The latest annual Hildebrandt/Citibank Client Advisory is out. We’ve posted about the Client Advisories before (see here and here).
You can read the whole report here.
Some highlights:
According to the Wall Street Journal, the economy added 200,000 jobs in December 2011, but the legal sector lost about 1,800. From December 2010 to December 2011, the sector lost approximately 2,700.
The American Lawyer magazine just published their annual survey of large law firm (AmLaw 200) leaders. Some key findings:
Despite the economy, 73% are optimistic about their firm’s future in 2012.
Transactional practices at these firms continue to struggle. Only about 20% are expecting to see any revenue growth in this area.
A majority (58%) are expecting only modest (less than 5%) profit increases for 2012.
54% reported that clients refuse to pay for work of first and second year associates.
75% used contract lawyers in 2011 (up from 55% last year). 37% outsourced work to lawyers managed by third parties (up from 25% last year). 28% outsourced work to non-lawyers managed by third parties, (a two-fold increase over last year).
With a continuing emphasis on greater efficiency, firms are increasingly expecting their lawyers to have project management skills. One respondent said that, in order to succeed, it is not enough to have excellent legal skills, “you also must be able to manage teams and a budget, interact with people, and anticipate your clients’ needs.” There is also an increased importance placed on the skill of developing new business (it is no longer enough to just maintain existing client relationships).
89% are expecting to add lawyers in 2012 through a combination of lateral and entry-level hiring. However, only 29% are expecting a larger first-year associate class in 2012 (though that is up from 13% in 2011). 74% are expected to hire lateral corporate partners. 82% are expecting to add lateral litigation partners.
Only 14% reported deferring starting dates in 2011, compared to 46% in 2010.
The well-known legal business consulting firm Hildebrandt Baker Robbins just published a report of its Peer Monitor Index, which includes information about key law firm business metrics for July – September of 2011.
We’ve regularly blogged about the Peer Monitor system before, but to refresh you , it is a service that allows law firms to access their peers’ financial data (in the aggregate) in exchange for supplying their own data to the system for others to access (on a normalized and aggregated basis). There are 35 Am Law 100 firms, 35 Am Law 200 firms and 30 NLJ 250 firms in the system. You can find more information about the Peer Monitor system here.
You can read a summary of the report here.
Among other things, the report shows that demand for legal services continues to grow, though the rate of growth has slowed. At the same time, expenses have continued to increase as has the rate of that increase. Part of the explanation for the increase in expenses is that new attorney hiring has increased (as it has been doing for the previous three quarters) in anticipation of growing demand.
The report warns: “While firms have been hiring, however, demand has slowed as the year has progressed, widening the gap between law firm capacity and available work. Whether this trend continues will depend on the performance of the broader economy and whether we see continued recovery in litigation and transactional work.” Stay tuned.
Citi Private Bank recently surveyed its customers, which include many of the largest law firms in the country and its results were similar to those of Hildebrandt and Wells Fargo (which are the subjects of our previous two blog posts).
Both demand and revenue are up slightly, but so are expenses. Headcount remained flat, which suggests lawyers are working a bit harder.
Citi’s report states:
[T]he economy appears to be in for a protracted period of slow growth or no growth, given the systemic issues it is facing. . . . It’s hard to see any way that this environment is good for law firms in the short term. There’s a good chance that M&A, private equity, and IPO work will slow as companies and investors seek some clarity before doing deals, and a spike in litigation seems unlikely.
Since the pie is not getting any bigger, one of the only ways for firms to grow is by cutting into their competitors’ slices. Accordingly, Citi predicts, “top-performing firms will seek to leverage their market advantage to buy talent for their weaker practice areas” just as “rainmakers at underperforming firms” are exploring the job market for other opportunities.
The American Lawyer’s AmLawDaily just wrote about results of a Wells Fargo survey that supports the findings of the Peer Monitor we blogged about a little over a month ago.
While there was a wide divergence of results, on average, net income, revenue, and profits per partner were up slightly at the nation’s largest law firms.
The survey also found that there is more litigation work.
In discussing the survey results, a Wells Fargo managing director predicted that growth will slow for the second half of 2011, but that it will still end up being a better year than 2010 overall.
