What About Wachtell? The Link Between Growth and Profits

Whenever law firm leaders tell me about their ambition to join the ranks of the 'global elite,’ I can't help but feel slightly uncomfortable.

I respect their drive, but I know that by talking about such a concept they are creating a problem for the media, and for me personally.

Because if everyone is talking about it, then we need to try to define it. While everyone thinks they belong to it, we’re left to determine who truly qualifies. Which firms make the cut? Who claims to make the cut but doesn't?

Even if we try to establish basic criteria—international reach, significant revenue, and high profit per partner—there are always outliers that challenge these assumptions.

The most obvious exception is Wachtell, Lipton, Rosen & Katz. Whenever we compile a list of large, profitable, and expansive firms to represent the elite, someone inevitably asks: what about Wachtell?

I'm Paul Hodkinson, Editor-In-Chief at Law.com International, bringing you this week's edition of The Global Lawyer.

Well, what about Wachtell?

The ultra-profitable, high-end New York M&A specialist arguably stands as the world’s most successful law firm, with average PEP of $8.5 million as proof. It feels remiss to exclude it from any rankings of elite global firms. The same applies to other highly-regarded, regionally-spread firms such as Cravath Swaine & Moore in the U.S., Slaughter and May in the U.K., and Hengeler Mueller in Germany.

Yet, there are two problems here. First, the term ‘global elite’ has taken on a different meaning—it does not necessarily signify the best firms, as the term suggests, but rather the most powerful. This creates confusion. If we’re speaking strictly about quality, a glance at the Global 100 ranked by PEP offers a pretty good starting point. These are the firms doing the most sophisticated deals that justify the high fees that convert to high profitability—with Wachtell consistently at the top.

The second issue is even more fundamental: focusing on relatively small but prestigious firms such as Wachtell presupposes that there is no inherent advantage to scale. So does size contribute to success in any meaningful way? This question remains central to the debate in the legal industry.

Many argue there is an advantage. They highlight the benefits of scale, such as a robust balance sheet that facilitates strategic lateral hires, and the ability to leverage experience in handling numerous similar mandates to attract new clients.

But what about the 265-lawyer Wachtell and its peers? Don’t they disprove this theory? Yes, but only if we look at the situation in a static, present-day context.

The real question should not be whether firm size and PEP are linked—which data shows is only weakly correlated—but whether revenue growth and PEP growth are interconnected.

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