More evidence that 2007 will be an Excellent Year for Law Firms
This will be excellent year for law firms, based on trends that started in 2006. This is according to a new client advisory issued by Hildebrandt and Citigroup. I pointed this out myself in an article in January.
The advisory is a numbing 6,000 words long plus 17 footnotes. Here are the high points:
- The average profits per partner (yes, I know the number can be easily manipulated) in 2006 were up a healthy 10.6%.
- Revenue growth was driven largely by a rebound, which continues in corporate and M&A practices.
- Revenues overall will grow in the 8 - 10% range in 2007.
- In 2006 there was a 7% increase in legal spending by US corporations over 2005.
- 59% of what corporations buy is litigation.
- Raising rates works -- with law firms annually imposing 6-8% rate increases across the board.
- To cut expenses, a number of firms have begun to experiment with "outsourcing" as a means of controlling costs -- re-locating various back office and support services to lower cost providers or lower cost locations.
- Mergers of law firms were numerous in in 2006 with 58 completed mergers and acquisitions involving US law firms, up from 49 in 2005.
- There were only 2 law firm dissolutions worth noting in 2006, those of Weinberg Richmond in Chicago and Miller Shea in Detroit. This total was down from the 4 dissolutions in 2005 and the 5 dissolutions in 2004.
- There was a significant expansion in the number of domestic branch office openings by US law firms -- a total of 82 new offices, as compared to 66 in 2005. (Soon there will be as many law offices as Starbucks.)
- The biggest firms are getting bigger. The average size of the 250 largest firms in 2006 grew to 486 lawyers, up from 467 in 2005.
"Looking ahead to 2007, we believe that healthy growth will continue," the advisory concludes (with caveats).
