US Top 50

The US' top 50 law firms have posted their fourth successive year of double-digit increases in revenue and partner profits, yet still look set to lag behind their key European rivals in terms of growth this year

Legal Week's annual table of the top 50 US firms, the first comprehensive financial picture of the world's biggest legal market in 2006, shows top 50 firms grew income by an average of 12% in 2006, while profits per equity partner (PEP) rose 11.2%.

The figures are slightly up on 2005, when the group managed an average turnover increase of 11.5% and a PEP rise of 10.5%. Overall, the top 50 generated more than $40bn (£20bn) in fees during 2006, while the average top 50 firm posted a PEP figure of $1.56m (£785,000).

Internationally-committed firms were among the strongest performers, with Dechert, Jones Day and Fried Frank Harris Shriver & Jacobson experiencing the strongest profits growth.

Fried Frank managing partner Valerie Ford Jacob told Legal Week: "For firms that have been advising in the corporate arena, it has been very international in its nature this year, while litigation and bankruptcy have been slower."

Kirkpatrick & Lockhart Preston Ellis Gates chairman Peter Kallis commented: "Major US firms are faced with a stark decision. We must align our business model with major clients and potential clients – an international focus with global reach – or face the consequences."

Domestically-focused firms were hampered by a slowdown in New York securities listings, a drop in top-tier commercial litigation and a series of salary wars over the 12-month period, which have all hit profit growth.

However, US M&A was robust, with overall activity rising in value by 26.3% to $1.607trn (£808bn) according to Mergermarket, thanks in part to a record-breaking run of private equity-backed bids. In volume terms, the total number of M&A deals in 2006 rose by 8.8% to 5,379.

Regionally, New York firms were generally outpaced by national rivals in terms of both revenue and profits growth. Firms based in Pennsylvania, including Philadelphia-based Dechert and Pittsburgh-based Reed Smith, saw the biggest growth in both turnover and profits.

Texas-based firms also performed strongly with a 14.5% rise in PEP and a 10.7% rise in turnover on average.

Twelve US firms now boast PEP figures of more than $2m (£1m), with Wachtell Lipton Rosen & Katz – the world's most profitable law firm – managing $3.9m (£2m). None of the top 50 saw a drop in either turnover or PEP.

The results also demonstrate the depth of the US legal market. The 50th-ranked firm, Washington DC's Arnold & Porter, would be placed 10th in revenue terms in the UK's top 50 league.

However, growth rates look set to pale in comparison to those at the top UK firms, which are preparing for a bumper rise in turnover following a busy year of cross-border transactions in Europe. UK firms also managed a stronger rise than US firms in the last financial year, when the UK top 50 firms' turnover rose by 13.1% and PEP rose by 19%.

The entire magic circle currently looks likely to achieve at least £1m PEP when the financial year finishes at the end of this month – a result which, if realised, would be further bolstered by the current strength of sterling against the dollar.

Talkback: How impressive is the performance of the top 50 US firms? Who are the winners and loses? The UK top 50 may be growing faster, but will they ever be as profitable as their US rivals? Click here to have your say.