Legal Business Blogs

Shifting sands – Largest US firms losing market share, report claims

The United States’ largest firms are losing market share to the band of firms below, according to a study by LexisNexis released yesterday (22 October) for the three years ending 30 June.

The CounselLink Enterprise Legal Management Trends Report shows that the 50 largest US firms, with at least 750 lawyers, have seen their share of client fees paid in the US drop to 20%, down from 26% three years ago.

In contrast, firms with between 201-500 lawyers (defined in the report as ‘large enough’) now account for 22% of all legal fees compared to 18% three years. More dramatically, they have almost doubled their share of big-ticket litigation matters – categorized as those matters generating outside counsel fees totaling $1m or more – growing their portion from 22% to 41% in the past 12 months.

One key metric identified by the report as a possible explanation for the trend is the percentage of legal work a client provides to its top 10 law firms, with the data indicating that the largest 50 firms are not the ones benefiting when companies direct more of their work to fewer firms. ‘Rather, firms with 501-750 lawyers and 201-500 lawyers increase their share of billings,’ the report concludes.

Another factor identified is the frequency with which the ‘large enough’ firms offer alternative fee arrangements (AFAs) – double the rate of the largest firms, which bill less than 3% of their fees under AFAs with the report concluding: ‘The “largest 50” firms lag behind in offering and implementing AFAs regardless of the aggregate anticipated fees or types of legal expertise or work involved.

‘Overall, the battle to win business is being won by “large enough” firms with strong reputations, diverse practices, multiple locations, lower rates and a greater willingness to offer, use and implement AFAs that meet client needs. ‘Large enough’ firms deliver a broad range of capabilities at lower price points than their larger counterparts,’ it adds.

Camille Abousleiman, a capital markets partner at US firm Dechert said: ‘I don’t see that trend myself, I don’t see big firms losing ground,’ however he added, ‘I see clients being conscious of fees could benefit smaller firms.’

The LexisNexis report is based on data supplied by CounselLink covering an analysis of how $10bn in legal fees has been spent.