State of the Legal Market; Lateral Partner Hiring; Golden Handcuffs
Profits per equity partner (PEP) grew 11.6% in 2024, one of the strongest PEP performances in recent years, according to the State of the Legal Market Report by Georgetown University Law Center and Thomson Reuters (2025 Report on the State of the U.S. Legal Market (“Report”), Jim Jones - Lead Author, 1/7/25) (analyzing data through Nov. 2024 from 184 US-based law firms, including 51 Am Law 100 firms, 52 Am Law Second Hundred firms, and 80 Midsize firms); see also Profits Surge Across Big Law Tiers, but Am Law 50 Segmentation Accelerates, Andrew Maloney, 1/29/25, American Lawyer) (Wells Fargo Legal Specialty Group survey results show PEP growth of 16.9% among the AmLaw 200).
According to the Report, profit growth was the result of both worked rate growth (6.5%) and demand growth (2.6%). The Report predicts that demand growth will "likely weaken" in 2025, not because of economic headwinds but simply because it is difficult for the legal industry to register significant growth year after year (Report). Although 2024's 2.6% demand growth registered on top of an already strong 2023, firms averaged only 0.1% annual demand growth from 2007 to 2023 (Report).
The Report explains that demand grew across practices and across segments in 2024, regardless of firm size:
Midsize firms saw demand growth increase over 2023, as "price-conscious clients flowed from Am Law 100 firms to Midsize firms";
The AmLaw 100 notched a two-percentage point increase in demand growth compared to 2023; when combined with worked rate growth, this demand growth led to double digit growth in fees worked for this segment; and
The Second Hundred "nearly match[ed] Am Law 100 firms in fees worked despite lagging nearly three percentage points in worked rate growth."
Lateral Partner Hiring
According to a recent whitepaper by Leopard Solutions, lateral partner hiring teams at AmLaw 200 firms and regional firms are growing, due to increased internal demand for strategic acquisitions and revenue growth (Unlocking Success in Lateral Partner Hiring ("Leopard Report"), Leopard Solutions, Dec. 2024) (surveying 93 law firm recruiting professionals from the AmLaw 200 and Midsize Firms). Over the last two years, 56% of firms surveyed reported an increase in the size of firm teams dedicated to lateral partner hiring; 38% indicated their teams stayed the same, and only 6% reported a decrease in team size (Leopard Report).
Respondents reported 14.59 lateral partner hires per firm on average, during the preceding 12 months (Leopard Report, surveying in Fall 2024). Over half of these lateral partner hires were sourced by external recruiters (58%), and 37% from internal referrals. Regardless of source, all partner hires (and the many other partner candidates who were considered but not hired) fell on recruiting teams that were already stretched thin, often balancing lateral partner hiring with associate and law student hiring (Leopard Report).
When asked what qualities their firm prioritizes in assessing lateral partner candidates, 93% of respondents selected book of business and client base, while only 4% referenced leadership skills and mentoring.
Golden Handcuffs
Some firms are making greater use of deterrents to discourage lateral partner movement, including deferred compensation, forgivable promissory notes, and longer gardening leave and capital repayment periods (Law Firms Turn to 'Golden Handcuffs' to Rein in Partner Movement ("Golden Handcuffs"), Andrew Maloney, American Lawyer, 1/24/25). That said, law firm compensation consultant Blane Prescott notes that longer capital repayment periods are often due to a firm being undercapitalized vs. an effort to punish departing lawyers. Prescott also notes that broad-based deterrent policies are still limited to a minority of firms who usually have other significant cultural problems that are making partners want to leave (Golden Handcuffs).
