Projecting the Future of Large US Law Firms:
The Scale and Scope of Things to Come*
Peter D. Sherer
Haskayne School of Business
University of Calgary
peter.sherer@haskayne.ucalgary.ca
* To be presented at The Future of the Global Law Firm, Georgetown University Law
Center for the Study of the Legal Profession. A version of this article appeared in the
May issue of The American Lawyer. Copyright 2008. ALM Properties, Inc. All rights
reserved. Further duplication without permission prohibited.
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INTRODUCTION
In 2015—the year that New York Yankees superstar Alex Rodriguez will surpass 762
home runs and break the Major League Baseball record-—Latham & Watkins and
Skadden, Arps, Slate, Meagher & Flom will be of such incredible scale that they will
both gross more than $5 billion. Baker & McKenzie will have more than 6,600 lawyers,
and the partners at Wachtell, Lipton, Rosen & Katz will bring home about $7.7 million
apiece – a number that will itself be dwarfed by the $15.7 million Wachtell partners will
average in 2025. And, a number of firms that were historically based in the US will
expand their scope internationally to the point that they will no longer be US law firms.
Will these events happen? Maybe, maybe not.
Predicting the future based on the past is a risky business. Just as age or injury might
derail Rodriguez’s bid to become the all-time home run king, so do both exogenous and
planned events-—ranging from strategic mergers to disastrous recessions—affect the
growth curves of the large law firms. Rodriguez has averaged 44 home runs a year for
11.8 seasons, but one cannot run a simple mathematical model (763 divided by 44) to
guarantee when or if he’ll break the record.
Nevertheless, our best predictor of the future is typically the past. As forecasting
techniques like scenario-planning suggest, we can use historic trends as a tool to gain
insight about what is likely to happen. To come up with the likeliest projections, we must
consider more than just historical performance trends. We scrutinize future projections to
identify possible factors or events that might promote or impede the forecasted future
values from happening, which can then be built into the strategic planning analysis of law
firms.
Moreover, when projections from past trends are so bold that they make the future look
unlikely or even impossible, we question the underlying basis for the projections. To
return to the baseball analogy, when Alex Rodriguez was on his home run tear early in
the 2007 season, some analysts projected he would shatter the record for a season, but the
smart bet was that his pace was unsustainable—which it was. So for some law firms,
projections about the future will be straightforward and speak to sustainable business
models. For others, projections about the future will be hard to believe, telling us
something about why those firms will struggle to meet their destiny.
That said, I will attempt to make future predictions about the scale and scope of large US
law firms. The projections may or may not come to pass, but they highlight a number of
key issues that will affect these law firms in the coming years.
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FORECASTING MODEL
What follows are projections about the forecasted future of large US law firms up until
2025 based on data going back to the inaugural 1985 The American Lawyer’s AMLAW
50 survey of US law firms, which identified the top 50 revenue producers in 1984. There
were complete data for 47 of the original 51 firms in the survey from 1984 to 2005, a
period of just over 20 years. The future projections take us out an additional 20 years.
The forecasting model is straightforward: Law firms will grow in the future
commensurate with their historic rate of growth. Past growth was based on the
compound annual growth rate (CAGR), which is commonly used to estimate rates of
returns with investments. CAGR provides a “smoothed out” average or uniform growth
rate through the use of a geometric as opposed to an arithmetic mean over a specified
period of time, in this case the 22 years from 1984 to 2005. The historic CAGR was then
projected into the future. The key projections using the historic CAGR were made on the
following four indices of scale and scope:




profits per partner (from The American Lawyer),
gross revenues (from The American Lawyer),
firm size in total lawyers (from The National Law Journal), and,
internationalization in percentage of lawyers outside the US (from The National
Law Journal).
FUTURE PROJECTIONS: THE SCALE AND SCOPE OF THINGS TO COME
Table 1 provides the mean expected values for the AMLAW 50 firm in 2025 (along with
the mean CAGR values). These firms will average profits of partner of just over $6
million dollars, will generate gross revenues of almost $6 billion, will have over 3,000
partners and associates, and will be at almost 22 percent international. The estimates for
profits per partner and gross revenues are particularly high because they are shown in
nominal value (that is, unadjusted for the real or inflation-adjusted value of money) as
opposed to the real value of money. Using the consumer price index (CPI) from 1984 to
2005 as a guide to the future, the value of a dollar in 2025 would be roughly half what it
would be worth in 2005.
