Loading...
Each week, the Law.com Barometer newsletter, powered by the ALM Global Newsroom and Legalweek brings you the trends, disruptions, and shifts our reporters and editors are tracking through coverage spanning every beat and region across the ALM Global Newsroom. The micro-topic coverage will not only help you navigate the changing legal landscape but also prepare you to discuss these shifts with thousands of legal leaders at Legalweek 2022. With a new date of March 8-11, 2022, the Legalweek program will feature Barometer focused sessions, TED-style focus talks, workshop boot camps, and industry panel sessions across 21 tracks and 74 sessions. Secure your registration today!
The Shift: In Talent Wars, Midsize Law Firms Are Poised to Lap the Competition
As Big Law contends with high demand and a hyper-competitive talent market, many large firms are eager to celebrate the success of their practices in 2021, even if it required burning the candle at both ends to get the work done.
But outside the Am Law 200, a great proportion of midsize firms also benefited from increased demand and decreased expenses in 2021, and they’re investing in targeted growth.
The Conversation
According to a recent report, more than a third of the Am Law 200 saw demand increase by more than 5% last year.
But their slightly smaller counterparts in the legal mid-market saw even more broad-based demand growth: 49.2% of midsize firms saw demand increase by more than 5% last year compared to 2020, the report by Thomson Reuters and Georgetown Law Center said.
The report also found that while Am Law 100 firms saw profits increase by 13.4%, and Second Hundred firms grew profits by 12.2%, midsize firms experienced an eye-popping 22.4% surge in profits over their 2020 mark.
According to another report, released by Citi Private Bank and Hildebrandt Consulting in December, firms outside the Am Law 200 saw an impressive 16.6% growth in revenue in 2021—though that number is tempered a bit sans forgiveness of Paycheck Protection Program loans (13.6%).
On the heels of that financial success in 2021, quite a few midsize firms have made strategic additions in the last few weeks, announcing mergers with smaller shops.
Oftentimes, the small firm being acquired has cited succession plan challenges as a reason for seeking out a partner. Others, like Verrill Dana and Rackemann, Sawyer & Brewster in Boston, found that a merger just made strategic sense.
“It was just sort of a light bulb moment,” Regina Hurley, a partner and chair of Verrill’s executive board, told Law.com. “So, we went back to our respective managing partners, and said this was sort of an interesting thought. And the next thing we knew we had another lunch scheduled.”
One common factor in all these combinations: midsize firms are seizing on this moment. The Significance
Meanwhile, law firms of all sizes and segments have been feeling the impact of a tight talent market. Many large firms are spending big money on bonuses and other incentives to attract and retain lawyers at all seniority levels.
“These talent issues are going to dominate what law firms do in 2022,” said Jim Jones, director of the Georgetown University Law Center on Ethics and the Legal Profession.
In the quest to strategically add scale, smart mergers are a more efficient path to growth than one-by-one lateral hiring, many law firm consultants agree.
What many midsize firms have long offered is a defined culture and closer relationship between leadership and the rest of the firm. For partners at small firms and boutiques who have enjoyed having an influence in how their firm operates, this can be more attractive than working in Big Law.
That pitch becomes even better when it’s paired with a strong financial foundation bolstered by success in the most recent calendar year.
Of course, adding on a boutique won’t instantly make a midsize firm overtake high-rate Am Law 100 leaders in terms of gross revenue, or even profits per equity partner. But it might send a message to existing partners that the firm is investing in a strategy. And having a well-defined strategy can help these midsize firms win the long game, which has become all the more important in recent months: retaining the most valuable talent.
The Information
Want to know more? Here's what we've discovered in the ALM Global Newsroom: With Competitive Billing Rates and Lower Costs, Midsize Firms Led Profit Gains Midsize Law Firm Consolidation Heats Up Associate Turnover Costs Temper Expectations After 'Extraordinary' 2021 Law Firms Made Historic Gains in 2021. They'll Be Hard to Maintain in 2022. Midsize Law Firms Kick Off Expansion and Merger Deals in 2022 Midsize Law Firms Are Seeking Mergers Amid Succession Challenges
The Forecast
Law firm merger talks continue throughout the industry, and more tie-ups are likely to emerge in the coming weeks. Midsize firms that have a positive story to tell from 2021 are poised to bring on some impressive groups of lawyers, if that’s what they want to do.
At the same time, many of these firms have historically prided themselves on staying smaller and more focused, only making additions that fit well into their niche service offering or promise to win more business from existing clients.
If they continue to do so, they stand to have an even better story to tell next year.
Lizzy McLellan is a senior editor on ALM's business of law desk. Contact her at lmclellan@alm.com. On Twitter: @LizzyMcLell
|
Loading...
Loading...