Citi Report: M&A Work Boosts Firm Profitability in 2014
Stronger industry performance in 2014 caused bigger smiles at more firms than in 2013. Net income and profits per equity partner were up 6 percent and 5.7 percent, respectively, compared with 3.2 percent and 3.5 percent in 2013. In fact, profitability performance was the strongest since 2010, especially among firms with significant transactional practices.
February 11, 2015 at 11:37 AM
7 minute read
Stronger industry performance in 2014 caused bigger smiles at more firms than in 2013. As we forecasted, legal industry performance in 2014 was stronger than the year before, with net income and profits per equity partner up 6 percent and 5.7 percent, respectively, compared with 3.2 percent and 3.5 percent in 2013. In fact, profitability performance was the strongest since 2010.
Firms with significant transactional practices benefited from the near-record level of M&A volume and outperformed firms with heavy litigation footprints. Since The Am Law 50 tends to have a high proportion of M&A firms, this segment significantly outperformed the others in profitability growth. As further evidence of the importance of transactional work in general, the top 15 most profitable firms in our sample materially outperformed the rest of the industry.
In the past few years, we've highlighted the significant percentage of firms experiencing year-over-year declines in profits, though we are pleased to see that this percentage declined in 2014. Although more firms enjoyed profit growth, the top 15 most profitable continued to distance themselves from the rest of the industry.
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