The ABA Journal reports that the legal services sector gained 4,500 jobs in January, with total employment surpassing the previous 10-year high set in November, according to recent data by the U.S. Bureau of Labor Statistics. The legal industry, composed of attorneys, paralegals, legal secretaries and others, climbed to 1,160,700 jobs last month. That’s an increase of 16,000 jobs from January 2019, when the legal services sector had 1,144,700 jobs, the report noted.
Additionally, a recent report by Citi Private Bank’s Law Group reported that 2019 was a year of solid growth for the legal industry. The Citi results, based on a sample of 201 firms including members of the Am Law 200 and boutiques, showed thatBig Law net income grew significantly in 2019, driven in part by the strongest billing rate increases since 2008 and stagnation in the number of equity partners. Citi’s quarterly flash report found that over 2019, revenue growth outpaced the increase in expenses at Big Law firms, due in part to a 4.5% increase in billing rates.
Gretta Rusanow, writing for The American Lawyer, adds there were, however, two factors that dampened revenue growth in 2019: a slight drop in realization and a longer collection cycle. We saw continued consolidation and dispersion with the majority of firms (58%) reporting demand growth, but with 42% of firms seeing a demand decline during 2019, it remains a challenging environment for many firms, (as quoted in The American Lawyer).
“We believe that 2020 will be another year of growth, albeit more modest than 2019. Demand growth continued to gain momentum in the fourth quarter. Rate growth has been strong. Year-end inventory levels are high, providing a strong basis for first-quarter collections. While we are likely to see continued dispersion driving further market consolidation, we expect average industry revenue growth of 5-6% in 2020, with profits per equity partner growth in the mid-single digits,” Rusanow notes.
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer reports on several key trends for midsize law firms heading into 2019, according to a recent article featured in Am Law’s latest Mid-Market Report. In the article written by Alan Tarter, he provides his thoughts on industry trends affecting mid-size law firms in the coming year based on his many years of experience as a managing partner and practicing lawyer. These trends include a heightened focus on cybersecurity, continued lateral acquisitions, cost-effective specialization, providing innovative programming to all team members, and greater collaboration between large and small firms.
According to the article, Tarter notes that midsize law firms, like their brethren at large firms, will continue to put an increased focus on mitigation of cyber risk through enhanced security, protocols and more sophisticated risk management. We will see greater use of outside risk management consultants working directly with mid- size firms to address new risks and gaps on coverages. In addition, competition for the best candidates has increased, so midsize firms will need to be even more creative in their offerings. Midsize firms will need to better exploit their value propositions to clients in order to attract laterals from larger firms, Tarter adds.
Tarter notes that an added value proposition of full-service, midsize firms is that they are able to fill in the gaps in the specialized legal needs of both larger firms and smaller firms. According to Tarter, larger clients will continue to gravitate to midsize firms for certain types of work. “Midsize firms are in a unique position to provide more cost-effective, efficient services in matters not requiring large firm infrastructures. For example, midsize firms may be in a better position to provide more cost- effective services in specialized areas such as construction law, office space leasing or IP prosecution where larger teams and multiple offices are typically not necessary. In-house clients are becoming aware of the advantages of using midsize law firms for legal work like this,” explains Tarter.
Tarter adds that midsize firms have a unique opportunity to lead the industry in developing innovative programming to enhance the professional development of employees. These types of programs will help midsize firms stand out from their competitors, and will aid in attracting and retaining employees. These programs should place a greater emphasis on the longer-term professional development of attorneys and other team members. With the goal of providing the most value-driven services to clients, firms of all sizes are also realizing the benefits of partnering with each other, Tarter notes. You will see greater collaboration between large firms and midsize firms in working on projects together where they can each do what they do best and provide better service to clients, (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
Certain Midwest and second-tier markets, in terms of population, have garnered particular interest from large law firms, especially those that serve middle-market clients, reports Lizzy McLellan of The American Lawyer. According to statistics from AmLaw’s latest NLJ 500 survey, the number of lawyers at NLJ 500 firms grew by 100 or more in each of the Washington State, Illinois, Minnesota and Michigan markets.
