Why are profits at Cravath consistently lower than peer firms? Forum

[Anonymous User]

Question in the title. WLRK/S&C/STB/DPW and a couple other firms perennially post higher profits per [equity] partner. I’m just curious if this means Cravath has super nice benefits/amenities/etc. for associates (and partners, I guess) that drive up its expenses…or if something else is at play lol.

The Cravath System (https://en.wikipedia.org/wiki/Cravath_System, which was invented by Paul Cravath himself) and Cravath Scale (which Cravath led the industry in salary increases for almost a century) have situated Cravath in the legal consciousness as the very top firm in the 20th century. It becomes and remains #1 when every other firm wants to copy Cravath and what it does. If Milbank keeps doing what it is doing with respect to salary increases every few years, it may be able to unseat Cravath in a few generations.

Yeah. Milbank is the next Cravath.

....

Ya never know.

Milbank and DPW are the only two firms I give top vault rankings to in the survey each year, solely because of their approach to salary. All the other firms (mine included) get lower rankings. I highly encourage everyone else to do the same.

Milbank and DPW and whichever firms went to 205 without the stub year silliness deserve to be ranked ahead of Cravath imo. But you can't call Milbank the new Cravath. They started the movement both times, but they didn't set the new scale.

[Anonymous User]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Where does S&C fit into this calculus? presumably the same banding as STB and DPW?

[Buglaw]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Where does S&C fit into this calculus? presumably the same banding as STB and DPW?

I'd say so. I think people on this forum draw WAYYYYYYYYY too many granular distinctions. I'd also be inclined to say who cares. They are all excellent firms who do excellent work with excellent reputations and exit options. The differences amongst these firms (and too be honest even the firms 1-2 steps down) don't matter for 99% of associates. The other 1% are insufferable and you should avoid them anyhow.

[Anonymous User]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Where does S&C fit into this calculus? presumably the same banding as STB and DPW?

Prb somewhere in between Wachtell and DPW.

[Anonymous User]

Milbank and DPW are the only two firms I give top vault rankings to in the survey each year, solely because of their approach to salary. All the other firms (mine included) get lower rankings. I highly encourage everyone else to do the same.

+1. Most BigLaw associates profited from these firms, so the firms' behaviors should be rewarded. If the firms see results from their actions, they'd keep doing the same over time. Everyone benefits in the long run.

[Anonymous User]

Cravath also has a very high end pension plan for its partners which, if you factor in, leaves PPP basically in line with S&C/STB for 2020:

Not sure about S&C and STB in particular, but there are several other V20ish firms that I know have similar pension obligations to retired partners. Cravath is not unique in that respect.

Not saying you are wrong but the way the law.com article quoted above refers to Cravath’s pension makes me think that it is a materially larger drag on PPP than at similar firms. If it weren’t, why would they mention it at all? And unlike us, a bunch of random associates speculating online, I assume that whoever does these write-ups probably has as good of visibility as one can publicly get into firm finances.

[Anonymous User]

Cravath's dominance at the top of vault is baffling to just about anyone that works in NYC biglaw. I really can't explain it with anything besides "precedence" - they've always held the spot.

In almost every meaningful metric, they lag behind their peers. At least back in the day, they could claim to set the industry standard on pay. However, they haven't been the first-mover for compensation in the past several rounds. On top of that, they pay associates less than K&E/L&W, and partners significantly less than all of their peer firms.

To my knowledge, there's no meaningful benefits/amenities/etc. that they offer vs. their peer firms, but I'd love to hear from Cravath associates if they disagree.

Have to weigh in here, because this post is baffling, and untrue. Reads like the take of a junior associate who is justifying the decision of choosing not to work there. Or thinks senior lawyers and clients judge firms based on how much money they are paying junior associates. Plenty of reasons to not work there, but this is just not the way partners and other attorneys view Cravath. Not at all.

