According to fresh data from Thomson Reuters Legal business, 24 per cent of finance directors at Top 100 law firms now believe that a subdued M&A market is a major threat to profitability at their firm, up 8 per cent on last year’s figures. The finding comes in the wake of other research published by Thomson Reuters earlier this year that found M&A volumes were down 18 per cent in the first quarter of 2016 when compared with the same quarter last year.

Knock-on effects

‘M&A transactions are a vital source of work for law firms, both in themselves and because they generate a significant amount of workflow across a range of other practice areas,’ explains Samantha Steer, director of the Large Law Segment for Thomson Reuters UK&I Legal Business. ‘If fears that corporate finance activity is weakening are realised that could rattle the sector.’

Fee pressure

As with all previous surveys since the global recession, downward pressure on fees from clients was the most cited source of profit anxiety among the FDs in Thomson Reuters’ survey. Around 72 per cent of respondents saw pressure on fees as a ‘high risk’ factor, up from 60 per cent in 2010. Fixed-fee work was the second biggest concern among the survey pool, named by 40 per cent of respondents. However, concern about late payments from clients have eased over the last five years, with the number of FDs citing this as a ‘high risk’ concern dropping from 27 per cent in 2010 to 12 per cent this year.