“There are a lot of firms that started out in the secondary, tertiary markets that now have offices in lots of other secondary, tertiary markets,” notes Mary K. Young of the Zeughauser Group. When those firms make entry to a new market, she adds, they often acquire or take from smaller local firms that would not have made it onto the NLJ 500 on their own, (as quoted in The American Lawyer).
David Barnard of Blaqwell Inc. also notes that small firms based in smaller markets are increasingly looking for merger opportunities. “Specialization is continuing. It’s no longer possible to do everything. It’s just too tough,” he said. So small practices have to choose their strengths and double down there. After doing that, he says, “the lawyers in those towns are combining so they can offer full service to local clients and maintain their livelihood,” (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer reports on a mistaken and dangerous belief pervading the current U.S. legal market: that it is consolidating as larger firms grow more quickly than the market by taking share from their smaller rivals. However, an in-depth analysis of Am Law data over the last 20 years reveals that in fact consolidation is not happening. Rather, worldwide revenue growth from larger firms expanding overseas has been mistaken for consolidation of market share.
In Am Law’s latest article, Debunking the Consolidation Myth, the authors argue that the mistaken perception of consolidation has driven firms to bulk up—by merging, acquiring and hiring laterally—to avoid being at a competitive disadvantage. Such moves are high-risk, disruptive distractions for leaders whose attention is better focused elsewhere. Despite the intense effort involved, they create no strategic advantage. Wise partner groups and firm leaders will see past the prevailing dogma and focus instead on optimizing the performance of organically growing businesses, (as quoted in The American Lawyer).
In a tightly argued analysis, the authors conclude that “Consolidation is not happening. The imperative for law firms to grow is groundless. Smaller firms that don’t expand internationally are not losing share; in fact, they’ve gained share through the Great Recession. The data could not be clearer. And yet we know that this simple truth will be ignored. Facts are an ineffective counterweight to long-held belief. It’s too bad. Running a U.S.-centered, organically growing law firm well is a strategy with enormous validity and tremendous potential for strong profit growth.”
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer reports that there’s plenty to look forward to in 2018, according to partners at two of the largest Am Law 100 firms. DLA Piper co-chair Roger Meltzer, for one, expects a rise in corporate transactional work due to “very robust capital markets” and an increase in M&A, including in the middle market. Ora Fisher, one of two vice chairs at Latham & Watkins and a member of the 2,280-lawyer firm’s executive committee, also expects good times to persist. “Assuming the global economy continues to grow, we see a whole lot of demand for our transactional practices and all the related practices that support them,” Fisher forecasted. In addition to transactional work, Fisher said she expects a rise in demand for complex trial litigation, white-collar criminal defense work, privacy and cybersecurity matters, and financial regulatory work globally (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer released a recent article reporting that a number of midsized law firms have doubled down on their commitment to secure, and deepen existing relationships with midmarket clients. According to the article, law firm leaders in the middle market segment, which generally includes businesses with $50 million to $500 million in annual revenue, agree deep-rooted relationships are extremely common among law firms that service midmarket clients.
Law firms with roots in major markets are also finding ways to prosper in middle-market locations. For some midsized firms, including Cozen O’Connor, Ballard Spahr and Fox Rothschild, that has spurred geographic expansion across the country. For others, like McCarter & English and Vorys Sater Seymour & Pease, it has meant doubling down in the region where they already have roots.
“Midmarket companies are normally always in growth mode, so as they’re growing there are opportunities to grow with them and expand the amount and type of work that you’re doing for them. They have the same sophisticated work that larger Fortune 1000 companies may have. The number of zeroes may not be the same, but the sophistication of the work is and the complexity of the matters are,” notes Cozen O’Connor’s CEO, Michael Heller.
