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Seesaw staffing: The optimal leverage ratio in law firms

Leverage has an inverted U-shaped relationship with performance in diversified law firms, reveal Amit Karna, Ansgar Richter and Monika Schommer

29 October 2014

One of the most pervasive features of the modern law firm is its size, reflecting past growth. Take Baker & McKenzie and DLA Piper, the largest law firms in the world by revenues. Formed in 2005 by a merger, DLA joined the billion-dollar club in 2006 and boasted US$2.48bn in revenues in 2013. Baker's growth took place over a longer period of time, but is impressive nonetheless: today it is even larger than DLA Piper, having recorded revenues of US$2.54bn in the past financial year. Both firms have invested heavily in international expansion, with offices in growth markets such as China, South Africa and United Arab Emirates.

Modern law firms are not alone in this respect. In fact, firms in some other professional service sectors have grown much faster. Even the largest law firms in the world pale in comparison to some of the integrated accounting and auditing organisations. As an illustration, the combined global revenues of the ten biggest law firms only mak...

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