It's hard to judge them on metrics like a single year of profits, since the corporate practice is much more narrow and boutique-like than other big NY firms. Compensation is lockstep among their associates and they couldn't care less - they are still attracting a higher concentration of top, type A talent than other NY big corporate firms. Everyone is trained in-house and there are no associate laterals. Don't get me wrong, they seem to be facing a lot of challenges and are constantly questioning their methods, but the firm has not experienced real decline whatsoever.

If you make partner there, you are on a lock-step system that guarantees extremely high comp. Most clients are institutional and you have less pressure to hit the pavement. You can make equity partner in 7/8 years without ever bringing in a client of your own, the shortest track I am aware of to making that much money. And once you are partner you constantly have top associate talent working your deals. If you love legal practice, and are willing to make sacrifices to do so, it is the perfect place for a certain personality type*.

*Used to work there, but it was not for me.

I'm the OP you are responding to, and here are my takes:

1. Cravath is not bringing in associate talent that is of higher quality than DPW/S&C/STB. I would argue S&C and DPW are more selective (or at least they were when I was in law school), and there are plenty of junior associates at both Skadden and STB that turned down offers from Cravath.

2. Associate talent is notoriously a complete crapshoot. What's the measurement here that Cravath brings in "top, type A talent" - the junior associate's law school ranking or LSAT score? I think we all agree that while those may be indicators of talent, they are hardly the be all, end all on good lawyering. I have not seen any material difference in the quality of lawyers between the top firms.

3. I'd also argue that the inflexibility to bring in lateral talent does more harm than good. Fresh ideas and exposure to new/different ways of doing things leads to better lawyers. Also, Cravath is handicapped by not being able to bring in talent to replace good associates leaving, which is a bad thing.

3. Fair enough on your point regarding short track to equity partner and no pressure to bring in clients. I can't speak to that having never worked at Cravath, but if true, I agree that is pretty unique and special about Cravath.

Agree with all your points except the second 3. This is actually the case for S&C/DPW/Simpson type of firms as well. So, this works in favor of your argument.

might be true for DPW or SC but def not Simpson - their ny office is in fact lateral hiring like crazy right now, and they lateral hire a decent amount of people whenever market is hot

[Anonymous User]

Cravath also has a very high end pension plan for its partners which, if you factor in, leaves PPP basically in line with S&C/STB for 2020:

Not sure about S&C and STB in particular, but there are several other V20ish firms that I know have similar pension obligations to retired partners. Cravath is not unique in that respect.

Not saying you are wrong but the way the law.com article quoted above refers to Cravath’s pension makes me think that it is a materially larger drag on PPP than at similar firms. If it weren’t, why would they mention it at all? And unlike us, a bunch of random associates speculating online, I assume that whoever does these write-ups probably has as good of visibility as one can publicly get into firm finances.

No way of knowing, but I assumed the “but our pension” thing was spin coming out of the Cravath PR dept. Like trying to save face when your profits are flat but peers’ profits are up 10-40%.

[sms18]

Cravath's dominance at the top of vault is baffling to just about anyone that works in NYC biglaw. I really can't explain it with anything besides "precedence" - they've always held the spot.

In almost every meaningful metric, they lag behind their peers. At least back in the day, they could claim to set the industry standard on pay. However, they haven't been the first-mover for compensation in the past several rounds. On top of that, they pay associates less than K&E/L&W, and partners significantly less than all of their peer firms.

To my knowledge, there's no meaningful benefits/amenities/etc. that they offer vs. their peer firms, but I'd love to hear from Cravath associates if they disagree.

Have to weigh in here, because this post is baffling, and untrue. Reads like the take of a junior associate who is justifying the decision of choosing not to work there. Or thinks senior lawyers and clients judge firms based on how much money they are paying junior associates. Plenty of reasons to not work there, but this is just not the way partners and other attorneys view Cravath. Not at all.

