Law firms are obsessed with growth.
This isn’t a new phenomenon, but since the COVID pandemic, the focus on size has ramped up, adding another dimension. The “small is beautiful” phenomenon certainly never caught on in the legal world. Instead, law firms seem to subscribe to the “too big to fail” mentality. The ghosts of big law firm failures, like the 2012 collapse of Dewey & LeBoef, evidently no longer haunt the legal world.
Firms today appear to be inspired, or even driven, by the likes of Kirkland & Ellis and Latham & Watkins, which reported revenue of more than $6.5 billion and $5.3 billion respectively, according to the 2023 Am Law 100 rankings. DLA Piper, Baker McKenzie and Skadden all broke the $3 billion mark. And if they improve on their revenue figures, firms such as White & Case, Sidley Austin, Clifford Chance, Ropes & Gray, Morgan Lewis & Bockius, Gibson, Dunn & Crutcher, and Hogan Lovells won’t be far away.
And in any discussion of law firm growth, the pending merger of Allen & Overy and Shearman & Sterling merger can’t be ignored. If it goes through, the new combined firm will almost certainly join the $3 billion club.
Even Hogan Lovells, which ended merger talks with Shearman & Sterling earlier this year, still wants to grow its international presence. Miguel Zaldivar, who this month was re-elected for another term as firm CEO, told Law.com last week that the firm will double down on expansion in key U.S. markets through group lateral hires and will remain in China, where many of its peer firms have pulled back.
And has the firm now abandoned thoughts of a merger? Not exactly.
“Do we need a merger? No.” Zaldivar said. But he added that if it found the right partner, “it would be irresponsible to not consider it.”
But is such a focus on expansion and revenue growth the way to go? Might it be short-sighted? Profits will track revenue, but only to a point. A firm that grows too quickly is at risk of having to cut quickly. Somewhere there will be diminishing returns. Why aren’t more firms focusing on their core areas, client needs and profits rather than unbridled growth?
