Great article on firm financials / differences in vault rank

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thesealocust
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Great article on firm financials / differences in vault rank

Postby thesealocust » Sun Jun 05, 2011 12:14 pm

http://amlawdaily.typepad.com/amlawdail ... chasm.html

There are questions all the time about the differences between law firms in various prestige / vault / profitability / whatever tiers, and it's always one TLS has struggled a bit to answer. I think this article does a good job of breaking it down into numbers and business terms that make it a bit easier to comprehend the forces at work in the market. It's a bit "advanced" (if I had read it a year ago it would have been close to an 'all greek to me' situation) but it paints a pretty solid picture of what the actually meaning of a difference in notional 'prestige' of firms is. This quote especially seems to sum it up:

After listening to firms describe their work, we've concluded that the market divides into five categories:

• Critical strategic work: a deal of a lifetime, a subpoena to the CEO;

• If you want us, you'll pay our fees: The client needs a law firm's imprimatur;

• Important operations support that the client can't manage in-house;

• Ordinary operations support that the client can't manage in-house; and

• Commodity work that is more efficient to outsource.

Virtually every firm would like to live and work in the first two categories, which, by the way, are no longer immune to price pressures. By our estimates, those premium-priced categories account for about one-third of the market, or $28 billion. We believe that all Am Law 200 firms get some of this premium work; there are too many good lawyers with good clients in a splintered market for that not to be true. We also include in the premium category contingency scores.

Based on the financial results we've reviewed, it seems that the best billing work goes disproportionately to the most profitable firms.


As law students, whatever this means really collapses to (1) what will it be like to WORK at the firm and (2) what will our prospects both at (stability, progression) and after (exit opportunities, partnership odds) which aren't directly addressed by the article. Still, interesting perspective and good concrete information.

2LLLL
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Re: Great article on firm financials / differences in vault rank

Postby 2LLLL » Sun Jun 05, 2011 2:13 pm

Very interesting read, thanks for posting. What I'd add as a caveat is that the work you'll be doing as a 1st-3rd year associate, which is statistically as far as many people will get at a V100 firm (voluntarily or involuntarily) is going to be relatively similar regardless of what category a matter falls into.

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thesealocust
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Re: Great article on firm financials / differences in vault rank

Postby thesealocust » Sun Jun 05, 2011 3:54 pm

2LLLL wrote:Very interesting read, thanks for posting. What I'd add as a caveat is that the work you'll be doing as a 1st-3rd year associate, which is statistically as far as many people will get at a V100 firm (voluntarily or involuntarily) is going to be relatively similar regardless of what category a matter falls into.


Yes. Although the qualifier 'relatively' is important - I'm beginning to get a sense that firms actually do have material differences in the way the staff their associates. And it's not purely leverage based, though it's definitely a factor.

Another thing I'm beginning to realize is that any given transaction is likely to have several parties and firms involved on the corporate side, and different firms are more or less likely to be on various sides (i.e. certain firms are tight with banks and tend to be underwriting an offering on a transaction another firm will typically be representing an issuer on).

Wavelet
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Re: Great article on firm financials / differences in vault rank

Postby Wavelet » Sun Jun 05, 2011 6:38 pm

After listening to firms describe their work, we've concluded that the market divides into five categories:

• Critical strategic work: a deal of a lifetime, a subpoena to the CEO;

• If you want us, you'll pay our fees: The client needs a law firm's imprimatur;

• Important operations support that the client can't manage in-house;

• Ordinary operations support that the client can't manage in-house; and

• Commodity work that is more efficient to outsource.

Virtually every firm would like to live and work in the first two categories, which, by the way, are no longer immune to price pressures. By our estimates, those premium-priced categories account for about one-third of the market, or $28 billion.


I think Revenue Per Lawyer (RPL) is a good proxy for the amount of work a firm gets in the first two categories.

http://www.law.com/jsp/tal/PubArticleTA ... hbxlogin=1

alumniguy
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Re: Great article on firm financials / differences in vault rank

Postby alumniguy » Mon Jun 06, 2011 6:52 pm

Wavelet wrote:
After listening to firms describe their work, we've concluded that the market divides into five categories:

• Critical strategic work: a deal of a lifetime, a subpoena to the CEO;

• If you want us, you'll pay our fees: The client needs a law firm's imprimatur;

• Important operations support that the client can't manage in-house;

• Ordinary operations support that the client can't manage in-house; and

• Commodity work that is more efficient to outsource.

Virtually every firm would like to live and work in the first two categories, which, by the way, are no longer immune to price pressures. By our estimates, those premium-priced categories account for about one-third of the market, or $28 billion.


I think Revenue Per Lawyer (RPL) is a good proxy for the amount of work a firm gets in the first two categories.

http://www.law.com/jsp/tal/PubArticleTA ... hbxlogin=1


This is somewhat accurate, but RPL is also tied to billable hours. Some firms truly are sweatshops and expect associates to be billing 2200+ hours and won't hire additional associates even if many associates are billing significantly more hours than that. Other firms don't have such high expectations and are more apt to hire more associates when billing exceeds certain thresholds.




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