It's hard to judge them on metrics like a single year of profits, since the corporate practice is much more narrow and boutique-like than other big NY firms. Compensation is lockstep among their associates and they couldn't care less - they are still attracting a higher concentration of top, type A talent than other NY big corporate firms. Everyone is trained in-house and there are no associate laterals. Don't get me wrong, they seem to be facing a lot of challenges and are constantly questioning their methods, but the firm has not experienced real decline whatsoever.

If you make partner there, you are on a lock-step system that guarantees extremely high comp. Most clients are institutional and you have less pressure to hit the pavement. You can make equity partner in 7/8 years without ever bringing in a client of your own, the shortest track I am aware of to making that much money. And once you are partner you constantly have top associate talent working your deals. If you love legal practice, and are willing to make sacrifices to do so, it is the perfect place for a certain personality type*.

*Used to work there, but it was not for me.

This post reads like it's coming from someone who worked at Cravath in the early 2000's (or before). 7/8 year equity partner track is likely no longer a thing at Cravath (it is generally no longer a thing in any NY biglaw). Lock-step partner comp at Cravath is not "extremely high," it is generally within the range of market in NY biglaw, and in fact is not appreciated by rainmaker partners who are good at brining new business and don't want lock-step comp (hence the "defections" by high profile partners like Barshay to PW and others to K&E and etc.). Many other large law firms also have steady institutional clients and it's not unique to Cravath that an associate has less pressure to bring in business.

[Anonymous User]

This post reads like it's coming from someone who worked at Cravath in the early 2000's (or before). 7/8 year equity partner track is likely no longer a thing at Cravath (it is generally no longer a thing in any NY biglaw). Lock-step partner comp at Cravath is not "extremely high," it is generally within the range of market in NY biglaw, and in fact is not appreciated by rainmaker partners who are good at brining new business and don't want lock-step comp (hence the "defections" by high profile partners like Barshay to PW and others to K&E and etc.). Many other large law firms also have steady institutional clients and it's not unique to Cravath that an associate has less pressure to bring in business.

Not the person who wrote the post you're responding to, but you're wrong about some of this. A 7-8 year partnership track is absolutely still a thing at Cravath. It's the case for almost every partner, including newly minted ones (see the most recently minted partner class for easy examples).

No (associate) is complaining about the loss of Barshay, either. Ask anybody at PW how they feel about him.

I don't think Cravath's special at all compared to its peers (Davis, S&C, etc.), but it's not worse, either.

[sms18]

This post reads like it's coming from someone who worked at Cravath in the early 2000's (or before). 7/8 year equity partner track is likely no longer a thing at Cravath (it is generally no longer a thing in any NY biglaw). Lock-step partner comp at Cravath is not "extremely high," it is generally within the range of market in NY biglaw, and in fact is not appreciated by rainmaker partners who are good at brining new business and don't want lock-step comp (hence the "defections" by high profile partners like Barshay to PW and others to K&E and etc.). Many other large law firms also have steady institutional clients and it's not unique to Cravath that an associate has less pressure to bring in business.

Not the person who wrote the post you're responding to, but you're wrong about some of this. A 7-8 year partnership track is absolutely still a thing at Cravath. It's the case for almost every partner, including newly minted ones (see the most recently minted partner class for easy examples).

No (associate) is complaining about the loss of Barshay, either. Ask anybody at PW how they feel about him.

I don't think Cravath's special at all compared to its peers (Davis, S&C, etc.), but it's not worse, either.

Gotcha, thanks - I may have wrong data on the equity track timeline. Sure, Cravath associates may not care all that much about rainmakers like Barshay leaving the firm (as it won't impact the associates' bottom line), but "defections" like that do have a material impact on the firm big picture-wise - i.e., Cravath used to be the type of place that by default handled all major transactions by blue chip companies like IBM, but that is no longer case (and similarly, PW wasn't known to be a major player in public M&A deals until people like Barshay joined the firm and took the reins) - hence the current view that Cravath isn't all that "special" in terms of corporate practice.

