AmLaw 100 and 200 overview: State of the law firm industry (2014)

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Gross revenue across the AmLaw 100 grew by a solid 5.4 percent year-on-year, the fastest rate since 2010. The top 10 firms, however, account for 25.7 percent of AmLaw 100 total, and are growing 1.5 times faster than the rest of the pack. The AmLaw 200 are outpacing the AmLaw 100 in revenue per lawyer and profit per partner.

See more details on how the country's top firms are faring, including how gross revenue, profits and rate of growth vary by specialization, geography and firm size.

More on law firm trends and their impacts on real estate strategy at http://bit.ly/1nN51Y8

Published in: Law, Career

AmLaw 100 and 200 overview: State of the law firm industry (2014)

  1. 1. Top firms remain drivers of growth, although not all fared as well June 20142014 AmLaw 100 & 200 overview
  2. 2. AmLaw 2014 overview
  3. 3. AmLaw 2014 key findings • Gross revenue across the AmLaw 100 grew by a solid 5.4 percent year-on-year, the fastest rate since 2010. In turn, this brought gross revenue to another new high: $77.4 billion. The AmLaw 200 hit $19.0 billion, growing at 2.7 percent, half the rate of AmLaw 100 growth. - The top 10 firms in terms of gross revenue overall raked in $20.2 billion, or 25.7 percent of the AmLaw 100 total. Compared to last year, this represents an increase of 40 basis points. 17.3 percent of AmLaw 200 gross revenue was concentrated in the top segment of the market, indicating a more even distribution. - These top 10 firms posted profit growth of 8.3 percent year-on-year, 1.5 times faster than the AmLaw 100 average of 5.4 percent. Year-over- year growth averaged 4.9 percent in 2012. On the other hand, the top tier of the AmLaw 200 posted slower-than-average gross revenue growth over the year. - The top 10 firms in terms of gross revenue increase grew on average by 12.5 percent, 2.3 times faster than the AmLaw 100 average and more than 4.0 times faster than the middle of the pack. The top 10 in the same metric last year saw profits rise 8.2 percent. This was more exaggerated in the AmLaw 200, with the same segment of the spectrum averaging year-over-year growth of 20.0 percent. - Outside of gross revenue, the AmLaw 100 and 200 posted slower growth than in previous years: - Profits per partner barely nudged, up just 0.2 percent from 2012 to $1.5 million. For the AmLaw 200, this metric was up by 0.7 percent, but only reached $701,310. - Revenue per lawyer decreased by 0.4 percent to $840,963. The AmLaw 200 posted far faster growth in comparison – 2.5 percent – although RPL for these firms was $626,784. • This mixed bag of results indicates segmentation of the top 100 law firms nationally. While revenues are up, this comes on the heels of growth in the uppermost segment of the industry, while the near lack of growth in RPL and PPP signals, at minimum, stagnation in the middle segment and lower end of the market. In general, the AmLaw 100 saw more unequal growth than the AmLaw 200, but both groupings lack uniform improvements. • Large law firms are witnessing cost pressures increasing. Real estate pricing in law firm-heavy submarkets, particularly in major markets, are up significantly. Class A asking rents are up 4.7 percent year-on-year in Midtown Manhattan, 3.0 percent in the Chicago CBD, 4.8 percent in Downtown Los Angeles, 5.6 percent in San Francisco and 4.6 percent in the Boston CBD. Similarly, salaries for lawyers already stand at $131,990 nationally, breaking $150,000 easily in top law markets. Real estate and labor are the primary costs incurred by law firms and are likely to rise more in the coming years. 2 Source: JLL Research, American Lawyer
