Law firms continued to show signs of health in the first half of the year, according to a survey of 174 firms by Citi Private Bank.
The study found that in the first half of 2014, gains in revenue resulting from higher rates and an increased demand for legal services exceeded growth in expenses.
The top 50 firms by revenue, as ranked by the trade magazine American Lawyer, saw the best results, largely because of the rise in transactions as well as an acceleration of global work, John Wilmouth, a senior client adviser with Citi Private Bank Law Firm Group, said in a phone interview last week.
Wilmouth explained that the top 50 firms “at times in the last few years were performing the worst, but in the cycle we’re in, these firms are benefiting the most.”
When compared with the first half of 2013, the top 50 firms saw revenues increase 5.9 percent, with expenses up 2.1 percent; firms in the top 100 had a 2.1 percent increase in revenue, with a 1.8 percent rise in expenses; and revenue at firms in the top 200 climbed 2.7 percent, while expenses grew 2.4 percent. In contrast, smaller firms saw revenue drop 0.5 percent as expenses rose 1.6 percent.
Southern California firms experienced the biggest rise in revenue — 9.1 percent — primarily because of rate increases, Wilmouth said. Revenue at Chicago-based firms increased 6.4 percent over last year, while demand rose 3.4 percent, the largest of any region. Firms based in New York had a 2.8 percent increase in revenue and a 4.4 percent increase in rates over the first six months of 2013.
Rate increases may seem counterintuitive with so many clients seeking discounts. However, it may be a side effect of cutbacks many firms made in recent years in hiring summer associates and new law school graduates.
Wilmouth said the increases resulted in part from some redistribution of workload. If partners and senior associates are handling more of the work, he said, the composite rates billed will be higher.