stall in growth marks a reversal in fortunes. However, it is important not to overstate the severity of the development. Like other professional service firms, many law firms are still eking a degree of growth when other industries like retail, construction, and food and beverage are posting consistent losses. This is to say that the upper segment of the US legal market is hardly in any trouble.

Nonetheless, many US law firms have ploughed ahead with one or more rounds of redundancies and layoffs. While many of these layoffs are confined to the US markets, where associates make up the majority of their global staff, certain US firms operating in London like Dechert have made cuts to their London offices.

A predominate reason for these layoffs is because many of the US firms over-hired during the 2021 deal boom. As dealmaking has slowed in the past few months, deal teams find themselves overstaffed.