The American Lawyer released a recent report, conducted by LexisNexis’ legal pricing data service, CounselLink, which revealed that large law firms continue to dominate high-rate work and firm discounting is on the rise as clients reexamine their relationships during the pandemic in 2020. Now in its seventh year, CounselLink’s Trends Report is based on data derived from $35 billion in legal spending comprised of almost seven million invoices and more than 1.7 million matters. According to the report, the country’s largest 50 law firms, which each have more than 750 attorneys, earned 62% of invoice amounts billed last year in three combined categories: mergers and acquisitions; corporate, general and tax; and finance, loans and investments.
Additionally, the report found that partner billing rates for lawyers at the largest 50 firms, which have more than 750 lawyers, are 51% higher than those of partners in firms with 501-750 lawyers. And partner billing rates in firms with 201-500 lawyers are 29% higher than those for partners in firms with 101-200 lawyers. “I don’t think people realize how strong the correlation is between the size of the firm and the rates,” notes Kris Satkunas, Director of Strategic Consulting for CounselLink and author of the Trends Report. “Firms slightly smaller than the “largest firms” category, ones with head counts of 501-750 lawyers, have an opportunity, she added, as clients look for high-quality legal work at a lower cost.”
Five major cities showed rate growth of 4% or more over the last year, and over the last 3 years, the report notes. The biggest growth spurts in attorney rates for the last year were in New York City (6.9%), Boston (5.9%), San Francisco (5.7%), Washington, D.C. (5.2%) and Chicago (4.7%). Each of the five cities saw attorney rates grow at or above 4% in both annual rate growth and compound annual growth rate over the last three years. On the opposite side of the spectrum, three cities saw hourly growth rate below 3% in both metrics: Miami, Minneapolis, and Phoenix.
As clients reexamine relationships with their law firms this year during a recession, Satkunas said the industry may see more discounted bills. And the CounselLink data is bearing that out. The report found a trend of increased discounting in the past few months of 2020, with more than 16% of bills discounted in May, a threshold normally crossed only at the end of the year. However, Satkunas added she was hopeful that more firms will work with clients to adopt alternative fee arrangements, which have grown in popularity in recent years. In 2019, 12.1% of matters were billed with an alternative fee arrangement, up from 9.2% two years ago, and she said there is now an opportunity for firms and clients to be more creative, (as quoted in The American Lawyer).
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Law firms had their best revenue growth in the first half of the year since the recession, with 5.5 percent growth in the first six months of 2018. That’s up from 4.9 percent in the first half of 2017, and the outlook continues to look good for rest of the year, according to a new report released by Citi Private Bank’s law firm group. In addition to revenue growth, law firm demand increased by 2 percent and lawyer billing rates increased by 4.5 percent. According to the report, improved demand (total timekeeper hours) and lawyer billing rate increases were the main drivers of growth.
The Citi Private Bank’s report found that among the Am Law segments, size mattered, with Am Law 50 firms outperforming the other market segments in the first half of the year. Smaller, niche firms had slightly stronger revenue growth, at 6.9 percent, than at those in the top group. Their demand was up 1.6 percent, and billing rates up 3.6 percent. Firms that have a dispersed geographic reach saw the strongest revenue performance, reaching 8.1 percent. Firms that had fewer lawyers outside the United States did less well, underscoring the strategy of the largest multinational firms which have numerous offices and a phalanx of lawyers spread around the globe, (as quoted in The American Lawyer).
The analysis also adds, however, that upward pressure on expenses–particularly from recent salary increases–could drag down profits. “Looking ahead, the revenue outlook for the rest of 2018 is very positive, with a solid buildup in inventory heading into the third quarter. The industry will need this, given the upward pressure on expenses we expect to see in the second half of the year as firms absorb the recently announced salary increases, ” notes research co-author Gretta Rusanow, the group’s head of advisory services.
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer released a recent report, conducted by LexisNexis’ legal pricing data service, CounselLink, which revealed the gap between partner hourly rates for firms with 750+ lawyers and firms with 501-750 lawyers continues to grow. According to the report, the gap between the two groups widened by 11 percent over 2016, with the bigger firms now demanding a whopping 45 percent higher rate on average than their less gigantic counterparts.
The report also revealed rate increases were higher and more widespread than in previous years. The report showed that Seattle, Chicago, Los Angeles and Boston all rivaled New York for partner billing rate increases. The Big Apple firms still led the pack, with a 5.7 percent growth rate. But firms in those other cities experienced greater than 4 percent annual growth in their rates. Nationwide, partner rates increased an average of 3 percent, with Minnesota, Georgia, Oregon and California seeing the highest increases on a statewide basis, (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.