Law Firm Trends: M&As, Global Expansion, and More (Abstracted: Hildebrandt International’s 2008 Client Advisory)

According to Hildebrant’s 2008 Client Advisory, "2007 was one of stark contrasts for the U.S. legal profession – a story of two very different years rolled into one. Although there were some signs of economic trouble on the horizon (rising interest rates, high oil prices, and a sharp downturn in the residential housing market), firms grew at a healthy pace in 2006, and there were expectations that growth would continue in 2007. The first half of 2007 not only met these expectations but exceeded them, with firms around the country reporting high levels of activity. In the third quarter, however, the picture changed dramatically. In most firms, productivity dropped, in some firms significantly, as the growth in business subsided, driven by the precipitous drop off in structured finance work triggered by the sub-prime mortgage crisis, a decline in M&A and transactional work due to a growing sense of uncertainty in the economy spawned by fears of a recession and resulting in an overall slowing of economic activity, and a continuing softening of the litigation market.

Continued Consolidation and Segmentation of the Market. During 2007, consolidation activity continued in the legal market with no slowing anticipated in 2008. There are signs that some firms may be adopting a merger strategy in an effort to grow their way into profitability. There were 55 mergers involving U.S. law firms during the past year, roughly similar to the preceding three years. There were 19 reported dissolutions of law firms in the U.S. during 2007, up from the 9 reported in 2006 – the highest number Hildebrandt has seen in recent years.

Continued Global Expansion. The number of U.S. firms with foreign offices remained fairly stable – 106 among NLJ 250 firms in 2007, with 35 new international offices being opened by NLJ 250 firms during the year. Notably, there was an 11 percent increase in the total number of lawyers practicing in foreign offices of NLJ 250 firms – 15,231 in 2007, compared to 13,707 in 2006."