[Anonymous User]

Cravath also has a very high end pension plan for its partners which, if you factor in, leaves PPP basically in line with S&C/STB for 2020:

Not sure about S&C and STB in particular, but there are several other V20ish firms that I know have similar pension obligations to retired partners. Cravath is not unique in that respect.

Not saying you are wrong but the way the law.com article quoted above refers to Cravath’s pension makes me think that it is a materially larger drag on PPP than at similar firms. If it weren’t, why would they mention it at all? And unlike us, a bunch of random associates speculating online, I assume that whoever does these write-ups probably has as good of visibility as one can publicly get into firm finances.

No way of knowing, but I assumed the “but our pension” thing was spin coming out of the Cravath PR dept. Like trying to save face when your profits are flat but peers’ profits are up 10-40%.

Maybe but I would imagine that the law.com staff aren’t just parroting the talking points of Cravath’s PR team since presumably they see actual data across firms

[Anonymous User]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

[Anonymous User]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

I think this has way more to do with a Cravath's leverage (ratio of partners to associates) than it has to do with expenses. Leverage is one of the primary drivers of profits in a law firm. Cravath has a leverage of 3.9, whereas DPW has a leverage of 4.55. When you add this to the fact that RPL at Cravath is $1.591 mil, but it's $1.806 for DPW, the difference in profit margin is easily understandable. Just like financial leverage gets you an outsize return on your investment (hence PE acquisition financing), so does human capital leverage.

[Anonymous User]

As others have pointed out, it's really just last two or so years Cravath lagged a few peers. So don't think there's that much to say just yet. Might not be a lasting trend. COVID has been weird.

WLRK isn't a useful comparator. WLRK is WLRK.

[Anonymous User]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

I’ve never heard of particularly generous perks at Cravath. Versus a place like S&C that is reputed to have good perks (though apparently not so good as to materially hurt PPEP).

Cravath has lower RPL (revenue per lawyer) versus some of its peers — $1.5M per lawyer at Cravath vs. >$1.8M at DPW/S&C/STB. When you combine that with a similar cost profile (about $800K per lawyer at Cravath and at DPW/S&C/STB) and similar leverage, it’s a recipe for lower profitability. Not sure why Cravath’s RPL is lower … I have a hard time believing that Cravath associates are billing less time than peer associates.

I agree with the anons who’ve pointed out this is still just a 1-2 year phenomenon right now. It’s too early to tell whether it’s a momentary blip or the beginning of some trend/actual divergence.

[Anonymous User]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

I’ve never heard of particularly generous perks at Cravath. Versus a place like S&C that is reputed to have good perks (though apparently not so good as to materially hurt PPEP).

Cravath has lower RPL (revenue per lawyer) versus some of its peers — $1.5M per lawyer at Cravath vs. >$1.8M at DPW/S&C/STB. When you combine that with a similar cost profile (about $800K per lawyer at Cravath and at DPW/S&C/STB) and similar leverage, it’s a recipe for lower profitability. Not sure why Cravath’s RPL is lower … I have a hard time believing that Cravath associates are billing less time than peer associates.

I agree with the anons who’ve pointed out this is still just a 1-2 year phenomenon right now. It’s too early to tell whether it’s a momentary blip or the beginning of some trend/actual divergence.

My friends there are jealous of my low health insurance costs. I think they pay like $400 monthly for individual health insurance and several hundreds more than that to add a spouse.

[Anonymous User]

OP. So, with the exception of one of the above poster's comment about some generous pension plan for partners, it doesn't sound like Cravath has any other major "reason" for not having higher profits. I personally still just find this to be odd, especially given that their partnership is much smaller than all of their peers except for Wachtell. Their profit margins have also been lower than their peers (albeit not drastically) - DPW/S&C/STB/PW hover around 55% every year while Cravath has historically been between 45%-50% (Wachtell is obviously sui generis at 67% in 2020).