  4. 4. AmLaw 100 posting faster gains in gross revenue; AmLaw 200 outpacing in revenue per lawyer and profit per partner… 3 Source: JLL Research, American Lawyer +5.4% +2.7% AmLaw 100 Gross revenue AmLaw 200 Gross revenue -0.4% +2.5% AmLaw 100 RPL AmLaw 200 RPL AmLaw 100 PPP AmLaw 200 PPP +0.2% +0.7%
  5. 5. …although AmLaw 100 revenue and profits are significantly higher in all categories $77.4 $19.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 AmLaw 100 AmLaw 200 4 Gross revenue ($ billions) Revenue per lawyer Profits per partner $840,963 $626,784 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 AmLaw 100 AmLaw 200 $1,500,000 $701,310 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 AmLaw 100 AmLaw 200
  6. 6. AmLaw 100 gross revenue jumped 5.4 percent to $77.4 billion, a record high and fastest growth since 2010 $31.1 $35.1 $38.1 $41.7 $46.0 $50.9 $56.8 $64.5 $67.3 $64.4 $67.4 $71.4 $73.4 $77.4 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Grossrevenue($billions) 5 Source: JLL Research, American Lawyer
  7. 7. AmLaw 100 gross revenue was distributed highly unevenly, with the top 10 roughly equaling the bottom 75 $200.0 $700.0 $1,200.0 $1,700.0 $2,200.0 $2,700.0 1 10 20 30 40 50 60 70 80 90 100 Grossrevenue($billions) AmLaw 100 rank 6 Source: JLL Research, American Lawyer Top 10 25.7% of AmLaw 100 revenue 11-25 48.1% of AmLaw 100 revenue 26-100 26.2% of AmLaw 100 revenue
  8. 8. Revenue was more evenly distributed among the AmLaw 200, with only 17.3 percent concentrated in firms rankekd 101-110 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 101 110 120 130 140 150 160 170 180 190 200 Grossrevenue($billions) AmLaw 200 rank 7 Source: JLL Research, American Lawyer – 10th and 11th-ranked firms tied in reveune Top 11 17.3% of AmLaw 100 revenue 12-25 18.2% of AmLaw 200 revenue 26-100 64.5% of AmLaw 200 revenue
  9. 9. Rank Firm Gross revenue Year-on-year revenue growth Change in AmLaw 100 ranking 1 DLA Piper $2,481,000,000 1.7% - 2 Baker & McKenzie $2,419,000,000 4.6% - 3 Latham & Watkins $2,285,000,000 2.7% - 4 Skadden $2,235,000,000 1.1% - 5 Kirkland & Ellis $2,016,000,000 4.1% - 6 Norton Rose Fulbright $1,904,000,000 - - 7 Jones Day $1,766,000,000 2.9% 1 8 Hogan Lovells $1,717,500,000 5.2% 1 9 Sidley Austin $1,601,000,000 7.5% 1 10 White & Case $1,440,000,000 4.1% 1 Top 10 AmLaw 100 firms $19,864,500,000 8.3%* - All other AmLaw 100 firms $57,535,500,000 4.5% - AmLaw 100 overall $77,400,000,000 5.4% - The highest-grossing AmLaw 100 firms are growing 1.8x faster than the remaining 90 AmLaw 100 firms 8 Source: JLL Research, American Lawyer – Norton Rose’s addition increases top 10’s earnings; for top nine, increase is 3.5 percent
  10. 10. Rank Firm Gross revenue Year-on-year revenue growth Change in AmLaw ranking 101 Sutherland $310,000,000 -1.4% -3 102 Shook Hardy $308,500,000 -2.7% -4 103 Cozen O’Connor $306,500,000 -1.3% -2 104 Husch Blackwell $302,000,000 7.1% +6 105 Fox Rothschild $301,000,000 8.7% +6 106 Wilson Elser $300,000,000 2.4% -1 107 Ballard Spahr $299,000,000 -0.3% -4 108 Akerman $298,000,000 4.4% - 109 Baker Donelson $297,000,000 7.2% +2 110 Chabourne $282,000,000 -2.9% -4 110 Womble Carlyle $282,000,000 -0.7% -1 Top 11 AmLaw 200 firms $3,286,000,000 1.9% - All other AmLaw 200 firms $15,715,000,000 2.8% - AmLaw 200 overall $19,001,000,000 2.7% - On the other hand, the highest-grossing AmLaw 200 firms posted slower year-on-year growth than the AmLaw 200 average 9 Source: JLL Research, American Lawyer
