Raleigh, NC (PRWEB) May 24, 2016
A new study of $21 billion in corporate legal spend demonstrates that outside counsel fees spent on M&A transactions have surged. The most recent edition of the CounselLink® Enterprise Legal Management Trends report, which analyzed law firm invoice data submitted by law firms and processed by corporate in-house counsel through the CounselLink solution for the full 2015 calendar year, found that corporate legal spending on M&A was more than twice the fees reported in 2012. The report indicates outside counsel M&A transactions and fees paid continue to increase year-over-year.
Larger law firms, those with more than 500 lawyers, “are the firms of choice for the vast majority of M&A transactions,” according to the CounselLink ELM Trends Report. Of all fees billed on M&A matters, 72% originated from larger firms. The standard business model – the billable hour – remains the dominant fee model for most M&A matters and hourly rates have risen in this practice area. In fact, the overall blended rate on M&A matters exhibits one of the largest increases over a three-year time frame, according to the report which also details law firm billing rates by practice area.
“The surge in rates brings to mind the perennial question of cost versus value,” said Kris Satkunas, director of Strategic Consulting at the CounselLink business and principle author of the report. “M&A work continues to be partner intensive and as demand for M&A expertise has grown, those partners with significant experience in the practice area are naturally able to command higher rates.”
Law Firm Panel Consolidation Continues
The most recent CounselLink ELM Trends Report also indicated that the trend toward law firm panel consolidation continues. While the inaugural Trends Report in 2013 found 58% of corporate legal departments hired fewer law firms – the most recent report “provides evidence that most legal departments are also forgoing hiring new firms to handle significant legal matters.”
More specifically, the analysis of legal invoices found just 44% of legal departments engaged at least one new US law firm in 2015 – one with which the company had not engaged in the previous four years – for legal work valued at more than $100,000 in legal fees. The willingness of legal departments to engage with new law firms drops off even more significantly from that point:
- 23 percent engaged with at least two new firms
- 16 percent engaged with at least three new firms
- 11 percent engaged with at least four new firms
When looking at the specific practice area of M&A, legal departments are prone to stick with the incumbent law firm. Just 31% of legal departments engaged a new law firm for M&A legal work in 2015.
The Legal Industry Score Card
The CounselLink ELM trends report, now in its sixth edition, is published bi-annually and tracks six key metrics across the U.S. legal industry. These metrics serve as a legal industry score card and cover the following:
- Blended Hourly Rate for Matters – by Practice Area
- Law Firm Consolidation – Number of Legal Vendors Used by Corporations
- Alternative Fee Arrangement (AFA) Usage
- Partner Hourly Rate – Overall
- Partner Hourly Rate Growth – by Location (both by City and State)
- Partner Hourly Rate – by Practice Area
“Amid the vast volumes of legal spend data available to legal operations and law departments, exists a cautionary tale,” added Satkunas. “That cautionary tale is cost metrics need to be balanced against value metrics. The data in this latest ELM trends report supports the notion that when it comes to high value work such as M&A, the corporate legal department is willing to pay for the very best legal counsel available.”
Unlike survey data, the CounselLink ELM Trends report is based on an analysis of legal invoices which were submitted by law firms and processed by corporate counsel through the CounselLink legal spend management system. Since 2009, the data set represents $21 billion in legal spending across nearly five million invoices and in excess of one million matters. It is effectively how corporate counsel is “voting” with its collective wallet. The data is aggregated, anonymized and presented back to participating legal departments who use the data to produce more granular and customized reports for benchmarking purposes.
- Download the CounselLink ELM Trends report. The full report is freely available for download with registration: http://lexisnexis.lookbookhq.com/counsellinktrends?utm_source=PR
- Expert analysis on a complimentary webinar. The CounselLink team will break down and explain the numbers behind the trends in a complimentary webinar; register here: https://cc.readytalk.com/r/w8ca1pdxm6kh&eom
- Previous ELM Trends reporting. A range of analysis and perspective stemming from previous reports can be found on the Business of Law Blog: http://businessoflawblog.com/tag/elm-trends-report/
The CounselLink business is a leading provider of cloud-based software for Enterprise Legal Management (ELM) which includes matter management, legal spend management and legal hold solutions designed to help corporate legal departments manage operations while providing analytics and benchmarking tools for better decision making. Expert professional services and product support teams are available to help users maximize the benefits of the branded solution. The CounselLink business offers innovative and tiered proprietary software solutions to addresses the unique requirements of both large and small legal departments. CounselLink is part of the LexisNexis software division. Visit us online at http://www.lexisnexis.com/counsellink.
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Carla Del Bove
CDB Communications LLC for LexisNexis