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Law Firm Partner Rate Gap Widens, Consolidation Increases

Size does matter, at least when it comes to law firm billing rates.

According to findings from a new CounselLink Enterprise Legal Management (ELM) Trends Report from LexisNexis, partners in the nation’s “largest 50” law firms earn significantly more than those in the second-largest group.

The latest ELM Trends Report reveals that firms with 750 or more attorneys now command 40 percent higher partner billing rates than firms with 501 to 749 attorneys.

“We’ve always seen a pretty big difference for these two groups, but the fact that the divide continues to get wider is eye opening,” said Kris Satkunas, Director of Strategic Consulting for CounselLink.

The uptick is noteworthy, she says, because it represents a significant increase from the findings reported in the previous Trends Report, when the rate gap was only 30 percent.

Putting these numbers into context, partners in the largest 50 firms charge a median hourly billing rate of $625 per hour, versus those in a second largest group who charge almost $180 less for every hour: $447. And as law firm size decreases, median partner billing rates continue to drop:

Median Partner Hourly Rates By Law Firm Size

Law Firm Consolidation Increases

The survey also shows corporate clients whittling down their rosters of outside law firms.

According to the latest Trends Report, more than 60 percent of companies in the CounsellLink data pool use 10 or fewer firms to account for at least 80 percent of their outside legal work. As you can see from the chart below, very few companies are continuing the practice of maintaining larger numbers of law firms on their rosters

Degree of consolidation

“Law firm consolidation has increased since our last report,” said Ms. Satkunas. “I think the trend will likely plateau at some point, but I don’t see it reversing”

Overall, the report shows companies with high levels of law firm consolidation have increased substantially, from 57 percent up to 62 percent.

It appears industry type plays a significant role in law firm consolidation. A few industries in particular reflect higher degrees of consolidation:

  • Retail and Trade Companies 77%
  • Information Companies 71%
  • Pharmaceutical Companies 70%
  • Professional Scientific, and Technical Services Companies 69%

The lowest rate of consolidation is in the insurance industry, where only 42 percent of CounselLink users continue to use larger numbers of firms.

AFA Use Remains Stable

One area that has remained relatively stable is the use of Alternative Fee Arrangements (AFAs). The latest Trends Report shows only modest increases in that area with both the percentage of matters billed under an AFA and the total dollars billed under an AFA increasing by just one-half of one percent compared to 2015.

Commodity-type work – Insurance, IP-Patent, IP-Trademark, and Employment and Labor –generally show the highest volume of matters billed under AFAs. AFA use in Employment and Labor, for example, grew from 17.3 percent to 18.1 percent.

Other practice areas showing increases in AFAs since the last Trends Report:

  • Finance
  • Loans and Investment
  • Commercial and Contracts
  • Mergers and Acquisitions

To learn more about these and other notable findings included in the latest ELM Trends Report, download a free copy of the report now.

Coverage of previous editions of the report can be found here:

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About Carla Del Bove

Carla Del Bove
Carla Del Bove is President and Founder of CDB Communications, an independent public relations agency specializing in content development, media relations and overarching PR Strategy. In her current role, Ms. Del Bove provides strategic public relations and content development support to the LexisNexis Business of Law Software Solutions (BLSS) portfolio of products. Ms. Del Bove also serves as a regular contributor to the LexisNexis Business of Law Blog. She frequently covers a gamut of topics related to managing the business aspects of the legal profession and relevant issues facing today’s law firms and corporate legal professionals. Ms. Del Bove brings nearly two decades of strategic communications expertise to her role. Her media relations efforts have landed her clients in a number of leading, national publications including: The Boston Globe, Forbes, Law360, The New York Times, The Wall Street Journal & Law Blog (The Wall Street Journal’s legal trends and issues blog). Prior to founding CDB Communications, Ms. Del Bove worked at among the top global public relations agencies including: Arnold Worldwide, MSL Group and Porter Novelli. She holds a Bachelor of Arts Degree in Journalism from Keene State College in Keene, New Hampshire.