  11. 11. +12.5% +3.1% -8.3% 10 fastest-growing AmLaw 100 firms saw gross revenue jump 2.3x faster than AmLaw 100 average 10 Source: JLL Research, American Lawyer Change in gross revenue year-on-year among 10 fastest-growing firms in the AmLaw 100 Gross revenue growth of middle sector of the AmLaw 100 Change in gross revenue year-on-year among 10 slowest-growing firms in the AmLaw 100
  12. 12. +20.0% +2.0% -11.3% Meanwhile, the disparity is greater in the AmLaw 200: fastest- grossing firms growing 7.4x faster than average 11 Source: JLL Research, American Lawyer Change in gross revenue year-on-year among 10 fastest-growing firms in the AmLaw 200 Gross revenue growth of middle sector of the AmLaw 200 Change in gross revenue year-on-year among 10 slowest-growing firms in the AmLaw 200
  13. 13. Rank Firm Profits per equity partner Year-on-year growth 1 Wachtell $4,755,000 -4.4% 2 Quinn Emanuel $4,485,000 1.1% 3 Cahill Gordon $3,780,000 6.3% 4 Sullivan & Cromwell $3,675,000 6.5% 5 Paul Weiss $3,620,000 8.1% 6 Cravath $3,290,000 -4.2% 7 Kirkland & Ellis $3,280,000 0.9% 8 Simpson & Thacher $3,165,000 18.8% 9 Boies Shiller $2,975,000 9.2% 10 Gibson Dunn $2,945,000 4.8% Top 10 AmLaw 100 firms $3,597,000 3.7% AmLaw 100 overall $1,470,022 0.2% New York-based firms dominate profits-per-partner rankings; top segment on the up despite flat growth across the AmLaw 100 12 Source: JLL Research, American Lawyer
  14. 14. Rank Firm Profits per equity partner Year-on-year growth 1 Irell $3,355,000 -1.9% 2 Munger Tolles $1,770,000 13.1% 3 BuckleySandler $1,705,000 -5.3% 4 Choate Hall $1,670,000 12.8% 5 Curtis Mallet-Prevost $1,610,000 2.2% 5 Jeffer Mangels $1,610,000 3.9% 7 Patterson Belknap $1,575,000 3.6% 8 Lowenstein Sandler $1,495,000 3.5% 9 Kasowitz $1,450,000 -14.7% 9 Loeb & Loweb $1,450,000 -3.3% Top 10 AmLaw 200 firms $1,767,000 1.4% AmLaw 200 overall $701,310 2.5% Irell far surpasses the rest of the AmLaw 200 in terms of profits per partner, highest PPP firms are seeing below-average growth 13 Source: JLL Research, American Lawyer
  15. 15. Business litigation; corporate, energy and real estate law; M&A; and tax-specializing firms lead AmLaw 100 RPL growth… 18.0% 14.9% 13.4% 10.9% 9.6% 9.4% 9.1% 8.1% 7.5% 7.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% Quinn Emanuel Simpson Thacher Shearman & Sterling Vinson & Elkins Proskauer Polsinelli Fried Frank Willkie Cravath Dorsey & Whitney Revenueperlawyeryear-on-yearchange 14 Source: JLL Research, American Lawyer Business litigation Business litigation/ corporate services Litigation/ international work Energy, environ., M&A, restructuring Corporate, M&A, real estate, tax, litigation Corporate, real estate, investment, M&A Varied Corporate, litigation, M&A, VC, bankruptcy Corporate, internat’l, tax, antitrust Self-described specialties Corporate, litigation
  16. 16. …although 10 AmLaw 100 firms saw revenue per lawyer shrink by at least 3.9 percent -8.6% -7.8% -6.6% -6.3% -5.4% -5.4% -4.9% -4.2% -4.2% -3.9% -10.0% -9.0% -8.0% -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% O'Melveny Jenner & Block Locke Lord Wachtell Fish Richardson Kilpatrick Townsend K&L Gates Finnegan Edwards Wildman Weil Revenueperlawyeryear-on-yearchange 15 Source: JLL Research, American Lawyer
  17. 17. -5.7% The contraction in RPL among AmLaw 100 firms, despite strong top-firm growth, indicates muted gains in the middle of the pack 16 Source: JLL Research, American Lawyer +10.8% Change in revenue per lawyer year-on-year among 10 fastest- growing RPL firms -0.4% AmLaw 100 overall revenue per lawyer change since 2012 Change in revenue per lawyer year-on-year among 10 fastest-contracting RPL firms