I'm NOT trying to get into a debate about which firm is better in terms of practice area strengths/prestige/etc. I know they're basically all the same in this tier (with Wachtell a notch above the rest). I have a much more mundane question. I'm honestly just curious if the lower profits/profit margins are the result of Cravath spending more on associates' wellbeing (e.g., things like bigger Seamless budgets, Uber black cars for late nights, fancy gym memberships, etc.). I've heard crazy stuff like how Wachtell has a catering team that goes around on busy nights taking orders from lawyers and delivers plated gourmet meals to them. If Cravath doesn't have similar benefits, what is it doing "wrong" LOL - i.e., why are expenses so high?

I’ve never heard of particularly generous perks at Cravath. Versus a place like S&C that is reputed to have good perks (though apparently not so good as to materially hurt PPEP).

Cravath has lower RPL (revenue per lawyer) versus some of its peers — $1.5M per lawyer at Cravath vs. >$1.8M at DPW/S&C/STB. When you combine that with a similar cost profile (about $800K per lawyer at Cravath and at DPW/S&C/STB) and similar leverage, it’s a recipe for lower profitability. Not sure why Cravath’s RPL is lower … I have a hard time believing that Cravath associates are billing less time than peer associates.

I agree with the anons who’ve pointed out this is still just a 1-2 year phenomenon right now. It’s too early to tell whether it’s a momentary blip or the beginning of some trend/actual divergence.

My friends there are jealous of my low health insurance costs. I think they pay like $400 monthly for individual health insurance and several hundreds more than that to add a spouse.

I am at Cravath and can confirm our perks suck. The mentality of the partnership is that we are all lucky to work at The Best Law Firm In The World so any associate who needs perks to feel appreciated just doesn’t get it.

[DoveBodyWash]

To actually answer the question directly: Cravath's corporate group has no PE practice to speak of and still largely relies on public-M&A and representing lenders/underwriters. It's also partly because the PPP-metric is kind of misleading to begin with. CSM probably has lower comp ceiling but the upper-lower bounds are closer together (i.e., the CSM rainmakers make less than their competitors at PW or Kirkland but the pay-range is tighter within the partnership so there's not a huge gap between the lowest and highest paid partner).

It just depends on what you want as a partner. If you want to inherit institutional client relationships and earn stable dollars spending most of your time on sophisticated legal work, then CSM is probably a better fit for you than a place like Kirkland where the "sky is the limit" on comp but the floor can also fall out under you if you don't deliver business.

ETA: Major eyeroll at any of these firms hiring "better juniors." All juniors are pretty much useless out of the box. The only distinguishing factor in the early years is their tolerance/eagerness to toil 24/7. But LOL @ notion that hiring dozens of upper-median CLS/HLS students means that any of these firms have better juniors. Absent constant supervision, they are all helpless people pleasers.

[Anonymous User]

To actually answer the question directly: Cravath's corporate group has no PE practice to speak of and still largely relies on public-M&A and representing lenders/underwriters. It's also partly because the PPP-metric is kind of misleading to begin with. CSM probably has lower comp ceiling but the upper-lower bounds are closer together (i.e., the CSM rainmakers make less than their competitors at PW or Kirkland but the pay-range is tighter within the partnership so there's not a huge gap between the lowest and highest paid partner).

It just depends on what you want as a partner. If you want to inherit institutional client relationships and earn stable dollars spending most of your time on sophisticated legal work, then CSM is probably a better fit for you than a place like Kirkland where the "sky is the limit" on comp but the floor can also fall out under you if you don't deliver business.

ETA: Major eyeroll at any of these firms hiring "better juniors." All juniors are pretty much useless out of the box. The only distinguishing factor in the early years is their tolerance/eagerness to toil 24/7. But LOL @ notion that hiring dozens of upper-median CLS/HLS students means that any of these firms have better juniors. Absent constant supervision, they are all helpless people pleasers.

