Transactional Work, Billing Rates, and Demand Driving Law Firm Growth
Good news for the legal industry: Large U.S. law firms had an outstanding first half of 2024. According to a recent report by the Wells Fargo Legal Specialty Group, revenue jumped by an average of 11.4%, compared to just 4.4% last year. Wells Fargo measured data from 192 law firms, including 81 of the 100 highest-grossing U.S. firms.
Both Wells Fargo and Citigroup reported similar findings from independent surveys in August. So, there are several indications of strong financial performance across the industry.
Big Law Getting Bigger
The top 50 highest-grossing firms led with 13.8% growth, a fantastic increase driven by higher billing rates and increased demand. Litigation, restructuring, and M&A activity have all seen increased demand so far in 2024.
It's not just demand that's driving profit, either. Billing rates are up by 6.6%, and direct expenses have only grown by 5.3%, putting U.S. law firms in one of their strongest financial positions of the past decade. Profits per equity partner have jumped by 8.8%. However, it isn't just equity partners who see all the benefits: associate pay has also increased as law firms compete to attract and retain talent. It's an excellent time to be entering Big Law.
Transactional Work Rebounds
Since the pandemic, transactional work has been slow to rebound — until now. In the second quarter of 2024, law firms saw a surge in demand for transactional practices, with a 2.2% increase in corporate work like contract drafting and real estate deals. According to the Thomson Reuters Institute's Law Firm Financial Index, this rise is part of a 2.4% boost in law firm demand compared to last year. Further, according to the LFFI, current transactional growth is more sustainable and diverse, as opposed to the quick spike firms saw in the immediate aftermath of the pandemic.
Let the Good Times Roll
The current LFFI score is the third-highest since the Global Financial Crisis. It comes after six consecutive quarters of progress, with no one practice area accounting for a large percentage of the increase. Despite the increase in demand for transactional work, for example, litigation still drives a lot of growth for the average firm. The only other caveat to note is that mid-size firms are not seeing the same significant increases in transactional demand as Am Law 100 firms, the report concluded.
Still, key performance indicators for law firms are strong across the board, which is welcome news after previous years' struggles.
Related Resources
- Lateral Hiring at an All-Time Low for Law Firms (FindLaw's Practice of Law)
- Legal Jobs Near All-Time High Even as Industry Is Adapting (FindLaw's Practice of Law)
- Billing Rates Surge Past $2k in the World of High-Stakes Litigation (FindLaw's Practice of Law Blog)