The full survey results, which were collected by Wells Fargo Wealth Management’s Legal Specialty Group, are not available, but you can read the AmLawDaily report about them here.
By the way, for those of you think you may be headed to biglaw or are considering it, you ought to consider subscribing to the AmLawDaily enewsletter. There’s a free limited access version, which you can sign up for here.
The well-known legal business consulting firm Hildebrandt Baker Robbins just published a report of its Peer Monitor Index, which includes information about key law firm business metrics for April – June of 2011.
We’ve regularly blogged about the Peer Monitor system before, but to refresh you , it is a service that allows law firms to access their peers’ financial data (in the aggregate) in exchange for supplying their own data to the system for others to access (on a normalized and aggregated basis). There are 35 Am Law 100 firms, 35 Am Law 200 firms and 30 NLJ 250 firms in the system. You can find more information about the Peer Monitor system here.
You can read a summary of the report here.
Among other things, the report shows that — very much in line with how the overall economy performed in Q 2 — the market (at least for large law firm legal services) gained a bit for the third quarter in a row. However, the “soft patch” that the economy recently hit is causing law firms to “prepar[e] for continued uncertainty and monitor[] headwinds and risk factors.”
Bottom line: “While the law firm market continues to show gradual improvement, growth is still well below historical averages, and a myriad of cautionary factors remain in place, including client rate pressures and
rising costs.”
For those of you interested in working for a law firm after graduation, Prof. Bill Henderson has a must-read piece in the ABA Law Journal, which has the uplifting title “Law Job Stagnation May Have Started Before the Recession-And It May Be a Sign of Lasting Change.”
The article states that “massive structural shift[s]” are happening in the legal industry and that they are the result of long-term trends like increased use of technology and globalization. The Great Recession accelerated the pace of change, according to Prof. Henderson, but was not its root cause, which means that change is here to stay –even after the economy fully recovers.
Here’s a key quote:
Whether BigLaw lawyers, boutique specialists or solo practitioners, U.S. lawyers can expect slower rates of market growth that will only intensify competitive pressures and produce a shakeout of weaker competitors and slimmer profit margins industrywide. Law students will find ever-more-limited opportunity for the big-salary score, but more jobs in legal services outside the big firms. Associates’ paths upward will fade as firms strain to keep profits per partner up by keeping traditional leverage down.
Interesting article in the Recorder reports that the job market for experienced associates in Silicon Valley firms has been picking up steam. However, the article states that the job market for brand new lawyers, unfortunately, currently remains “tight.” Still, it’s good news because its a sign of an improving economy overall, which will eventually produce a positive effect on the entry level market.
The well-known legal business consulting firm Hildebrandt Baker Robbins just published a report of its Peer Monitor Index, which includes information about key law firm business metrics for January – March of 2011.
We’ve regularly blogged about the Peer Monitor system before, but to refresh you , it is a service that allows law firms to access their peers’ financial data (in the aggregate) in exchange for supplying their own data to the system for others to access (on a normalized and aggregated basis). There are 35 Am Law 100 firms, 35 Am Law 200 firms and 30 NLJ 250 firms in the system. You can find more information about the Peer Monitor system here.
You can read a summary of the report here. You can read the whole thing here.
Among other things, the report shows that — very much in line with how the overall economy performed in Q 1 — the market (at least for large law firm legal services) gained a bit for the second quarter in a row. However, challenges remain. Growth is “constrained,” realization rates [i.e., the percentage difference between time spent on a matter and the amount of time for which the client actually paid] remain “low,” and expenses [which firms did a great job of cutting in order to remain profitable during the recession] have “begun to grow again.” As to hiring, the report summary states that firms are “currently being very conservative in adding capacity.”
The report concludes:
“As we move into mid‐year, law firm activity is gradually increasing and, for some firms, demand is strong, providing optimistic signs for the remainder of 2011. But in this economy, one still needs to be watchful for unexpected developments. The legal industry is now poised at an inflection point where firms must transition from a defensive to a strategic posture, and shift focus from extreme cost controls to achieving sustained revenue growth. However, attaining that goal will not be easy, and will, in most cases, require firms to change their traditional business models.”