DRAFT: Non-equity vs equity Partner analysis
Introducing a non-equity tier doesn't guarantee instant growth
Paul, Weiss are perhaps the most talked about example of an AM Law firm that has recently adopted a non-equity Partner tier, but they are not the only one. Several firms have introduced non-equity tiers in the last few years; Cravath did so in late 2023, while Paul, Weiss, WilmerHale, and Cleary Gottlieb all announced 2 tier models in 2024.
Despite all adopting a non-equity around the same time, the levels of growth have varied firm by firm. Paul, Weiss appear to be an outlier, with a significant increase in revenue and Partner numbers since adopting the 2 tier model.
| Firms that recently introduced non-equity tier (growth since adopting) | Revenue | Profit per equity Partner | Partner headcount |
|---|---|---|---|
| Paul, Weiss | +32% | +15% | +46% |
| Cleary Gottlieb | +14% | +16% | +15% |
| Cravath | +9% | +13% | +10% |
| WilmerHale | +7% | +5% | +0% |
Paul, Weiss have dramatically grown their Partner numbers since adopting the 2 tier model, so have presumably focused on increasing their non-equity rank.
The elite firms still on a 1 tier model have seen slower growth than some peer firms with well established non-equity tiers
87% of the AM Law 100 now have 2 tier Partnership models. Only a handful of firms at the upper end of the AM Law still have a solely equity tier, so how is this affecting their growth amongst some of their peer firms?
With the AM Law top 15 becoming increasingly competitive, how much longer can Skadden, Ropes & Gray, and Jones Day hold off introducing a non-equity tier?
| Elite firms still with 1 tier (growth since 2021) | Revenue | Profit per equity Partner | Partner headcount |
|---|---|---|---|
| Skadden | +21% | +19% | +6% |
| Ropes & Gray | +28% | +15% | +10% |
| Jones Day | +18% | +11% | +3% |
| Well established 2 tier firms (growth since 2021) | Revenue | Profit per equity Partner | Partner headcount |
|---|---|---|---|
| Kirkland & Ellis | +46% | +25% | +43% |
| Gibson Dunn | +43% | +62% | +23% |
| Paul Hastings | +42% | +43% | +28% |
However, there are still firms without non-equity Partners reporting strong financial metrics
Wachtell Lipton ($9m) and Davis Polk ($7.8m) boast some of the highest profits per equity Partner on the market and firms like Taft (+69%) and Williams & Connolly (+64%) have significantly grown annual revenue.
Interestingly, we recently looked at lateral partner retention rates among AM Law 100 firms and found that Davis Polk had 100% retention of laterally hired Partners (between 2020-2024), while Taft retained 94% of its lateral hires. Perhaps the 1 tier models and strong financial metrics are key to their strong retention of lateral hires.
Thompson Coburn sample - firms with a presence in St. Louis
| Sample of firms (growth since 2021) | Revenue | Profit per equity Partner | Partner headcount |
|---|---|---|---|
| Thompson Coburn | +22% | +1% | +10% |
| Husch Blackwell | +48% | +19% | +16% |
| Armstrong Teasdale | +11% | -13% | -32% |
| BCLP | -2% | -4% | -14% |
Written using publicly-available data from Pirical Legal Professionals (PLP)
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