Flywheel Effect; M&A Value vs. Volume; PE Stake in Firms

Law.com examined the AmLaw 100 over the last 25 years, as part of the recent release of the 2026 AmLaw 100 (Who Pulled Away, Who Dropped Off_ The Am Law 100 Through the Years Andrew Maloney, Law.com, 4/16/26).  A few observations:

·      The pace of growth has increased dramatically.  At the beginning of the century, it took more than a decade for the revenue of the top-ranked firm to double.  Most recently, Kirkland doubled its revenue in just five years (from $4.83B in 2020 to $10.5B in 2025).

·      Increased segmentation.  Twenty-five years ago, the Top 50 firms were much closer together in revenue.  The standard deviation (how far a data set spreads from its mean) has grown more than tenfold since then.

·      Size matters.  As firms increase their size, they are able to make larger gains more rapidly because of compounding. 

As an example, consider two firms, one that generates $500M a year and one that generates $1B.  Assuming they each increase collected rates by 5% annually over the next 5 years, today's $1B firm will end up $138M ahead of today's $500M firm. 

Firm A - $500M starting point

• Year 0: $500M

• Year 1: $500M × 1.05 = $525.0M

• Year 2: $525M × 1.05 = $551.25M

• Year 3: $551.25M × 1.05 = $578.81M

• Year 4: $578.81M × 1.05 = $607.75M

• Year 5: $607.75M × 1.05 = $638.14M

• Total growth over 5 years: +$138.14M

Firm B - $1B (or $1,000M) starting point

• Year 0: $1,000M

• Year 1: $1,000M × 1.05 = $1,050M

• Year 2: $1,050M × 1.05 = $1,102.5M

• Year 3: $1,102.5M × 1.05 = $1,157.63M

• Year 4: $1,157.63M × 1.05 = $1,215.51M

• Year 5: $1,215.51M × 1.05 = $1,276.28M

• Total growth over 5 years: +$276.28M

In other words, the $500M firm falls further behind, even though it "performed" equally as well.  This structural advantage also allows for greater investment by the $1B firm in high-performing laterals and technology, which would further increase the delta.

Legal industry observers often caution against growing for growth's sake but the illustration above suggests that there is significant value in exploring large group hires, acquisitions, and mergers that otherwise meet strategic objectives.

M&A Value vs. Volume

According to preliminary figures from the London Stock Exchange Group, Q1 2026 global M&A volume remains down sharply year-over-year, but total deal value registered above $1 trillion, driven by a surge in mega-deals.  As of March 3/23/26, "deal count for Q1 2026 represented a 20% dip from the same time period last year which was a 1.4% decline from 2024, which was a 13.8% decline from 2023... On the flip side, deal value has steadily climbed. Overall, deal value in the first quarter of 2026 is up 93% since the same period in 2023" (With Deal Inventory in Question, 'Warning Signs' in Big Law Appear, Patrick Smith, Law.com, 3/30/26).

Two adds from conversations with partners: (1) mid-market M&A has stayed consistently strong over the past 2–3 years; and (2) the Q1 ’25 slowdown tied to rapid policy shifts and regulatory uncertainty did not reduce annual volume—it shifted it into Q2.  Hearing similar expectations around Operation Epic Fury potentially compressing Q1 ’26 into Q2 again.

PE Stakes in Law Firms

There is significant buzz around private equity (PE) investing in law firms through managed services organizations.  Historically, law firms have not been attractive to PE for several reasons:

·      it is challenging to make big changes to law firm management and overall strategy (as any innovation-minded law firm leader would attest);

·      law firms do not have predictable recurring revenues;

·      partners can leave with clients at any time, without restriction.

In fact, only 13 years ago, one buyout executive noted that law firm deals were “not attractive”, due to “wretched partnerships” that moved at a “palaeolithic pace" (Inside Private Equity's Law Firm Fishing Expedition ("Fishing Expedition"), Becky Pritchard, Law.com, 4/16/26).

Three developments have made law firms more attractive targets at present:

·      Movement toward performance-based compensation;

·      More centralized, corporate-style governance;

·      Greater recognition that law firm revenue is highly predictable, even if not contractually recurring.

Additionally, PE has successfully invested in accounting firms in recent years (Fishing Expedition noting "1,000 accountancy firms worldwide had received private equityinvestment over the past decade—with a significant uptick in activity from 2022").  Observers note that accounting firms were attractive to PE due to their "embedded clients."  Accounting firms often have an advantage over law firms in embedding client relationships, as their work typically spans multiple functions beyond the GC’s office—particularly across finance leadership—creating more institutionalized ties.  Further, the right of clients to choose their counsel and the corresponding prohibition on law firm non-competes make clients relatively more mobile, despite firms’ efforts to institutionalize the relationship past one or a handful of partners.

That said, PE capital could allow firms to introduce real long-term alignment—equity, deferred comp, or similar structures—that make leaving economically expensive for partners, even if not legally restricted.  Depending on how such arrangements are structured, partners may also have the opportunity to participate in future liquidity events. In some cases, those proceeds could receive capital gains treatment, though outcomes would vary based on the specific structure and applicable tax rules (Fishing Expedition; but see also The Law Firm Disrupted_ Can PE Funding Unlock Partners' Golden Handcuffs, Dan Packel, Law.com, 3/16/26,for contrary view that PE funding could actually increase partner mobility, providing departing BigLaw partners with the capital and infrastructure to start their own firms).