Adding to this - the business model has changed across the board. Traditional underwriting isn't as profitable as it once was which is why you see some of the cream of the crop banks venturing out into more esoteric investment opportunities . GS/MS/etc. of the worlds just don't make as much as they used to underwriting an IPO, which was their bread and butter.

Debt is also cheap and there's a lot more advantage to raising cash via debt over equity. Thus, capital markets as a practice has moved to a world where frequency is more profitable than sophistication. Doing 100 little debt issuances in a year is more profitable than doing 1 big IPO in the same year.

Then, you have the emergence of private equity M&A. M&A was always a money printer, but there aren't that many major, public M&A deals in a year. These deals also take a lot of time, meaning that you have to find ways to keep the lights on as you won't collect on M&A bills for awhile (thus, finance practice that churn deals and collect consistently). There are, however, literally thousands of private equity M&A deals. These don't make as much money or time as the public M&A deals, and once again, you just churn the shit out of these for higher profits. Firms with big PE M&A practices that can churn 1000 100mm -10bn deals, will outperform a firm that is doing 10 70bn dollar deals a year.

This isn't to say that Cravath is on a downturn by any means - they still make as much money as their peers doing highly sophisticated work, but it explains why the other players have "caught up" so to speak and why Cravath isn't really spectacular/unique anymore.

FWIW, I think every law student should think about the work they want to do, why they want to do that work, and how the work they'll do aligns with their long term goals rather than just looking at raw numbers like PPP, Vault rankings, chamber rankings etc. Unfortunately, if you could answer those questions as a law student, you probably wouldn't have gone to law school in the first place since it's really just a breeding ground for ppl who don't know what they want to do, but know they want to get paid to do it.

[Anonymous User]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

[cheaptilts]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

[Moneytrees]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

In what way are they not peers? There really isn't anything distinguishing Cravath from K&E or Latham anymore. I'm sure you could find some differentiators at the margins but let's be real.

[Anonymous User]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

There are a number of reasons it should be anon, like if I work at one of the mentioned firms and am talking crap about it. And you still haven't given a reason why they aren't peers. I hope you're better at your day job lmao

[cheaptilts]

Agree it's legacy, but it's also not super crazy. Profits aren't the only measure of prestige. They have a very small office, it's hard to get hired there, they do almost universally sophisticated work, they created the model for big law firms, they were the compensation leader for decades and their numbers aren't really behind STB or DPW. They are less, but more like peer numbers, not a step below. That being said, their time as the dominant factor with it being Wachtell and Cravath head and shoulders above everyone else has clearly come to an end. They are more peers with STB and DPW now.

K&E and LW aren't really peers. They are a bit of a different type of firm. I don't think it's fair to make a comparison between the two (just like comparing Sussman to Cravath doesn't really make sense).

Why aren't they peers, because the profits of K&E and LW outpace Cravath lmao?

This doesn’t need to be anon. But Latham and Kirkland are not peers to Cravath (or S&C, or Davis Polk, or even Skadden). Your comment reminds me of that part of Mean Girls where Gretchen is told to stop trying to make “fetch” happen.

There are a number of reasons it should be anon, like if I work at one of the mentioned firms and am talking crap about it. And you still haven't given a reason why they aren't peers. I hope you're better at your day job lmao

Quality and consistency of lawyering, for one thing. Brand strength in the financial capital of the world (NYC), for another thing. Attractiveness to top law students at top law schools. Etc. money isn’t everything. Is Williams & Connolly a peer to Dechert?

I don’t think we need to turn this into another “K&E vs. the world” thread.

I’m pretty good at my day job (or else I’d simply lateral to K&E/Latham like everyone else…)

Your reason for going anon doesn’t make sense unless your username is tied to your IRL identity AND you’ve disclosed in your post history that you work at K&E/Latham, but go off I guess.