BigLaw Financial Outlook Forum

[TLSModBot]

Alternate thread title: BAHAHAHAHAHAHAHHA

Reading:
Altman-Weil 2015 Partners Survey
Georgetown's 2016 Report on the State of the Legal Market
Citi/Hildebrandt 2016 Client Advisory

Just a thread for posting how we're all doomed.

[TLSModBot]

"I get it, man, it's all these other idiots who are the problem!"

[BigZuck]

tl;dr

[BigZuck]

Also, tag

And bump

[TLSModBot]

EVERYTHING IS OK NO NEED TO WORRY HERE AT ALL

[Danger Zone]

Also, tag

And bump

[TLSModBot]

Also FYI even though most AmLaw 200 firms have seen overall gross revenue growth since before the recession (not even counting those who achieved "gains" through mergers because lol), about half have had overall shrinking profit margins.

[TLSModBot]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

[landshoes]

those are the ones you want? K&L Gates, man.

[xael]

I call WSGR for the "massive layoff" category in the pool

[smaug]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

As much as the idea of a law firm dead pool entertains me, it's probably in awful taste. Also, hard to talk about some things publicly.

[Danger Zone]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

As much as the idea of a law firm dead pool entertains me, it's probably in awful taste. Also, hard to talk about some things publicly.

Yeah, I had posited a guess, but retracted because of this.

[TLSModBot]

It is in poor taste I suppose. But as a public service announcement for those not yet in firms (or law school), general info about law firm financials will be useful - I'll just stick to that.

Also good lord do firms play with their numbers to sugar coat things.

[Aeon]

The fragility of law firms is concerning. Because they are partnerships with pass-through taxation, they don't retain much more cash than they need to pay their expenses: partners hate paying taxes on money they don't actually receive. When the cashflow dries up, the partners either have to pay those expenses out of pocket or scale back. And partners really hate having to pay out of pocket...

But as a public service announcement for those not yet in firms (or law school), general info about law firm financials will be useful - I'll just stick to that.

Also good lord do firms play with their numbers to sugar coat things.

This. Law firm financials are incredibly opaque, and they don't share them in any significant way with non-partners. Which leaves us with PPP and work volume as proxies, I guess.

[TLSModBot]

The fragility of law firms is concerning. Because they are partnerships with pass-through taxation, they don't retain much more cash than they need to pay their expenses: partners hate paying taxes on money they don't actually receive. When the cashflow dries up, the partners either have to pay those expenses out of pocket or scale back. And partners really hate having to pay out of pocket...

But as a public service announcement for those not yet in firms (or law school), general info about law firm financials will be useful - I'll just stick to that.

Also good lord do firms play with their numbers to sugar coat things.

This. Law firm financials are incredibly opaque, and they don't share them in any significant way with non-partners. Which leaves us with PPP and work volume as proxies, I guess.

We get net operating income, gross revenue, etc. through AmLaw which helps but isn't amazing. PPP is less than useless because it can be (and is) rigged by firms.

Even if we had audited financial statements in detail, some things like future work volume from existing clients and collection rates on receivables make real prediction still difficult.

[TLSModBot]

Anyone have strong opinions one way or the other on using Revenue Per Lawyer as a gauge for comparing law firms relative financial strength (outside of the fact that it's merely revenue and not profits - Profits per lawyer would be great but AmLaw only just started tracking this and I'm too lazy right now to calculate manually for every year)?

[smaug]

You should make your own profitability index and publish the data. Law Firm Transparency.

[Aeon]

Looks like AmLaw has expanded the list of metrics they publish. It's been a while since I've looked at their data.

[TLSModBot]

You should make your own profitability index and publish the data. Law Firm Transparency.

I don't know enough about finance in general or why AmLaw structured theirs the way they do but there has to be a better way of figuring out profitability that excludes PPP.

PROFITABILITY INDEX includes leverage, which is the ratio of all lawyers (minus equity partners) to equity partners, and profit margin, which is the ratio of net operating income to gross revenue multiplied by 100. It can also be obtained by dividing profits per partner by revenue per lawyer.

[TLSModBot]

Unfortunately like the USNWP law school rankings, AmLaw's PPP tracking has gained a de facto importance in everything because partners rely on it for lateraling purposes (and, I suspect, internal financial decision-making). And the sheer inertia of it all makes ignoring it worse than including it, I think.

[TLSModBot]

From the Citi report. Future demand is getting even harder to predict from past volume. This could be due either to law firms getting better at stealing each other's lunch or to shifting/decreasing net client demand. Probably a mix of both trending heavier on the latter.

[MCFC]

Huh.

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

[TLSModBot]

Yeah that was in slightly bad taste.

But seriously I hope Dickstein gets their merger cuz otherwise it's not looking great.

[MCFC]

Yeah that was in slightly bad taste.

But seriously I hope Dickstein gets their merger cuz otherwise it's not looking great.

http://www.philly.com/philly/business/2 ... apiro.html

[Desert Fox]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

As much as the idea of a law firm dead pool entertains me, it's probably in awful taste. Also, hard to talk about some things publicly.

Poor taste? A bunch of rich ass white UMC and rich folks might have to find another job ohes noes. Lets do this.