Law Firms
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 159,000 law practices in the US provide advocacy and advisory services to businesses, non-profit organizations, individuals, and government agencies. The practice of civil law accounts for 94% of the legal industry’s revenue, while criminal law accounts for only 4%.
Client Cost Cutting
Businesses have cut their legal budgets, resulting in reduced spending on outside legal services.
Alternative Fee Arrangements
Driven by client demands for cost containment, firms are offering alternatives to the traditional billable hour model.
Industry size & Structure
The average law firm operates a single location, has 6-7 employees and generates $2 million in annual revenue.
- There are about 159,000 law firms in the US with over 1 million employees and generating about $343 billion in annual revenue.
- Another 290,300 lawyers practice solo.
- The industry is highly fragmented with the 20 largest law firms representing less than 10% of revenue.
- The largest US law firms by revenues are Baker McKenzie; Skadden, Arps, Slate, Meagher & Flom; Latham & Watkins; Jones Day; and Kirkland & Ellis.
Industry Forecast
Law Firms Industry Growth
Recent Developments
Aug 27, 2024 - Law Firm Revenues Rise
- Driven by robust billing rates and rising demand, revenue at US law firms increased 11.4% in the first half of 2024 compared to the same period in 2023, according to Wells Fargo’s Legal Specialty Group. The Wells Fargo survey included over 130 law firms, including 66 of the 100 top-earning firms in the US. The boost in revenue was fueled by stronger demand from capital markets and mergers and acquisitions (M&A) activity, as well as other legal services including litigation, antitrust, restructurings, and investment management. Revenue growth in the first half of 2024 was strongest for the 50 highest-grossing law firms, which saw revenue rise 13.8% compared to 7% growth for the next 50 largest firms. Overall, law firms’ productivity rose an average of 1.5% in the first half of 2024 compared to a year earlier.
- Amid uncertainties including the upcoming presidential election and potential Federal Reserve rate cuts, some firms are putting the brakes on their initial public offering (IPO) plans, according to The Wall Street Journal. Some IPO market players – including bankers, lawyers, and corporate executives - suggest that while September is often a popular time to take a firm public, the overall IPO market needs to be strong to pull off a successful fourth-quarter offering. So far in 2024, US IPOs have raised about $25 billion, which is well below pace compared to the ten-year annual average of about $55 billion, according to Dealogic.
- Among the pecking order at large law firms, the role of counsel is increasingly being deemphasized, according to American Lawyer. Typically, counsels at law firms are any attorney who is not a partner, associate, or staff/contract attorney, according to biglawinvestor.com. The counsel position has traditionally been a key career stop between associate and equity partner. Industry observers suggest that the role of non-equity partner is increasingly the favored stepping stone between associate and equity partner. Some firms are reducing their counsel ranks to provide more hours for their senior associates and non-equity partners.
- The number of law firm mergers picked up in the first half of 2024 compared to the same period in 2023, according to legal industry consulting firm Fairfax Associates. In the first six months of 2024, there were 29 law firm mergers completed compared to 28 in the first half of 2023 and 25 in 2022 and 2021. There were only two mergers involving large law firms, which Fairfax defines as firms with at least 100 lawyers. The merger of London-based Allen & Overy with New York’s Shearman & Sterling created A&O Sherman. The combined firm has nearly 4,000 lawyers working in 47 offices worldwide. With about 275 lawyers, UB Greensfelder was formed by combining Ulmer & Berne and Greensfelder, Hemker & Gale. Amid fewer announced deals, the pace of law firm mergers has slowed in the third quarter.
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