  18. 18. A similar trend emerged in the AmLaw 200, with more of a focus on intellectual property 79.9% 14.9% 11.8% 9.9% 8.4% 8.3% 8.3% 8.0% 7.9% 7.8% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Robins Kaplan Shumaker Munger Tolles McElroy Deutsch Dinsmore Choate Hall Goulston & Storrs Strasburger Patterson Belknap Kenyon & Kenyon Revenueperlawyeryear-on-yearchange 17 Source: JLL Research, American Lawyer Litigation, antitrust, intellectual property Corporate, intellectual property, trusts Corporate, litigation, real estate, labor, tax Varied Corporate, labor, intellectual property, regulatory Varied Litigation, tech, M&A, finance Energy, varied Varied Self-described specialties Intellectual property
  19. 19. Declines in RPL were more prominent among the AmLaw 200 than the AmLaw 100; 15 saw decreases of more than 1.0 percent -12.4% -10.2% -8.4% -7.2% -5.4% -3.4% -3.1% -3.0% -2.7% -2.5% -2.4% -2.4% -2.3% -1.8% -1.1% -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% Revenueperlawyeryear-on-yearchange 18 Source: JLL Research, American Lawyer
  20. 20. +8.5%* +2.4% -3.4% Compared to the AmLaw 100, the middle of the pack played a larger role in AmLaw 200 RPL growth 19 Source: JLL Research, American Lawyer – *excludes Robins Kaplan’s 79.9 percent increase Change in revenue per lawyer year-on-year among 10 fastest-growing RPL firms AmLaw 100 overall revenue per lawyer change since 2012 Change in revenue per lawyer year-on-year among 10 fastest-contracting RPL firms
  21. 21. 53.7 percent of AmLaw 100 gross revenue came from firms headquartered in New York, DC, Chicago and Los Angeles… 20 Atlanta: $2,319.0 Boston: $3,545.0 Chicago: $9,701.5 Cleveland: $540.0 Dallas: $726.0 Houston: $1,539.5 Indianapolis: $344.0 Source: JLL Research, American Lawyer (figures in $ millions) Kansas City: $324.5 Los Angeles: $7,148.0 Miami: $1,230.5 Milwaukee: $644.5 Minneapolis: $778.0 New York: $18,973.0 Philadelphia: $3,571.5 Pittsburgh: $2,234.0 Richmond: $1,154.5 San Francisco: $3,614.5 Seattle: $635.5 St. Louis: $643.0 Washington, DC: $5,760.0
  22. 22. …even though they are home to only half of all AmLaw 100 firms Rank Market Number of AmLaw 100 HQs Gross revenue of HQ-ed firms 1 New York 25 $18,973,000,000 2 Washington, DC 10 $5,760,000,000 3 Chicago 8 $9,701,500,000 4 Los Angeles 7 $7,148,000,000 5 Boston 6 $3,545,000,000 5 Philadelphia 6 $3,571,500,000 7 Atlanta 4 $2,319,000,000 8 San Francisco 5 $3,614,500,000 9 Houston 3 $1,539,000,000 10 Dallas 2 $726,000,000 10 Minneapolis 2 $778,000,000 10 Pittsburgh 2 $2,234,000,000 10 Richmond 2 $1,154,500,000 14 Cleveland 1 $540,000,000 14 Indianapolis 1 $344,000,000 14 Kansas City 1 $324,500,000 14 Miami 1 $1,230,500,000 14 Milwaukee 1 $644,500,000 14 Seattle 1 $635,500,000 14 St. Louis 1 $643,000,000 21 Source: JLL Research, American Lawyer
  23. 23. Law firm mergers are also keeping pace with 2013; YTD 2014 at one quarter of 2013 levels 60 70 53 39 60 60 88 22 0 10 20 30 40 50 60 70 80 90 100 2007 2008 2009 2010 2011 2012 2013 2014 Lawfirmmergers 22 Source: JLL Research, Altman Weil
  24. 24. Employment and economy
