As 2017 comes to a close, Midsize law firms — defined as firms in the Peer Monitor program outside of the Am Law 200, which employ an average 146 lawyers — are making a last-minute push to reach positive demand growth for the third consecutive year, even if that growth is as tepid as it’s been the past several years.
It’s a consistency the Midsize market segment hasn’t seen in recent times, according to the just-released Thomson Reuters 2017 Midsize Law Firms Midyear Report.
Indeed, in the prior seven years heading into 2017, the Midsize law firm segment has experienced quite a bit of volatility. Year-over-year demand growth percentages have ranged from 2.6% growth in 2012, to a low point of a 2.2% contraction in the subsequent year.
After finishing 2016 in slightly positive territory, however, demand through the midpoint of 2017 was down 0.9% relative to the previous year according to the new Midsize Law Firms Midyear Report, utilizing Peer Monitor data. The Report is available for free download below.
So far, this year’s decrease in demand for the segment is driven in large part by decreases in litigation, which is down by 2.9%; and in transactional practices (Corporate General, Corporate M&A, Tax and Real Estate), which is down by a combined 0.9%, through midyear of 2017. Litigation and transactional practices each account for approximately 36% of all hours worked by firms in the segment as tracked by Peer Monitor.
The average Midsize law firm has in recent history increased its worked rates on average by slightly more than 2.0% year-over-year. This has remained the case despite the decreasing levels of demand; and in fact, this year the segment saw its largest midyear worked rate growth since 2012. This has led to a strategy similar to that seen in larger law firms: Raising work rates has become one of the ways firms are attempting to maintain revenue and thereby profitability levels in a segment where hours are becoming harder to come by.
Looking through the final three-week sprint of this year and beyond, the question is whether we are again witnessing a cyclical decline, or if the decreasing amount of hours worked in the segment is the new norm. That is to say, will demand once again rebound, or will firms be faced with strategic decisions regarding their future success.
In the coming months, we will re-examine the full-year performance for the Midsize law firm segment to determine how the year ended, as well as to discuss what the future holds for law firms outside of the Am Law 200.
Peer Monitor®, a product of Thomson Reuters, is a dynamic, live bench-marking program that provides anytime access to critical firm assessment information and allows comparison against selected peers, with details for practice performance. For more information, go to legalsolutions.com/peer-monitor.
Download the 2017 Midsize Law Firms Midyear Report