Press Room

NEW YORK – Dec. 3, 2012 – The prospect of outside financing of law firms in the UK has given new urgency to a perennial industry question: How do you value a firm? ALM’s The American Lawyer addresses the challenge in its December issue, and online at americanlawyer.com, with a groundbreaking valuation study of the Global 100, its list of the world’s highest-grossing firms.

While acknowledging the options and ambiguities inherent in the process, The American Lawyer settled on a formula according to which the Global 100 have an average valuation of about $1 billion. Thirty-three firms exceed the average, topped by Kirkland & Ellis, with a valuation of $3,953,500,000; Latham & Watkins at $3,796,500,000; and Skadden, Arps, Slate, Meagher & Flom at $3,337,000,000. Nine other firms are valued at between $2 billion and $3 billion.

The study also calculates value per equity partner – each firm’s total value expressed on a per-partner basis. Quinn Emanuel Urquhart & Sullivan’s $17,680,000 VPP is clearly the leader, 36 percent above second-place Kirkland’s $12,965,000.

Three Global 100 firms – Fidal, J&A Garrigues, and McCarthy Tétrault – did not disclose the required profit data and were not part of the study.

Valuations were calculated by taking each firm’s net profit, making deductions by assigning equity partners with a notional salary, and then applying a multiple based on the firm’s size, average growth rates in revenue and profits, and brand strength.

The methodology was developed by The American Lawyer’s editors after discussions with more than 50 private equity and other investment professionals, merger and strategic consultants, and senior law firm personnel, including managing partners, chief financial officers, and treasurers.

“Valuing any business is as much an art as it is a science,” wrote The American Lawyer’s Chris Johnson. “Our work is intended to shed light on the issues an investor would face when analyzing a law firm target, and to paint a picture – albeit with a relatively broad brush – of how the market might be valued today.”

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