Legal Market Predictions: Double the Extreme
After a week in London, home of four of the world’s six largest law firms, the founder of the social networking company Legal OnRamp brought home his observations and predictions about the U.S. legal market in the context of a financial crisis.
Drawing from lessons that arguably can be learned from experiences in the U.K., Paul Lippe, in a column for the American Lawyer, identified six factors likely to have a negative impact on a general demand for legal services and five trends that will occur as a result.
The negatives include pressure to reduce executive compensation, which may impact law firm compensation. Also firms should expect work to vanish from practices focused on synthetic or derivative securities, and mergers and acquisitions, Lippe says. Not to mention, there will be less client demand for legal services all around during a recession. And as companies slash staff and budget, they’ll also cut legal services.
“While there will be countervailing factors such as the growth of hedge funds, restructuring, litigation and bankruptcy, the net effect of the above is likely to be the greatest year-to-year decline in law firm revenues that anyone practicing today has experienced in their lifetime,” Lippe maintains. “Whatever the most extreme forecast you’ve seen about the decline from 2008 to 2009, you should double it.”
Lippe expects that London firms will continue to gain market share, compared to New York, because they are making better use of their size, have better global management and more stable partnership structures.
And Lippe argues that smart firms will resist temptation to simply hike rates. “Wise firms,” he says, “will eschew rate increases, and use this time of anxiety for both clients and firms to engage in a conversation with clients on delivering value, managing costs, and increasing ‘share of wallet.’ “
