General

What’s Ahead for the Large Law Firm Market in 2017?

Citi Private Bank and Hildebrandt consulting recently issued their 2017 Client Advisory.

It predicts another year that will look like the past 6 — low single digit growth in revenue and profitability, continued emphasis on holding down expenses, and relentless focus on improving efficiency, which would include reducing office space and shifting leverage models.

Behind the overall low growth numbers, we can expect to see the forces of dispersion and volatility assert themselves in the market.  Some firms will do much better than others, but they may not be the same firms that outperformed the prior year or the year before that.

The anticipated growth is expected to come from more so in transactional practices (particularly M&A and Capital Markets).  We are likely to see a decrease in US agency-driven regulatory related litigation work under the new administration.

You should read the Client Advisory in its entirety.  The last section identifies some key characteristics of the firms that have been the most successful in this post-recessionary environment.

Another Source: 2016 Just An OK Year for Biglaw

The Citbank/Hildebrandt assessment of the first 3 quarters of 2016 is consistent with Well’s Fargo’s, which was the subject of our post 2 weeks ago.

Demand for Biglaw legal services is essentially flat (+0.3%); revenue was up 3.8% but only because of rate increases; and lawyer productivity is down.

Underlying data comes from surveys of 41 Am Law 1-50 firms, 35 Am Law 51-100 firms, 53 Am Law 2nd 100 firms, and 76 additional firms.

Legal Industry Expert Moderates Expectations for Rest of 2015

Citibank’s latest report on the financial performance of the legal industry as of the end of the 2nd quarter 2015 is a bit less optimistic than their 2014 end of year report.

You can find the full report on the first half of 2015 — via the American Lawyer — here.

Revenue — as a result of increased demand for legal services — is up, but it is lagging behind the increases we experienced in the first half of 2014 (3.3% at the midpoint of 2015 vs. 4.4% midway through 2014) and expense growth is up.

The growth in expenses was largely due to the fact that firms paid larger bonuses at the beginning of this year (to reward lawyers for a relatively strong 2014). There was also an increase in operating costs due to expenditures on cybersecurity and health insurance, among other things.

Sounding a similar theme to the Thomson Reuter’s 2014 end of year report, it seems as though not all large firms have experienced the same impact.  The AmLaw 100 continues continues to experience positive momentum whereas the Second Hundred actually saw a decrease in demand.  Interestingly, it appears that the niche/boutique firm market outpaced both the AmLaw 100 as well as the Second Hundred.

Citi’s bottom line:  “While we remain optimistic that revenue and profit will both grow, we believe that they will now fall short of 2014’s results.”

Read more: http://www.americanlawyer.com/id=1202734681984/Citi-Report-Despite-Growth-Law-Firm-Forecast-Dims-for-2015-#ixzz3io1AyUAf

Writing Style Guide from Silicon Valley General Counsel

Adobe Systems GC Michael Dillon recently announced the release of a writing style guide for the company’s in-house attorneys to use in their communications with their business unit clients and with each other.

There are lot’s of great suggestions for better, clearer writing, which is, after all, an essential tool of the lawyer’s trade.  It also could be an interesting topic for discussion during on campus interviews.

You can find some top tips here and the actual guide here.

Not Quite Biglaw Rankings

As a follow up to our May 8 posting on Biglaw rankings, The American Lawyer has now published its 2015 AmLaw Second Hundred rankings. Firms are ranked in a number of different ways relating to their financial performance: growth rates, profitability, revenue, etc.

Firms in the Second Hundred tend to be elite specialists, smaller firms in major markets or big regional players.

Check out the data and analysis at their rankings landing page.

How Law Firms Are Innovating To Stay Relevant

Great article in the Legal Intelligencer on how law firms are changing their business models and practices to keep up with the pace of change in the legal industry and to meet changing client demands.

