By Citi Private Bank and Hildebrandt Consulting,
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The US law firm industry is enjoying its strongest growth in almost a decade. However, dispersion remains, with the market favoring the industry's largest and, notably, its smallest firms.
We are pleased to share the 2019 Citi Hildebrandt Client Advisory, our annual publication which outlines the current landscape of the law firm industry, how law firms are responding to these conditions and their best opportunities for growth in 2019.
The US law firm industry is enjoying its strongest growth in almost a decade.1 However, dispersion2 remains, with the market favoring the industry’s largest and, notably, its smallest firms. The concentration of growth within these two market segments indicates that it is reputation and brand that are currently helping firms win new work, rather than scale alone.
Even within the Am Law Second Hundred, which continued to experience pressure in 2018, a group of firms successfully grew demand for their services. Like their larger and smaller counterparts, these firms were also assisted by their differentiated brands.
While dispersion remains a market characteristic, so does market volatility, with a high proportion of firms continuing to experience reverse trends in demand performance from one year to the next.
In this market of strong growth, but underlying dispersion and volatility, the most successful firms will outperform the market by maintaining an approach that is focused on profitable growth and above all else delivering what the client needs. This means following a growth strategy that builds on its market strengths, while protecting the firm’s culture. It also means focusing efforts to institutionalize clients in this active lateral market, and the likely increase in partner retirements in coming years. And more than ever before, in the face of evolving technology and the growth of alternative legal service providers in market share, it means becoming more efficient and adaptable in the way a firm delivers legal services.
We expect that 2019 will be another strong year in top line growth for the law firm industry, in the range of 6 to 7 percent. As we also expect increasing expense pressure, we project profit per equity partner growth in the mid-single-digit range. With dispersion expected to remain, further consolidation is likely, particularly where demand and expense pressure are most acutely felt. On the other hand, we expect to see strong outperformance by the firms with the strongest brands.
Please read the full report here.
1Our analyses and projections are based on data collected from a sampling of primarily US-headquartered law firms by Citi Private Bank, as well as conversations with law firm leaders. For third-party providers of legal services, our information is mostly anecdotal. Sources include the "Citi Annual Survey Database" of 191 US-headquartered firms, including 45 Am Law 1-50 firms, 33 Am Law 51-100 firms, 45 Am Law Second Hundred firms, and 68 additional firms; the "Citi Flash Survey", including 41 Am Law 1-50 firms, 29 Am Law 51-100 firms, 48 Am Law Second Hundred firms and 49 additional firms; the "Citi Law Firm Leaders Survey" of 55 large firms headquartered in the US, UK Australia, China and India; and the "Law Firm Leaders Confidence Index" which reports the forward-looking opinions of law firm leaders from 156 firms.
2Dispersion is defined as a near even split between firms that see demand increase and firms that see decline year-to-year. Volatility is defined as reverse demand growth trends from one year to the next.