Corporate Legal Spending To Rebound Strongly in Second Half of 2009

By Larry Bodine, Esq., a business development advisor based in Glen Ellyn, IL, and Tucson, AZ. With the Apollo Business Development Program, he has helped law firms nationwide get new clients and generate millions of dollars of new revenue. He can be reached at 630.942.0977 and www.ApolloBusinessDevelopment.com

In the latest sign that the recession in the legal profession may end soon, businesses will once again begin increasing their law budgets in the second half of this year according to a new research report, BTI Mid-Year Spending Update and Outlook.

Key findings of the study include:

• Clear signs of renewed legal spending after a sharp decline of 7% since year-end 2008.
• Corporate legal spending at large companies will grow nearly 5% over the next 6 months, bringing overall market growth to only negative 1.4 percent for the year.
• Leading the growth in spending will be the practice areas of regulatory compliance, employment, securities and bankruptcy/corporate restructuring law.
• Year-to-date, the hardest hit core practice areas have been corporate, securities and finance, and intellectual property.

Clobbered by the recession

The legal profession was clobbered by the recession beginning in 2008. As of today, 102 major law firms are listed on the Law.com Layoff List. Larger firms have laid off 10,015 people this year (3,851 lawyers, 6,250 staff) according to LawShucks.

Personal bankruptcy was the first area of practice to grow in November 2008.  See 4,946 Reasons to Enter the Hottest Practice: Personal Bankruptcies.
The next sign of a turnaround came in January when employment law rebounded.  See Law Firm Marketing Should Focus on Employment Law

Next, in March 2009 Robert Half Legal announced One in Four Law Firms Plan to Add Attorneys this Year. Despite a down economy and layoffs in the legal field, one-quarter (25 percent) of lawyers interviewed recently said their organizations would be adding personnel in the next 12 months. Bankruptcy and litigation were the most in-demand specialties.

In another major trend, the economic pendulum began to swing away from megafirms and in favor of regional and mid-sized firms, which can offer equally-good service at much lower rates. See Pendulum Swings in Favor of Mid-size Law Firms. Lawyers in smaller and mid-size firms are successfully luring away prize clients of large law firms.

“I have read a number of articles in recent weeks predicting it will be boutiques/locals/regionals that will do best in 2009-2010. Today, one of my clients, Reilly Pozner, a litigation boutique of 21 lawyers in Denver, told me they are hiring another seven lawyers. They have been appointed by the bankruptcy court as national coordinating counsel for loss recovery for a Wall Street investment bank,” said Bob Weiss of Alyn-Weiss & Associates, Inc. in Denver, CO.

The study by BTI Consulting of Boston covers 16 practices and 18 industries and is based on 370 interviews with corporate counsel at Fortune 1000 companies that average $19.4 million in outside counsel spending.

A ray of sunshine

"We have all read the headlines detailing drops in business spending across every category, including legal services. This study presents a big ray of sunshine in what has been a very stormy environment. The reversal of this negative spending trend will help buoy flailing legal markets and offers some hopeful news about business spending in general," explained Michael B. Rynowecer, President of The BTI Consulting Group.

Rynowecer suggested that the increase in spending will not, however, alleviate law firm layoffs which have been rampant in recent months. "Rather than a wholesale recovery, we are seeing a shift of resources to specific firms and practices that are well-positioned," Rynowecer warned. "Large companies are sharing this renewed spending with a smaller group of law firms than just six months ago. Those firms caught unaware or unprepared for this shift will continue to face significant challenges and not reap the benefits of this increased spending."

To download an executive summary of the study, or to register for a May 28th webinar, which will discuss the study and the market opportunities it uncovers in detail, Click Here.