ALM journalist, Lizzy McLellan concludes, “the perception of value often attracts midmarket clients to firms with a more affordable rate structure than the very top of the Am Law 100 offers. Sometimes that means a national Am Law 100 firm in the second 50, like Cozen O’Connor or Fox Rothschild. But it can also mean a midsize firm like Pryor Cashman or a regional Am Law 200 firm like McCarter & English.” McCarter & English’s chairman, Michael Kelly, notes “the big expensive firm gives them cover, but I can tell you with no uncertainty that we will do a better job with less cost.”
See highlights from the full article on the American Lawyer.
Contact Bill Sugarman for more information.
The “vast majority” of lawyers and staff from Houston-based IP boutique Novack Druce Connolly Bove & Quigg will be absorbed into the fast-growing Polsinelli, according to recent reports by The American Lawyer.
Polsinelli chairman and CEO Russell Welsh told The American Lawyer that acquisition by Polsinelli, which currently has just over 700 attorneys, will enhance their already “robust IP practice,” especially in the burgeoning area of post-grant patent reviews (as quoted in The American Lawyer).
Novak Druce, which had 140 attorneys in 2012, has been losing “a stream of partners to competitors,” The American Lawyer reports, including Drinker Biddle, Reed Smith, and Dykema Gossett. This mirrors the ongoing trend for intellectual property boutiques in the recent years, many of which have been struggling and have since been absorbed into or have had partners taken by mid-sized, full-service firms like Polsinelli.
Ranked the fast-growing firm for the seventh year in the row, Polsinelli has experienced continued success in their expansion efforts, with revenue rising 11.4 percent in 2015 (The American Lawyer). Their now-proven strategy is to concentrate growth in low overhead markets in order to compete for health care work and other “price-sensitive assignments.” Todd Dickinson of Novack Druce’s executive committee agrees with their method, telling The American Lawyer that Polsinelli utilizes a “Midwest sensibility about rates that’s client friendly.”
Intellectual property boutique Brinks, Gilson, & Leone lost four litigation partners to Midwest-based Barnes & Thornburg last week, according to The American Lawyer. This follows the recent trend for IP boutiques, many of which have either been absorbed by larger firms or have also had an unusually large number of partners depart.
John Gabrielides, one of the four partners that moved to Barnes, explained that they felt “limited in the services we could offer to our clients” at Brinks Gilson, and that joining a full-service firm “gives us a lot more flexibility and latitude” (as reported by The American Lawyer).
The world’s largest law firms are still feeling the heat from their stagnated approaches, as discussed in last week’s post. A report released by CounselLink concluded that firms with 201 to 500 attorneys–termed “large enough” firms–are “increasingly winning the market share at the expense of the largest U.S. law firms.”
CounselLink Strategic Consulting Director Kris Satkunas suggests that the success of these ‘large enough’ firms is generally due to lower billing rates (for similar levels of service) and the increased willingness to engage in AFAs, the ‘Alternative Fee Arrangements’ widely preferred by clients today. She reports that as a result, corporate clients are “finding the same value from this size law firm for less or at least more predictable costs–and that is driving the migration of legal work into this segment of the law firm market.”
This trend is exemplified in the recent layoffs by megafirm Reed Smith, a 1750+ attorney firm who laid off 45 lawyers and a “comparable” number of administrative staff in January 2016, according to their press statement. Sandy Thomas, the global managing partner at Reed Smith who gave the statement, blamed the layoffs on the “fundamental shift in the nature of the demand for, and the delivery of, legal services in recent years.”
Another ‘big law’ firm, global giant Dentons, (now, with a 6,600 employee headcount, the largest law firm in the world), has been the subject of skepticism for its continued ‘bigger is better’ growth philosophy. Jordan Furlong of global law firm consultancy Law21 argues that since there are already many multinational firms, “having dozens of offices and thousands of lawyers isn’t enough to set you apart, and I’m not sure if 80 offices and 8,000 lawyers will do it either” (as quoted in The American Lawyer).
Time will tell if “bigger really is better” for today’s law firms, but for now, all signs seem to point to an ideal amalgamation of factors for middle market firms to flourish.