As striking as these numbers are, as averages they mask the future projections of specific
firms. Figures 1 through 4 show projected trend lines from 2005-2025 on the four key
indices for five well known firms: Wachtell Lipton, Rosen, & Katz (Wachtell), Cravath,
Swaine & Moore (Cravath), Skadden Arps Meagher & Flom (Skadden Arps), Latham &
Watkins, and Baker & McKenzie. Table 2 provides the future projections for these firms
in 2025. Key highlights of the forecasts are:
 The profits per partner projections for 2025 have Wachtell leading the five firms
at almost $15.7 million a year (in nominal value). Cravath’s will be at $9.6
million, Skadden Arps’ at $6 million, and Baker & McKenzie’s at $2.5 million.
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While not shown, the highest profits per partner go to Cadwalader Wickersham &
Taft (Cadwalader) at close to $20 million!
 The revenue projections for 2025 have Latham & Watkins leading all firms at
close to $23 billion, followed by Skadden Arps at close to $16 billion. Baker &
McKenzie is projected to be at $12 billion. Wachtell at $3.4 billion surpasses
Cravath at $2.6 billion.
 The size projections for 2025 show Baker & McKenzie with over 13,500 partners
and associates. White & Case will lead among all AMLAW 50 firms with over
13,800 partners and associates. Latham & Watkins will have over 11,000 and
Skadden Arps will have over 6,700. Maintaining modest historical growth,
Cravath is projected at 832 partners and associates and Wachtell at 400. While
not shown, Cadwalader grows very slowly to only 88 partners.
 Baker & McKenzie will continue to lead on internationalization, with almost 90%
of its lawyers outside of the US in 2025. Among the five selected firms, Latham
& Watkins will go to almost 40% international. While not shown, a number of
firms will have over 50% of their lawyers outside the US, including White &
Case at almost 80% and Shearman & Sterling at close to 60%.
The projections make clear that not only will the US corporate law firm of the future be
wealthier, grow larger, and be more international than in the past, but also that the gap
among firms on these key indices will grow ever larger. The rich will get richer and the
poor relatively poorer; big firms will become bigger relative to smaller firms; and firms
with a strong international presence will stand in greater contrast with those firms that
have a minimal or no international presence.
THE CHALLENGES AND OPPORTUNITIES OF SCALE AND SCOPE
The forecasted projections present numerous challenges and opportunities for these law
firms. For the projections to be borne out, even in part, law firms will have to grapple
with a number of critical questions:
 Will the market for high-end corporate legal services continue to expand? The
forecasted future projections assume the demand for these legal services will
continue to grow at their historic market rates. For that to happen, these law firms
will have to penetrate or create new markets, particularly in the international
realm but also through new practice areas. But what happens if the market for
high-end corporate legal services slows down and reaches what organizational
theorists refer to as its carrying capacity?1 If that happens, will large firms with
historically high growth rates relative to the market rate face major challenges in
keeping pace with their pasts? More generally, this scenario suggests growth
1
See Michael T. Hannan and John Freeman (1977), The Population Ecology of Organizations. American
Journal of Sociology, 82(5): 929-964.
5
could become more costly for firms as it would come directly from other firms’
market shares. This potential for increased rivalry raises the question: which
firms, if any, will win in the competition for market share?
 Where will these law firms get all the lawyers they need to grow? The class sizes
of elite US law schools are either not growing or growing only at a rate that is
insufficient to fill the future demand. The obvious conclusion to draw from these
projections is that law firms will have to do much more to find, retain, and
develop talent – and perhaps also outsource. These projections also suggest that
law firms will need to use mergers and acquisitions of other law firms in order to
meet their numbers.
 How will the firm of the future manage its ever increasing complexity in scale and
geographical scope? Consider just scale. The firm of the past had a few hundred
lawyers. Several firms today have more than 1,000 lawyers. In 20 plus years,
firms of over 1,000 will be commonplace if not modestly sized. Add to this that
firms will be much more geographically dispersed. Just as Alfred Chandler
discussed the importance in the history of the modern industrial enterprise of
managing scale and scope, so too will the law firms of the future have to manage
this ever-increasing complexity.2 It will also require law firms to have the
dynamic capabilities to continually develop and innovate while at the same time
providing a seamless integration of legal services for clients.3
 What will be the organizational identity of firms that are internationalizing? A
number of firms, like Shearman & Sterling, will slowly but surely cross the
threshold from being a US firm to an international firm, presumably altering who
they are. Will these firms continue to see themselves as US firms or will they
take on an international identity? Will these firms be able to create a global
identity that unites their partners?
 Will those firms that have avoided internationalizing or kept it to a minimum
continue to do so in the future? According to the future projections, Wachtell will
continue to be wholly domestic and Cravath will not be far behind, with only
about 6% of its lawyers outside the US. Given the excellent reputations and legal
expertise of these two firms, certainly an argument can be made that if they
decide to internationalize they will succeed. But is there an advantage or
disadvantage to being a decidedly “second” mover? On the one hand, highly
reputable firms like Wachtell and Cravath may benefit from watching first movers
and their mistakes and successes. On the other hand, there may be significant
costs financially and on their cultures of catching up, especially if they move fast.
