Why Joe Biden Was the Best President for Big Law’s Bottom Line

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at how US presidents may or may not impact Big Law financial performance. Sign up for Business & Practice, a free morning newsletter from Bloomberg Law.

US presidents have historically been credited and blamed for a lot of things they don’t totally control. Gas prices, foreign wars, and post-Watergate Justice Departments are just a few examples.

We are not above spurious correlations here at Big Law Business. Today, I’m going to add to the list: Joe Biden was the best president for Big Law’s bottom line in decades.

Biden’s bid for a second term in the White House, of course, ended in failure. Some criticized him for failing to tout his accomplishments. Big Law’s record profits may not have been on their list, but listen here, Jack: Top firms have raked in cash at a record rate over the past four years.

The 100 largest US law firms are projected to grow revenue more than 40% during Biden’s four-year term. The average equity partner at those firms will have seen profits soar by roughly 50% since the president was elected. That’s based on data from The American Lawyer, and Wells Fargo’s legal banking group.

The profit growth would be the best on record during a four-year presidential term since at least as far back as George W. Bush’s second term. (That’s the furthest back I can gather the AmLaw data.)

The data likely tells us very little about how a president’s policies impact law firm demand. But it does show that law firms are an incredibly resilient business, and they are likely to perform well no matter who is in the White House.

Big Law revenue grew 46% during Bush’s second term, from 2004 to 2008, narrowly topping the 43% gain seen under Biden. Still, the current commander in chief won where it matters most. Profits during Bush’s second term, which included the run up to the global financial crisis, rose only 31%.

Big Law partners, give it up for Joe. Maybe this is why they chipped in so much money to Kamala Harris’ campaign after Biden’s vice president replaced him at the top of the ticket in the race against Donald Trump. (I know. It’s not.)

The US Federal Reserve deserves much of the credit for Big Law’s early success in the Biden era. Biden oversaw arguably the greatest financial year ever for US law firms in 2021, when rock-bottom interest rates fueled deal activity.

Remember the SPAC boom? Investors might wish they didn’t, but it was a good run for law firm partners.

The top 100 firms grew revenue in 2021 by nearly 15% while profits per equity partner expanded by 19%. That’s the best performance on both scores since at least 2002. It could be shattered in Biden’s last year on the job.

Profits rose 21.5% through the first three quarters, according to Wells Fargo. Biden only needs that figure to grow about 7% to have the best post-2000 four-year presidential term by PPP standards. It’s a safe bet.

Revenue is projected to grow more than 13%—a figure only seen in 2021 and 2007—meaning Biden could have the first- and second-best annual revenue figures under his belt, too. (At least in the timeline of this analysis.)

What may be described as a rise in “complexity” has boosted demand for litigation services. Federal Trade Commission Chair Lina Khan has made no small list of opponents, but Big Law partners will miss her when she’s gone. There’s nothing like the challenge—and billable hours—that come with antitrust lawsuits.

A signature Biden legislative victory has also spurred demand for lawyers’ time.

The Inflation Reduction Act has funneled money toward green energy investments. Energy markets are complex, highly regulated, and suck in vast amounts of capital. They’re also a a lawyer’s delight and appear poised to continue a hot streak.

That brings us to the next four years.

If past is prologue, lawyers can expect a second Trump presidency to provide healthy gains. Big law revenue rose 28% and PPP jumped 34% during his first term.

I’m reluctant to make broad predictions, since Trump has promised that this term will be different than his first in many ways.

Profitability may be challenged if law firms end up hiring the throng of former government lawyers reportedly looking for private practice jobs. Those people won’t come with books of business. In these polarized times, some may carry a threat of retribution from clients.

Projections for next year are mostly optimistic. Continued interest rate cuts are likely to spur momentum in important practices, including M&A, according to a report from Citi’s law firm banking group and Hildebrandt Consulting. Practices that ran hot this year—litigation, regulatory, funds/investment management, bankruptcy—are expected to continue performing well.

More reason for optimism: Big Law has fared better, on average, under Republican presidents (37% revenue growth, 33% PPP growth) than Democrats (23% revenue growth, 27% PPP growth) since 2002.

That’s mostly due to the prolonged slump the industry suffered during Obama’s terms, the post-financial crisis years.

Trump boasts plans to undo many of his predecessor’s accomplishments. Besting Biden’s performance on Big Law finances is something lawyers of all political stripes can root for.

Worth Your Time

On Gibson Dunn: The firm earned more than $5 million in one year for helping Texas in a longstanding legal battle over the state’s foster care system brought by a class of children, Ryan Autullo reports.

On Trump: Firms with ties to Trump are positioning themselves to influence policy while those heavily tilted toward Democrats retool, Justin Henry reports.

On Law Firm Mergers: I spoke with Kent Zimmermann, a principal at law firm consultancy Zeughauser Group, on how Big Law leaders negotiate billion-dollar mergers.

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