Firms are thriving and lawyers are working more than ever, and there appears to be no end in sight as the industry adapts to the second year of Covid-19.
This year saw surging associate compensation, record levels of deals activity, a hot talent market, and multiple rounds of office return plans for the country’s largest law firms. Associates gained the most leverage that they’ve ever had in Big Law amid growing concerns about lawyer burnout.
Here are some of the biggest legal stories of 2021, as told by the numbers.
At least 74 of the top 100 law firms in the U.S. are allowing associates to work from home. The overwhelming consensus in favor of a hybrid schedule reflects the reluctance to force complete office returns and the desire to preserve in-person culture.
“Our attorneys and our personnel deserve the flexibility,” said Nixon Peabody managing partner Stephen Zubiago. “We’ve been able to maintain our service levels and meet the needs of our clients.”
Firms are already reconsidering in-office requirements as a result of the spread of the Covid-19 omicron variant. Some have told lawyers and staff to temporarily work from home, while others have said they would push back office returns planned for 2022.
VIDEO: Leaders from Big Law firms share return to office plans for their firms.
Annual bonuses reached a new high of $138,000 for senior associates and some others after Cravath Swaine & Moore raised the bar to $115,000 at the top end and Davis Polk added special, one-time bonuses of up to $23,000.
The massive additional payments come on top of spring and fall bonuses that lawyers received earlier in the year. As of late November, firms like Cleary Gottlieb, Boies Schiller Flexner, and Cadwalader Wickersham & Taft had matched Cravath’s new bonus scale.
These large bonuses have been seen as a way to retain and reward burned out associates, though many legal consultants say throwing money at lawyers isn’t enough to improve their quality of life.
Some firms like Paul Weiss, Cadwalader, and Boies Schiller are also handing out extra, performance-based bonuses for their busiest associates.
Cadwalader said it would give up to 120% of an associate’s annual bonus for those billing more than 2,200 hours, and Boies Schiller released two tiers of “extraordinary” bonuses. Boies Schiller’s lawyers who bill more than 2,600 hours in 2021 could receive an additional $150,000.
On top of the multiple rounds of associate bonuses this year, many Big Law firms have also increased their base salaries for junior lawyers. Milbank kicked off the salary scale increases in June by raising first year associate salaries from $190,000 to $200,000.
Firms like Davis Polk quickly countered by boosting salaries to $202,500 for the class of 2021 and $205,000 for the class of 2020.
McDermott Will & Emery, Baker McKenzie, Dechert, Proskauer Rose, and Wilson Sonsini Goodrich & Rosati are among the firms to match the new salary scale.
As of early August, 40% of all mergers and acquisitions globally involved a private equity party, according to Bloomberg Law analyst Grace Maral Burnett. Private equity deals made up 34% of deals in 2020 and 29% of transactions in 2019.
Private equity deals reached a total value of $1.2 trillion by August, according to Bloomberg data.
“Private equity is also focusing on green energy: alternative energy targets have recieved $30.4 billion in PE investments in 2021, marking a 568% increase over the same period last year,” Burnett wrote.
Corporate spinoffs eclipsed a ten-year high as of November, when companies like General Electric Co. and Johnson & Johnson both announced major splits. In total, 205 spinoff transactions had been announced by Nov. 15 compared to 277 in all of last year.
In-house counsel and outside lawyers for companies like GE, J&J, Dell Technologies Inc., Prudential Plc, and L Brands Inc. will need to handle mountains of legal work like disclosures, tax avoidance, contracts, liabilities, intellectual property, and executive compensation.
The top 10 “most prestigious” law firms, according to an analysis by lateral hiring services firm Decipher, have hired, on average, 64 associates from January to late July this year. That’s a 131% increase from the historical average of 28 associates over the same period from 2017 to 2020 as firms seek to attract and retain talent to take on their massive workloads.
The industry’s top 10 “Best Firms to Work For,” according to Decipher, meanwhile, have hired only 37% more associates than usual. Associate attrition is up too—prestigious firms are seeing a 19% increase in attrition and those with better quality of life are experiencing a 20% increase.
Women now make up 37% of all lawyers, up from 33% in 2011, according to the American Bar Association’s annual industry profile report. The numbers are smaller at the partnership level, where women comprise about one-quarter of partners across all law firms.
Racial diversity across the legal industry has remained largely flat over the last decade. The ABA report found that 4.7% of lawyers are Black, 4.8% are Hispanic, 2.5% are Asian, and 0.4% are Native American. Those figures show little change from 10 years earlier.
Paul Weiss’ partners can expect to earn more than $6 million each this year, according to estimates from firm chair Brad Karp. Karp told Bloomberg Law that the firm expects its 2021 revenue to grow by more than $250 million, reaching a total of $1.75 billion.
“All the indications are pointing quite strongly in the direction of continued robust activity [in 2022], especially for the elite law firms in the country,” Karp said in October. “I can’t see anything that is looming that would change the trajectory that most big law firms are on right now.”
Only Wachtell Lipton Rosen & Katz, Davis Polk & Wardwell, and Kirkland & Ellis have topped the $6 million profits per partner mark.
Kirkland & Ellis reported a 16% increase in revenue to $4.8 billion in 2020, bringing its profits per equity partner up to $6.2 million and its annual compound growth rate to 11.7% for the past decade.
If the firm continues to increase revenue at that rate, it could reach $16 billion by 2031, and partners would earn an estimated $15.3 million.
—Spinoff data visualization from ANALYSIS: YTD Spinoff Deal Count Is the Highest Since 2011 by Grace Maral Burnett.