Some key takeaways:

  • even firms that are smaller (100 lawyers), older and not thought of as innovators are doing things differently, like creating outside board of legal industry expert advisers, investment funds for the firms to support innovative ideas, and creating spaces within their offices so startups and entrepreneurs can interact.
  • firms have largely eschewed innovation and have not traditionally offered the breadth of services consultants do. But, they are uniquely situated to do so because of the scope of their business, political, philanthropic, global and local connections.
  • Firms of the future will have more professional resources embedded within to help identify what the client needs (and not just their legal needs).
  • Firms will need more people who are trained managers and understand business needs and generally be more business-minded.
  • Demographic trends will create a shortage of highly qualified lawyers to assume leadership positions at firms as well as a shortage of associates entering firms.  This will create increased competition between firms and their clients for legal talent.  Talent strategies, including professional development, advanced leadership training and retention programs, will become increasingly important.

2015 State of the Nor Cal Legal Market and Law Firm Guide

Every year, Jon Escher, founding partner of the legal recruiting firm, Solutus Legal Search, based in Silicon Valley, makes a presentation to students about the Silicon Valley legal market.

He also prepares a guide to Northern California law firms by practice area, which includes descriptions of those areas as they are practiced specifically in this geographic area.

We just posted to the 2015 version of the Guide on this page of CDO webcasts.  Unfortunately, the webcasting equipment malfunctioned, so we do not have a 2015 version of his in-person remarks this year, but we left the 2013 version up there in case you’re interested.

Biglaw Rankings 2015

The American Lawyer recently published its 2015 rankings known as the AmLaw 100.  Firms are ranked in a number of different ways relating to their financial performance:  growth rates, profitability, revenue, etc.

Check out the data and analysis at their rankings landing page.

 

A Look Back At the Large Law Firm Legal Market in 2014

Thomson Reuters Peer Monitor — in conjunction with Georgetown University Law Center’s Center on the Study of the Legal Profession — recently issued its annual report on the legal market, which you can find here.  Some highlights:

  • 2014 saw a modest increase (0.5%) in the demand for legal services, which is better than the drop in demand experienced in 2013, but overall indicative of a trend, which has extended over the past 5 years, of fairly flat demand growth
  • the growth has been in transactional practice activities (corporate, tax, and real estate); demand growth in litigation was actually slightly negative.  Litigation still accounts for about a third of all practice activities (though it was more like 40% twenty years ago). Corporate accounts for 23% (and tax and real estate come in at 3% and 6% respectively).
  • number of lawyers in US firms grew by 1.4% in 2014 (about a percent more than demand, which in turn led productivity to fall a bit)
  • despite all this, profits per partner (PPP) were up 3.1% (over 2013, a year during which PPP grew by only 1%)
  • if you adjust for inflation, business spending on legal services is down almost 26% from where it was in 2004

The Report also addressed the reasons why the legal market has not improved to the same extent that many other sectors of the economy have:

  • corporations increasingly keeping work in-house or farming it out to non-law firm service providers
  • general counsel finding litigation a less attractive option as it’s become more expensive (e-discovery)
  • continuing proliferation of new, non-traditional service providers (facilitated by the steady world-wide collapse of, or the finding of workarounds to, regulatory barriers that shielded law firms from such competition in the past)

Finally, the Report includes a discussion of another observed phenomenon: the fact that the rising economic tide is not lifting all boats at the same rate.  20 firms in the AmLaw 100 and about the same number in the second hundred are far outpacing their competitors in their respective “classes.”  Dubbed the Super Rich by the American Lawyer (see April 29, 2014 article (online) entitled AmLaw 100 Analysis: The Super Rich Get Richer available via Lexis), those in the first hundred grew their revenue by 20% and their PPP by almost 32% since 2008.  And they accomplished this with only modest growth (5% headcount increase and only 4.3% increase in equity partner ranks).

The elite high performing firms in the second hundred increased their gross revenues by 4.6% (compared to the 1.1% growth rate for the other 80 firms in the second hundred.  Their PPP increased 3% (compared to the other 80, which saw a growth rate of -0.8%).