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.
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The American Lawyer reports that more than 3,100 lateral partners moved between Am Law 200 firms in 2019, with corporate partners accounting for 25% of those moves, according to recent data released by ALM Intelligence. The total is 14.5% higher than last year’s lateral total of 2,754, largely as a result of an improved methodology used to collect this year’s data, which affects the year-over-year comparison. Over the past two decades, the number of lateral partner moves, tracked by The American Lawyer since 2000, has ranged from just above 2,000 to more than 3,000 a year, the article adds.
The article reported that at least 580 corporate partners joined the ranks of the Am Law 200, while 469 departed, which adds up to a net gain of 111 partners. Litigation partners accounted for another quarter of the past year’s laterals. Banking and Finance partners were the third-most-transient practice, comprising nearly 14% of all laterals. Interestingly enough, given the warnings of a recession, bankruptcy attorneys were the least transient, accounting for just a small fraction of the year’s lateral moves, at 2.4%, ALM Intelligence reports.
According to the report, Philadelphia-based Fox Rothschild saw the greatest percentage growth via lateral moves, as its partnership ranks grew by 60, or roughly 18%, on the back of 102 lateral hires, offsetting 42 departures. The firm has been growing steadily since it first cracked the Am Law 200 in 2015, the article notes. Additionally, the article noted that Winston & Strawn saw the greatest net defections among the Am Law 200, losing 52 partners and adding 17, for a net loss of 35, (as quoted in The American Lawyer).
Nearly three-quarters of Am Law 200 firms have had a lateral partner leave within the past five years due to an issue with personality or law firm culture, according to data released by ALM Intelligence. A lawyer’s business is easier fixed than their character, notes Polsinelli’s CEO Chase Simmons. And while there’s no one lateral partner who can affect a law firm’s revenue numbers on their own, a toxic partner could ruin a firm’s culture, he adds. “Culture is more permanent. Everything derives from the culture,” Simmons says. “If you mess with that, the dollars aren’t going to follow.”
“Law firms are constantly on the hunt for top talent, and they have recently began building programs focused on lateral integration. The reasons for doing so are interconnected. For one thing, firms use their programs as a selling point in their recruitment efforts. They also lead to better retention rates. Nearly every law firm The American Lawyer spoke with for this story touted a higher five-year retention rate than the 60% average that ALM Intellection reported last year among Am Law 200 firms,” (as quoted in The American Lawyer).
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The American Lawyer reports that 2019 was a record-breaking year for law firm merger announcements and represented a “solid year of growth” for completed mergers, according to recent data collected by two legal industry consultancy firms tracking law firm tie-ups. Altman Weil, which tracks law firm merger announcements, announced that last year’s 115 combinations broke the record set by the U.S. legal industry in 2018, which saw 106 announcements. Additionally, another report by legal consultancy firm Fairfax Associates, which counts combinations once they are completed, announced that firms completed 59 mergers in 2019. While this is lower than the 71 mergers counted in 2018, it is still higher than the historical average of 54 mergers per year recorded between 2009 and 2018, Fairfax notes.
Two of the largest merger announcements from 2019 took effect the first day of the new year: Taft—the result of Cincinnati-based Taft Stettinius & Hollister merging with Minneapolis-based Briggs & Morgan—and Lathrop GPM, the offspring of Kansas City, Missouri-based Lathrop Gage and Minneapolis-based Gray Plant Mooty. Aside from Taft and Lathrop GPM, ten more law firm mergers are scheduled to close in the first quarter of 2020, Fairfax reports. This includes Dentons’ combinations with Indianapolis-based Bingham Greenebaum Doll and Pittsburgh-based Cohen & Grigsby as well as the pending marriage of Minneapolis-based Faegre Baker Daniels and Philadelphia-based Drinker Biddle & Reath, (as quoted in The American Lawyer).
The majority of mergers in 2019 continued to be small combinations, with eighty-five percent of the mergers involved firms between five and 20 lawyers, Fairfax reports. “We are continuing to see firms anywhere from 100 lawyers to 600 to 700 lawyers feel like they need more scale in order to compete effectively,” notes Lisa Smith, a principal at Fairfax Associates. “I think we’ll continue to see consolidation in the form of laterals and groups or small acquisitions or mergers of equal size. Consolidation is going to continue to be big in 2020,” she adds. Additionally, Zeughauser Group consultant Kent Zimmermann notes law firms are competing hard for talent. Deciding to scale up and merge can give a law firm a deeper bench and greater revenue, which can mitigate and ward off the poaching of top talent by other firms, (as quoted in The American Lawyer).
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The American Lawyer reports that the U.S. law firm industry had another strong year in 2019 and revenues for 2020 are predicted to continue growing at a healthy rate, according to a new report from Citi Private Bank’s Law Firm Group and Hildebrandt Consulting. The report found that after a slow start to the year, firms progressively improved their financial performance, and are expected to grow revenues between 5.5% and 6.5% over the course of the full year.
