Kirkland’s Remarkable Growth Has Lit a Fire Under Its Competition

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at how Kirkland’s growth has driven the intense competition for talent among law firms. Sign up for Business & Practice, a free morning newsletter from Bloomberg Law.

Two years ago, I wrote a column asking law firm leaders to consider what the competitive landscape would look like in 2027.

The column used a simple, status quo analysis to show that by next year, only one law firm, Latham & Watkins, will generate half as much revenue as Kirkland & Ellis. The analysis led to a simple conclusion: No law firm hoping to compete with Kirkland can afford a decade like the last one.

Kirkland’s growth hasn’t been the end of competition. It has been fertilizer for it.

When I wrote the column, Kirkland’s revenue had grown at an annualized rate of 13.5% over the 10 years ending in 2023. That put the firm on pace to cross the $12 billion revenue mark in 2027.

But Kirkland has exceeded that pace. After 20% growth for consecutive years, the firm is set to cross the $12 billion threshold this year. Hitting that target will require about 13.5% growth, a rate the firm has eclipsed in six of the past nine years.

Still, something noteworthy has happened with the competitors. A group of highly profitable firms have become more aggressive in responding to market conditions. They have adjusted their compensation systems, changed their partnership structures, and leaned into hiring important partners to make their firms stronger.

The result is that Kirkland’s growth hasn’t made competitors irrelevant. Instead, it has driven strategic changes that have made the industry more dynamic than ever.

“There is some very strategic and intentional thinking that has been part of a much more serious growth effort at some firms,” said Kent Zimmermann, a partner at the law firm consultancy Zeughauser Group. “They are recognizing that their relative size and profitability compared to rivals is important.”

Kirkland’s closest competitor, Latham & Watkins, has stepped up its performance over the past two years, matching Kirkland’s revenue growth rate over that time.

Latham’s prominent position advising on the buildout of artificial intelligence data centers spurred its growth last year. It has made a huge investment in its bankruptcy practice, and it has opened up a recruiting pathway from the world’s most profitable firm, Wachtell.

At Davis Polk, meanwhile, the firm has made good on a promise chair Neil Barr made two years ago. He said then that his firm was going to lean into the lateral market to advance strategic priorities amid what he saw as a consolidating industry.

Davis Polk added an asset management team from Debevoise; launched practices such as sports and emerging companies; and opened a Los Angeles office. The firm’s 26% revenue growth last year topped all Wall Street competitors, AmLaw reported.

Simpson Thacher & Bartlett has also stepped into overdrive. It has invested in its equity partnership, added a sports practice, and poached one of Kirkland’s top partners to start a capital structure solutions practice.

Gibson Dunn & Crutcher moved up the revenue rankings last year and has been on an impressive growth streak under chair Barbara Becker.

Paul Hastings, which grew revenue 20% last year, has been adding talent at one of the fastest clips in the industry, driven by the recruiting efforts of chair Frank Lopez.

These law firm leaders are acting fast in a hyper-competitive market changing as quickly as they can blink.

To drive home the point that firms can’t afford to fall too far behind any rivals, chairs at some firms have shown their partners financial models of what another decade of the status quo would look like, Zimmermann said.

The analysis makes it clear: “It’s no time to take the foot off the gas,” he said.

Worth Your Time

On Kirkland: The firm is poised to hire a Wachtell partner known for his liability management transactions.

On Mergers: Hogan Lovells and Cadwalader partners formally adopted their merger, creating a firm expected to generate $3.6 billion in revenue, Justin Henry reports.

On Sidley: Sidley Austin hired partner Ellen Park, marking another partner
departure from the storied Wall Street firm Cravath Swaine & Moore this year, Meghan Tribe reports.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.