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 160,400 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 160,400 law firms in the US with over 1 million employees and generating about $320 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
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Feb 28, 2024 - Law Firm Pricing Keeps Pace with Wage Growth
                                • US producer prices charged by law firms are rising alongside industry wages, which could suggest some firms’ margins are being protected from higher labor costs. In Q4 2023, law firm wages rose at a rate that was only slightly lower than the pace of pricing. Law firm employment increased slightly in Q4 compared to the same period in 2022.
                                • Global mergers and acquisitions (M&A) activity fell 15% in 2023 to $3.2 trillion, marking the lowest level of M&A in 10 years, according to a recent report by Bain & Company. High interest rates, regulatory hurdles, macroeconomic uncertainty, and weak corporate valuations hindered deal activity. However, the lack of M&A in 2023 could lead to more deals in 2024 as firms seek liquidity or revamp their portfolios. The tech sector was most affected by the weak environment for M&A in 2023 as deal values fell 45%, although valuations in tech are expected to improve in 2024. Other industries that are expected to see more robust M&A in the coming year include healthcare and life sciences, energy and natural resources, and aerospace and defense. M&A activity is a key demand driver for some law firms.
                                • Employment growth at some of the largest US law firms slowed in 2023, according to Wells Fargo’s Legal Specialty Group. The survey of 130 large firms showed that job growth slowed to 2.9% in 2023 compared to 6% in 2022. Job openings at the 200 highest-grossing US law firms also declined from 15,424 in 2022 to 14,561 in 2023, according to Leopard Solutions, which tracks law firm hiring. The Wells Fargo survey also showed that despite average billable hours falling to 1,542 in 2023 from 1,566 in 2022, law firms’ average revenue growth in 2023 was 6%.
                                • Copyright law could negatively impact the emerging artificial intelligence (AI) industry, according to Reuters. So far, judges have been wary of ruling for plaintiffs’ copyright infringement claims based on the output of generative AI platforms. However, courts have yet to weigh in on whether AI tools are infringing copyrights on a mass scale by scraping writing, images, and other data on the internet. Several proposed class-action lawsuits have been filed by groups of writers who claim their work was used to train AI platforms without permission or compensation, and similar suits have been filed by artists, The New York Times, Getty Images, and music publishers. Tech firms argue that such lawsuits could hamstring the AI industry’s potential.
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