Legal trends lack drama
Alternative fee arrangements rise by few percentage points, while partner rates continue to widen more significantly - anyone surprised?
Partners at big firms are seeing a continual rise in fees, while alternative fee structures appear to be lagging somewhat, according to results from LexisNexis CounselLink, a cloud-based enterprise legal management solution for corporate legal departments, which has released its 2019 Enterprise Legal Management Trends Report.
Now in its sixth year, the trends report is based on more $33 billion in legal spend comprised of nearly seven million invoices and approximately 1.7 million matters. “CounselLink collects a wealth of data that allows law departments to gain critical insights into current legal metrics trends and benchmark their performance against other organizations,” said Kris Satkunas, director of strategic consulting for CounselLink and author of the Trends Report. “These insights enable law departments to make informed business decisions that drive results.” The use of alternative fee arrangements (AFAs) has increased over the last two years, with the percentage of matters that include a non-hourly billing component increasing from 9.2 percent in 2017 to 12.2 percent, and the percentage of dollars billed under an AFA increasing from 7.4 percent to 8.3 percent.
Partner rates widen
The gap between the average partner rates at the “largest 50” firms (750+ lawyers) and those at the “second largest” firms (501-750 lawyers) continues to widen. Firms with more than 750 lawyers have billable rates that are 53 percent higher than rates at the next tier of firms (501-750 lawyers). This compares to a 45 percent gap reported in 2017, and a 40 percent gap in 2016. High-rate work is dominated by the largest 50 firms. These firms were responsible for 74 percent of the billings generated by M&A transactions in the period, 58 percent of finance, loans, and investment work, 55 percent of corporate, general and tax work, and 52 percent of regulatory and compliance work. Combining these, the largest firms had a 57 percent share of the work in 2018 plus the first 4 months of 2019 compared to a 50 percent share in 2016. The law firm consolidation trend has stabilized in the last few years. According to the new data, 61 percent of companies have 10 firms or fewer accounting for at least 80 percent of outside counsel fees, compared with 60 percent in 2018 and 62 percent in 2017. The full CounselLink Trends report is available for download here.