Large Law Wallet Share Dominates, CounselLink 2024 Trends Report Shows
The CounselLink® 2024 Trends Report: Dynamics Shaping the Future of Legal, reports on outside counsel median partner billing rates and other data culled from the enterprise legal management platform benchmarking database. For the second straight year, corporate legal paid higher legal fees to outside counsel while Large Law wallet share dominated. Its influence is especially apparent in five key practice areas.
Large Law Wallet Share Domination
According to data from the CounselLink report, the median partner billing rate in 750+ law firms is 61% higher than the next smaller tier, indicating large law wallet share domination. Data shows that the gap in billing rates between Large Law and other tiers is widening.
What’s interesting about the continued climb in partner fees in 2023 is that it crosses all law firms and practice areas except Environmental. Big law firms particularly control the market in Mergers & Acquisitions, Finance Loans & Investments, Corporate, Commercial and Contracts, and Regulatory & Compliance. Within these five practice areas commanding the highest billing rates, Large Law increased its share of wallet from 59.0% in 2022 to 60.3% in 2023.
Most importantly, this year’s report shows that average law firm partner billing rates rose 5.4%, a record-setting pace and the highest recorded since 2013. Last year, 2022 data documented the highest jump in average outside counsel partner fees to 4.6% up from 3.4% in 2021.
Why Do Outside Counsel Rates Continue Rising?
In a post-pandemic world, all types of pricing, including law firm fees, were and still are affected by inflation, the economy, global strife, disrupted supply chains, and much more.
“In this global economy affected by inflation, supply chain issues and regional conflict, the impact on legal services is significant,” said Pamela Gelfond, Vice President of LexisNexis CounselLink. “Our report provides a comprehensive snapshot of how these market factors affect the dynamic between corporate legal and law firms. We’re hopeful that the insightful data in this CounselLink report provides what’s needed for our clients to successfully maneuver these shifting sands.” Another key issue for corporate legal departments is recruitment of talent. Many legal departments suffer from a lack of candidates from which to select, and there is also a revolving door of talent entering and leaving the legal department for various other opportunities. Recent industry reports show that a flood of U.S. Department of Justice attorneys is entering the market, which may be a positive for legal departments seeking talent.
Corporate Legal Staying with Large Law
In the CounselLink 2024 Trends Report, data shows no indication that companies are moving legal work away from Large Law to mid-sized law firms.
- The largest tier of law firms has shown growth in share of wallet over each of the last two years, from generating 45.5% of legal billing in 2021 to 48.2% in 2023.
- In 2023, the median partner in the largest law firms billed at a rate that was 61% higher than the median partner in the next tier of firms, the largest gap in partner rates recorded in the CounselLink Trends Report since 2013. The differential in 2022 was 49%.
- The median partner rate in Large Law was $991 per hour in 2023 compared to $615 per hour in the next tier.
Some good news on that front suggests a positive implication: matter rates did not rise across most practice areas as significantly, as partner rates continued to rise in 2023. This indicates that the management of matter mix (rates, timekeepers, alternative fee arrangements) is working favorably for corporate legal.
“Annually, corporate legal departments and law firms anticipate the CounselLink Trends Report benchmark data to determine their position with outside counsel fees and median partner rates nationwide,” said Kristina Satkunas, Director of Client Strategy for LexisNexis CounselLink. “Our enterprise legal management platform provides benchmarking data and analysis, dashboards and scorecards that help legal departments assess law firm performance and legal team productivity. Additionally, our professional team is available to help set up the tracking of analytical data and reporting so everyone on the leadership team can have full visibility into legal department success.”
Benchmarking Data Critical to Legal Department Success
Legal departments that put an enterprise legal management platform in place are better able to track and analyze benchmarking data that contributes to performance, productivity and efficiency. Legal operations, in particular, can develop analytical reports with visuals to make it easier for company leadership to have 360-degree visibility into how outside counsel is performing, among other measurable and actionable factors.
CounselLink enables development of dashboards, scorecards and other tracking data so analytics are reported clearly and accurately on a consistent basis. Legal departments can pinpoint the beneficial relationships to keep, while making a decision to change non-beneficial relationships.
The platform’s extensive database of more than $59 billion in legal spend across more than 460,000 timekeepers and more than 1.6 million matters contributes to the report. Annually, since 2013, those interested can read detailed insights on seven key metrics, law firm partner fees by firm size, hourly rates by practice area, firm size, and location, and a snapshot of hourly rates in 18 countries.
The CounselLink 2024 Trends Report: Dynamics Shaping the Future of Legal, is available here.
Learn more about CounselLink and the integrated tools to manage the corporate legal department with greater visibility. Schedule a call with us here.