Ineffectual control of European law firm costs in 2005: their profits rose more than 20 percent

BDO Stoy Hayward benchmarked profit per partner at leading law firm in eight European countries, as reported in the Fin. Times, Jan. 16, 2006 at 19. Median profits per partner jumped from €337,900 ($410,000) in 2004 to €406,300 ($493,000) in 2005 – more than 20 percent! The article credits “the return in big-ticket M&A work,” better management in firms, as well as high fee-earner leverage. Leverage ratios in Italy, for example, average 6.4 non-partner lawyers for every partner. For all the haranguing and hand-wringing about holding the line on outside counsel fees, the campaign has faltered at the dare I say high end in Europe.

What might further surprise most Americans, who only hear about Magic Circle firms, is that the Italian law firms are far and away the most profitable. Their partners average €800,000 ($971,000) compared to median UK partner profits of €529,800 ($643,000).

Finally, litigation accounts for the plurality of legal spend on this side of the pond; in Europe last year, however, M&A and banking transactions accounted for 49 percent of the German firms’ work.