As in other post-recession years, the primary driver of revenue growth was an increase in billing rates, rather than demand growth, the report revealed. During the first nine months of 2019, billing rates had the highest growth rate since before the recession, growing by an average of 4.7 percent. By contrast, demand grew far less than in 2018 at a rate of 0.9 percent. The most significant impact on revenue growth was the continued trend of a lengthening of the collection cycle, which was largely driven by clients delaying payment of their bills, the report revealed.
The report also identified an active lateral recruiting market as a key trend in 2019, combined with a majority of firms hoping to grow the size of their equity partnership in the coming years.“The success rate of laterals has improved. In the past, half the laterals weren’t really accretive to the firm,” explains Brad Hildebrandt, Chairman of Hildebrandt Consulting. “But firms have become much more cautious about who they’re hiring.”
The key reason for the better success rate is even greater rigor on the lateral hiring process, Hildebrandt argues. Firms are aligning hiring with their overall strategy, improving their due diligence, and working harder to integrate new partner hires. “This eagerness to add talent at the top of the leverage pyramid will likely continue, with 61% of leaders surveyed saying they aim to add equity partners in the next two years,” Hildebrandt adds.
“Looking ahead, we expect that the most successful firms will continue to expand and innovate—despite ongoing geopolitical and macroeconomic uncertainty and volatility, and a challenging talent market. For those firms, expansion will be closely aligned to the firm’s business strategy—more so than pursuing opportunistic growth,” Gretta Rusanow, Head of Advisory Services at Citi Private Bank concluded. “For many firms, the steps they are taking to do more with existing clients and broaden their client base, focus on growth practices, industries and regions, and introduce further efficiencies in the way they deliver legal services will go a long way to ensuring that 2020 is a successful year.”
See highlights from the full article on The American Lawyer.
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The American Lawyer reports on law firm financial performance for the first nine months of the year, concluding that for the first time this year, law firm revenue growth outpaced expense growth, according to a recent report by Citi Private Bank’s Law Group. The Citi results, based on a sample of 190 firms including members of the Am Law 200 and boutiques, showed that revenues grew at 5.1% for the first nine months of the year, compared to 4.1% from just the first half. The bulk of that increase stems from higher rates, which grew 4.7%, compared to demand, which grew 0.9%.
“While the first nine months of 2019 saw slower revenue growth than we saw through the same period in 2018, there are several positive trends in the results. Demand growth continued to gain momentum. Rate growth has been strong. Expense pressure has moderated, easing margin pressure. Dispersion and volatility remain but are less acute than we saw earlier in the year,” notes Gretta Rusanow, research co-author and head of Citi Bank’s advisory services. “Looking ahead, inventory levels are high. The biggest challenge to a strong year-end is the continued lengthening of the collection cycle. If firms are able to collect on strong inventory levels, 2019 should end well,” she adds.
The report also revealed that law firms headquartered in Chicago and the Midwest matched or exceeded the revenue growth across the legal industry for the first nine months of 2019. Law firms headquartered throughout the Midwest reported their revenue is 7.8% higher this year when compared to last year, the report found. “Demand is up 1.6%, which is higher than the industrywide average of 0.9%, and rates have gone up 5.8%—more than anywhere across the United States,” Rusanow notes.
“Chicago is one of the most popular legal markets in the country. From a revenue point of view, they’re matching where we’re at for the industry. On top of that, they’re sitting on pretty healthy inventory levels going into year-end,” Rusanow adds. “I’m pretty optimistic about what the top-line stories will be for Chicago through the end of the year,” (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
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Law firms continue to expand in lower-cost areas with large talent pools, while growth in dominant markets such as New York and Washington, D.C., has plateaued, according to a study released on The American Lawyer. The new report on legal employment and real estate trends found that the U.S. legal sector has continued to grow in emerging markets, where low business costs and talented millennial workers have attracted firms looking to expand, (as quoted in The American Lawyer).
The report also identified key markets for potential future growth based on legal industry labor and real estate costs—particularly for large firms looking to establish back offices outside their core markets. According to the article, Phoenix was the national leader in legal service employment growth, which includes lawyers, paralegals and administrative staff, with a 9.6% increase from last year. Following Phoenix was Austin, Texas, at 9.1%; Atlanta at 8.9%; Orlando, Florida, at 7.4%; and Dallas/Fort Worth at 5.1%.
“Law offices, in general, are at the point right now where they are really struggling with a profit vs. expense scenario,” notes Julie Whelan, CBRE’s head of occupier research. “Real estate is becoming even more expensive, especially in gateway markets, making it even more important for firms to be strategic in terms of location and size. In some cases, firms may decide to increase efficiency by going to a much smaller space—where they may be paying more per square foot for a smaller size,” (as quoted in The American Lawyer).
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The American Lawyer released its annual Global 100 report, a ranking of the world’s 100 largest law firms by gross revenue, profits per partner, and total attorney headcount. Overall, gross revenue grew by 8.1 percent to $114.2 billion, and profits per equity partner increased, on average, by 4.6 percent. Attorney headcount also saw an increase this year, with an annual growth of 5.7 percent. According to the report, law firm mergers, rapid growth among Chinese law firms, and a healthy American market coalesced to turn 2018 into a spectacular year.