  25. 25. Legal employment key findings • Legal services employment growth continues to be below average, posting growth of only 0.4 percent year-on-year, just one-quarter of the total non- farm growth rate: 1.6 percent. Law firms increasingly seek to maximize employee productivity and efficiency, which has lowered potential job growth in this subsector. - This is not a new trend, as legal services has yet to see improvements since averaging 12-month growth of around 40,000 jobs in the 1980s. This rate was halved in the 1990s and has seen an even sharper decline in the 2000s and 2010s. • From a geographic perspective, legal services employment is highly concentrated in key markets. The top 10 markets, all of which have more than 20,000 legal services employees, account for 32.7 percent of the subsector’s jobs. - Interestingly, these markets witnessed a combined net loss of 1,000 legal services jobs, while 5,000 were created outside of major markets, indicating a geographical diversification of legal services employment. - Secondary markets such as Miami, Philadelphia, Silicon Valley, Charlotte and Pittsburgh are posting gains in legal services employment, while many others (Houston, Seattle and Denver, for example) saw no net new legal services jobs year-on-year. • Looking at occupation, lawyers and paralegals combined represent 83.0 of those who work in law-related occupations. The largest fields outside of these two are title examiners and abstractors, other legal support and magistrate judges and magistrates. 24
  26. 26. Legal services employment growth across the country continues to be muted, well below average compared to the 1980s and even the 1990s -60.0 -40.0 -20.0 0.0 20.0 40.0 60.0 80.0 12-monthnetchange(thousands) 25 Source: JLL Research, Bureau of Labor Statistics 1980s average: +40,200 jobs 1990s average: +13,100 jobs 2000s average: +7,400 jobs 2010s average: +2,400 jobs average year-on-year growth
  27. 27. Nationally, legal services is growing at only one-quarter of the rate as the economy as a whole 26 Source: JLL Research, Bureau of Labor Statistics +0.4% 12-month % change in legal services jobs +1.6% 12-month % change in total non-farm jobs
  28. 28. While other traditional industries are also seeing below-average growth, law is even slower 0.4% 0.7% 1.1% 2.0% 3.6% 4.3% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% Legal services Financial activities Accounting Management of companies PBS overall Management and consulting 12-month%change 27 Source: JLL Research, Bureau of Labor Statistics U.S. average (+1.6%)
  29. 29. Market Legal employment 12-month change New York 75,400 -1,300 (-1.7%) Los Angeles 48,700 +500 (+1.0%) Chicago 47,300 -600 (-1.3%) Washington, DC 46,400 -100 (-0.2%) Philadelphia 38,600 +900 (+2.4%) Boston 24,400 -1,000 (-3.9%) Houston 23,800 +0 (+0.0%) Atlanta 23,700 -100 (-0.4%) Miami 22,500 +800 (+3.7%) Dallas 21,200 -100 (-0.5%) Top law markets 372,000 -1,000 (-0.3%) Rest of U.S. 765,400 +5,000 (+0.7%) U.S. overall 1,137,400 +4,000 (+0.4%) While major markets still hold a significant portion of legal services employees, a few markets are seeing net gains 28 Source: JLL Research, Bureau of Labor Statistics Markets with more than 20,000 people employed in legal services Around one in three legal services employees is in a top market
  30. 30. Secondary law markets are posting increases in legal services employment, however 29 Source: JLL Research, Bureau of Labor Statistics Philadelphia: +2.4% Miami: +3.7% Silicon Valley: +2.9% Austin: +1.3% Charlotte: +4.7% Baltimore: +2.4% Pittsburgh: +0.7%
  31. 31. Occupation Employment Annual mean wage Lawyers 592,670 $131,990 Paralegals 271,320 $51,170 Title examiners et al 53,640 $47,340 Other support 45,700 $61,560 Magistrates et al 27,190 $105,380 Court reporters 19,200 $54,760 Administrative judges 14,270 $89,360 Judicial law clerks 10,890 $53,890 Arbitrators et al 6,830 $76,840 U.S. overall 1,041,700 $99,620 From an occupational standpoint, lawyers and paralegals represent around 83.0 percent of those in legal occupations 30 Source: JLL Research, Bureau of Labor Statistics Lawyers Paralegals and legal assistants Title examiners and abstractors Other legal support workers Magistrate judges and magistrates Court reporters Administrative law judges Judicial law clerks Arbitrators, mediators and conciliators