And what of the chances and costs for respected yet lesser regarded firms?
See Alfred Chandler’s (1990), Scale and Scope: The Dynamics of Industrial Capitalism. Cambridge,
MA: The Belknap Press of Harvard University Press.
3
See David J. Teece, Teece, Gary Pisano, and Amy Shuen. 1997. Dynamic Capabilities and Strategic
Management. Strategic Management Journal, 18(7): 509-533.
2
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 Which firms are the up-and-comers? Latham & Watkins stands out. Given its
fast growth, one wonders if it is gaining momentum or getting ready to stumble
and fall.
 Will a firm like Cadwalader be able to sustain its model? According to the
projections, Cadawalader partners will earn nearly $20 million but the partnership
will grow to only 88 partners. The juxtaposition of these two figures raises
questions about the sustainability of the present model. While making partner at
Cadawalader would be like hitting the ultimate jackpot, will it have enough young
partners to fuel its growth in the future?
 Will the firm of the future be a partnership or a publicly held corporation?
Partnerships of the past, like Cravath, Skadden, or Baker & McKenzie, started
with two or three partners and a handshake or relatively lean partnership
agreement. Firms today increasingly have features of corporations. The
movement toward corporations has the potential to lead to major consolidation
through takeovers, with large law firms gobbling up small elite firms and midsized firms increasingly pressured to get bigger.
CONCLUSIONS
These projections focus on firms historically based in the US, which comprise the vast
majority of law firms in the Global 100. These projections do not address the major
firms outside of the US, particularly those in the Magic Circle, that are of very significant
scale and scope. In a preliminary analysis of the Magic Circle firms, I can say that the
issues of scale and scope apply equally if not more so to Magic Circle firms. Their future
projections, given their historical growth rates (so far, I have calculated CAGRs back to
the 1990s), place them among the leaders or in the lead on scale and scope.
In concluding, let me say that no growth model can promise that Latham’s 2025 gross
will exceed the gross revenue of the entire 1985 Am Law 50 or that Baker & McKenzie
will have more lawyers in 20 years than the total number employed by the inaugural Am
Law 50. These forecasts are not set in stone; they are merely indicators of what lies
within the realm of possibility. But they show that realm to be a land of enormous
opportunity and wealth for those firms that are able to rely on their history to control their
destiny.
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Table 1
The Expected Mean Values for the AMLAW 50 in 2025
Profits Per Partner
Gross Revenues
$6.02 Million
(CAGR=7%)
$5.92 Billion
(CAGR=11%)
Firm Size
Internationalization
3,022 Lawyers
(CAGR=5%)
21.5%
(CAGR=11%)
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Table 2
2025 Projections for Five Key Firms
Profits Per
Partner
(US Dollars)
15,677,000
Gross
Revenues
(US Dollars)
3.44 Billion
Latham &
Watkins
Skadden
Arps
Cravath
5,774,000
22.725 Billion
11,066
39.6%
6,023,000
15.97 Billion
6,745
23%
9,635,000
2.59 Billion
832
5.7%
Baker &
McKenzie
2,501,000
12.13 Billion
13,512
89%
Wachtell
9
Firm Size
International
(Partners and
Associates)
400
0%
Cravath, Swaine & Moore
Skadden, Arps, Slate, Meagher & Flom
Baker & McKenzie
10
Latham & Watkins
Wachtell, Lipton, Rosen & Katz
2025
2020
2015
2010
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2005
Dollars (000)
Figure 1
Profits Per Partner
Cravath, Swaine & Moore
Skadden, Arps, Slate, Meagher & Flom
Baker & McKenzie
11
Latham & Watkins
Wachtell, Lipton, Rosen & Katz
2025
2020
2015
2010
$23,000
$22,000
$21,000
$20,000
$19,000
$18,000
$17,000
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2005
Dollars (000,000)
Figure 2
Gross Revenues
Figure 3
Firm Size
15000
14000
13000
12000
11000
9000
8000
7000
6000
5000
4000
3000
2000
1000
Cravath, Swaine & Moore
Skadden, Arps, Slate, Meagher & Flom
Baker & McKenzie
12
2025
2020
2015
2010
0
2005
# of Lawyers
10000
Latham & Watkins
Wachtell, Lipton, Rosen & Katz
Figure 4
Internationalization (2005 - 2025)
100.0%
90.0%
International Lawyers (%)
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
2005
2010
2015
Cravath, Swaine & Moore
Skadden, Arps, Slate, Meagher & Flom
Baker & McKenzie
13
2020
Latham & Watkins
Wachtell, Lipton, Rosen & Katz
2025