The American Lawyer tabulates worlds most valuable firms Kirkland amp Ellis tops the table with estimated valuation at close to 4 billion

Published on:

12 Dec 2012, 11:33 pm

2 min read

Popular legal website The American Lawyer (Am Law) has come up with a ranking of the world’s highest-grossing law firms. Out of the 97 firms which make the cut, 33 firms have been evaluated at more than $1 billion. The firms have been ranked on the basis of “value” and “Value per Partner”, with Kirkland & Ellis topping the Value table at $4 billion and Quinn Emanuel Urquhart & Sullivan topping the list of value per partner with each equity partner holding an effective stake worth $17 million.

The top 10 firms ranked by value are available below:

The entire list can be seen here.

Am Law explains the methodology used to create the ranking list as follows:

Value = Cash flow x (Size multiple + Revenue growth multiple + Profit growth multiple + Brand strength multiple)

Where

CASH FLOW: The profit generated by a law firm, once the cost of providing all equity partners with a fixed salary was deducted. For our ranking, this equates to half of the firm’s “net income” — the total profit currently distributed among equity partners each year.

SIZE MULTIPLE: This varies, depending on a firm’s annual revenue. Firms were given a multiple of 4 for revenues of less than $500 million; 4.5 for $500 million to $1 billion; 5 for more than $1 billion.

REVENUE AND PROFIT GROWTH MULTIPLE: The size of this multiple varies, depending on average annual growth in revenue and net income since the 2009 fiscal year. Firms received multiples of 0.5 for growth in either revenue or net income of between 0-5 percent; 1 for increases of 5-10 percent; 1.5 for increases of 10-20 percent; and 2 for increases of over 20 percent. Average declines in either profit or revenue of more than 5 percent each resulted in a 0.5 multiple deduction. Years in which mergers resulted in extraordinary increases were not included.