The report revealed that a total of 46 firms cracked the $1 billion mark, up from 34 firms two years ago. Of those 46 billion-dollar firms, United States accounted for 77 of the world’s top-grossing firms, followed by 12 from the United Kingdom, and five from China. Additionally, this is the fourth time in the history of Am Law’s global ranking that U.S.-based firms occupied the top five spots. The top five firms in their respective order were Kirkland & Ellis, Latham & Watkins, Baker & McKenzie, DLA Piper and Skadden Arps.
“Globally, most key practice areas were subject to brisk demand. The merger and acquisitions environment was active, albeit stronger in some markets than others. Disputes work, particularly international litigation and arbitration, kept practitioners busy. And an anticipated dip in investigations did not materialize, with sanctions, the Foreign Corrupt Practices Act and money laundering matters dotting the headlines. Other factors, beyond growing demand, also helped boost the numbers including two significant mergers between U.S.-based firms and two significant trans-Atlantic mergers: Nelson Mullins combination with Broad and Cassel and Hunton & Williams merger with Andrews Kurth Kenyon on the domestic side, and the creation of Womble Bond Dickinson and Bryan Cave internationally,” (as quoted in The American Lawyer).
See the full rankings and highlights from The Global 100 on The American Lawyer.
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The American Lawyer published results from its annual Midlevel Associates Survey, finding that “third-, fourth- and fifth-year associates are as happy than ever at their law firms.” The survey, conducted at 96 participating law firms, asked third-, fourth- and fifth-year associates to rate their firms on several aspects of job satisfaction, including: compensation and benefits; training and guidance; interaction with partners and other associates; interest and satisfaction level with the work; the firm’s policy on billable hours; and management’s openness about firm strategies and partnership chances. Midlevels graded their workplaces in these categories on a scale of 1 to 5, with 5 being the highest score.
According to the report, associates in their third, fourth and fifth years gave an average composite score of 4.29 out of 5, an increase from last year’s average of 4.27. “Associate satisfaction grew in nearly every category lawyers were asked to rate. The results bode well for retention, in particular. The greatest improvement in average score was in the “expect to stay two years” category, rising to 4.18, compared with 4.12 last year. Midlevel associates are also happier on average with regard to the type of work they’re doing and the training they are getting. The average score for “interesting work” was 4.51, up from 4.47 last year, and the average for “satisfying work” was 4.39, up from 4.37. Scores for “training and guidance” and “partner relations” increased by similar margins, to 4.24 and 4.45, respectively,” (as quoted in The American Lawyer).
“Young lawyers appreciate law firms’ efforts to improve work-life balance, the report revealed. Training and mentorship also appear to be working well for firms that have made efforts to improve in those areas. But associates also cautioned their firms in some cases throughout the survey, warning that burnout is a risk and calling on leaders to continue to modernize their business models by moving away from longstanding billable hour policies,” the article reports. Of the 96 firms surveyed, the top five firms in terms of midlevel associate satisfaction in numerical order were Schulte Roth & Zabel, Paul Hastings, Drinker Biddle & Reath, O’Melveny & Myers, and Blank Rome.
See highlights from the full article on The American Lawyer.
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The American Lawyer released its annual A-List rankings of the top 20 “most well-rounded” law firms in the United States. According to the report, law firms are ranked based on a combination of financial and cultural factors including revenue per lawyer, pro bono commitment, racial diversity, associate satisfaction and percentage of female equity partners.
Munger Tolles ranked No. 1 on this year’s A-List. Climbing from last year’s No. 3 spot, the firm moved up due to high scores in revenue per lawyer, pro bono work, and number of female equity partners. Wilmer Cutler remained in the No.2 spot, improving in four of five categories. Slipping from 1st place last year, Ropes & Gray landed spot No. 3, declining across all categories. Washington, D.C.-based Buckley jumped nine spots to move onto this year’s A-List at No. 17, improving in three of the five categories, most notably associate satisfaction.
New firms added to this year’s A-List rankings included Hughes Hubbard & Reed (No.11), Gibson Dunn (No.13), and Buckley (No.17). A few firms on the list made last year’s Top 20 but faced short comings in vital areas, forcing them off in 2019. Those three firms included Akin Gump (No. 23), Patterson Belknap (No. 29), and Jenner & Block (No. 30).
Additionally, The American Lawyer released a list of the next 20 A-List firms (No. 21-40), The A-List Runners-Up. Washington D.C.-based Williams & Connolly jumped 35 spots to land 21st place, due to high scores in associate satisfaction, revenue per lawyer, and female equity partners. Appearing for the first time on this list, Proskauer Rose claimed 25th place, thanks to large improvements in associate satisfaction and female equity partners. Cravath Swaine & Moore jumped 16 spots to land 26th place, improving across all categories, particularly in revenue per lawyer, diversity and pro bono.
See highlights from the full article on The American Lawyer.
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