A new CounselLink report suggests clients aren’t likely to retain new law firms this year. However, as they say, there are exceptions to the rule. The 2015 CounselLink Year-End ELM Trends Report concludes a majority of clients, 56 percent, plan to stay with their incumbent firms. Interestingly, the tide changes for those clients seeking counsel in two particular areas of law— litigation and corporate.
The report found 57 percent of clients with significant litigation hired a new firm in 2015. The report defines “significant work” as work with at least one matter with a minimum of $100k in outside counsel fees. Similarly, 46 percent of legal departments engaged with a new law firm in the last year, for a high value corporate matter. The report also concludes litigation is the one area of law in which clients are most likely to engage with multiple firms. By contrast, less than a quarter of clients are willing to bring on a new firm to handle their employment matters.
Here’s a brief look at some outside counsel hiring patterns in 2015, as told by the data:
- Legal departments worked with between five and 27 outside firms to handle their litigation matters, representing the largest number of firms engaged with than any other type of legal work.
- On the opposite end, clients favor working with the fewest number of outside firms (between one and five) to handle their M&A matters. Interestingly, 31 percent of clients hired a new firm in 2015 for M&A work. “This represents either a material addition to their panel, or a replacement of a law firm from the existing M&A panel,” according to the report.
- For corporate and securities work, the report shows a company at the 50th percentile uses 10 firms, but typical legal departments use anywhere between six and 19 firms to handle this type of work.
- The median numbers of outside firms legal departments engaged with in 2015 is 36. On the low end (the 25th percentile) 23 firms were engaged, and on the high end (the 75th percentile) 71 firms were used.
- Across the board, just 44 percent of clients engaged with a new firm in 2015 and that number only decreases when a new firm is added. For example, 23 percent of clients engaged with two or more firms and just 11 percent of clients hired at least four new firms.
“From the law firm perspective, the low level of new outside counsel hiring represents a challenge to firms hoping to acquire business from new clients. This supports the importance of firms differentiating themselves and finding new ways to add value for clients,” concludes the report.