  32. 32. Lawyers’ salaries in nearly all large markets exceed the national average $169,340 $165,690 $164,620 $158,430 $156,640 $151,510 $144,970 $144,000 $140,050 $135,710 $131,990 $131,860 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 $180,000 Annualmeanwage 31 Source: JLL Research, Bureau of Labor Statistics
  33. 33. Office landscape
  34. 34. Rental growth is fastest in CBD Class A space, which disproportionately affects law firms compared to other industries 33 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2010 2011 2012 2013 2014 Averageaskingrents($p.s.f.) Class A (CBD) Class A (suburban) Class B (CBD) Class B (suburban) Class C (CBD) Class C (suburban) Source: JLL Research
  35. 35. Additionally, the premium for Class A space increased to $4.97 per square foot during the first quarter 34 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 2010 2011 2012 2013 2014 ClassApremium($p.s.f.) Source: JLL Research
  36. 36. Demographics and technology are driving productivity and utilization and the next evolution of office space use 35 15% space reduction by U.S. law firms and financial services relocating 72% of global CREs plan to aggressively increase density in next 3 years 150 Square-foot-per- employee average target density, down from 225 in 2009 50% of the U.S. workforce was baby boomers in 2010. Gen Y will be 50% by 2020 Source: JLL Research
  37. 37. Many of these changes show stark pre- and post-recession contrasts 36 Floor plates Floor plates are up from 25,000 square feet before the recession to 60,000 square feet. Personal space Before the recession, employees had around 300 s.f. per person; now they have 200 s.f. Interaction Employees have gone from rarely running into others to a nine-in-ten change of bumping into a coworker. Building features Aesthetic and building features such as increased roof heights and floor-to-ceiling windows are “in.” Source: JLL Research
  38. 38. And, as a result, law firms are shifting 37 15.2% Giveback by law firm across the U.S. when relocating 20.5% Giveback by law firm across the top seven U.S. markets when relocating 24.7% Giveback by law firm across DC when relocating • Going digital • Elimination of law libraries • One-sized fits all office • Higher administrative ratios • Migration to glass boxes • Migration to long and lean • Migration to smaller floorplates Source: JLL Research
  39. 39. New supply coming to market is slowly increasing, but still well below historic norms 38 0 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000 140,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Completions(s.f.) Average annual completions Source: JLL Research
  40. 40. And while the vast majority of new product is top-quality, most of it is now coming to the suburbs rather than CBDs 39 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 2010 2011 2012 2013 YTD 2014 YTDcompletions(s.f.) Class A (CBD) Class A (suburban) Class B (CBD) Class B (suburban) Class C (CBD) Class C (suburban) Source: JLL Research
  41. 41. COPYRIGHT © JONES LANG LASALLE IP, INC. 2014 Find more insights at jll.com. >>> Click to see current law firm trends and their impact on real estate strategy.

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