With more and more national firms opening offices in Florida and corporate clients handling an increasing amount of work in-house, many mid-sized Florida law firms are feeling squeezed. Clients are willing to pay for high-end work that takes extra expertise, but they want bargain prices for commoditized work. Many firms that are neither at the top nor the bottom—a group known as “the hollow middle”—are therefore experiencing slower growth. .
This year’s Review 100, which ranks Florida firms by headcount, shows a decline in the number of full-time lawyers at more than one-third of the Florida firms that reported census numbers in both 2016 and 2017.
An analysis of this year’s Am Law firmsindicates that across the country, mid-sized firms are struggling. But those firms that have found ways to differentiate themselves are still doing well. Analysts have found that in highly competitive markets where the supply of lawyers outweighs demand, firms that don’t have a niche are likely to struggle. But in Florida, as elsewhere, the firms that have figured out ways to differentiate themselves continue to grow.
“Firms are differentiating themselves in order to better position themselves for long term success,” said Joshua Dull, a legal recruiting partner for Major, Lindsey & Africa.
Miami remains an attractive market for national law firms, according to Broad and Cassel Miami office managing partner Mark F. Raymond. And the expansion of national firms into Miami and other cities in Florida has made it even more important for smaller, local firms to stop trying to be general, full-service firms.
“You have to have areas of proven expertise and market acknowledgement where lawyers at other firms say, ‘if you are in that kind of case, this is the firm you should consider,’ ” Raymond said.
Firms like Shutts & Bowen and Holland & Knight have developed complex or highly specialized practices that bring in higher billing rates. But other firms have found ways to stand out—focusing on a particular practice area, industry or region.
Broad and Cassel is differentiating itself with the largest health care practice in the state, as well as one of the larger real estate practices. The firm has continued to expand its health care practice with a specialty in health care-related bankruptcy, and recently added a former assistant U.S. attorney who focuses on health care-related defense, Raymond said.
Another Florida firm using an industry niche strategy is Cole, Scott & Kissane. Primarily an insurance defense firm, it has faced new competition from several firms that have moved into the state. Yet, 2016 was still a good year for the firm. In fact, managing partner Richard Cole said it probably tried more civil cases to verdict than any other firm in the state. It added 40 full-time equivalent lawyers this year, propelling it up a notch to No. 3 on the Review 100—ahead of Holland & Knight and GrayRobinson. The firm does not release its financials, but Cole said it experienced continued growth in all aspects of its practice across the state.
Fort Lauderdale-based Greenspoon Marder has pursued a very clear niche to differentiate itself. Co-managing director Gerald Greenspoon believes the firm is the only large law firm to have launched a national cannabis practice. Its net income shot up 42.3 percent last year, and the firm added attorneys in Florida, as well as in other areas of the country.
Niche practices can be risky, however. A dramatic change in the industry or its regulations can have devastating effects on a law firm’s investment.
Some firms, hoping to capture more clients, look for merger opportunities. Arnstein & Lehr, for instance, is engaged in discussions with Saul Ewing about a potential merger that would expand the firm’s footprint and practice areas.
“With a larger organization, you can offer more services to counter the competitive pressures that we are all feeling,” said Jeff Shapiro, chairman of Arnstein & Lehr’s executive committee and managing partner of the firm’s Florida offices. “Clients look for a firm to provide all their legal services in multiple locations.”
In South Florida, Arnstein & Lehr is best known for work in the EB-5 visa space, but Shapiro touts the full-service firm’s other practice areas with the same gusto. In this very competitive legal market, firm size matters, he said. By joining forces, the merged firms can hold on to more of the work that they would otherwise refer to other firms or attorneys with more expertise in certain areas.
Yet the success of some mid-sized firms indicates scale isn’t everything. Mid-sized firms may feel more price sensitivity than they used to, but the price sensitivity is not dissimilar to what some of the larger Am Law firms are feeling, said legal recruiter Joe Ankus.
“It’s a matter of degree,” he said.
Analysts believe that legal market trends often appear earlier among Am Law’s Second Hundred because smaller firms are more sensitive than larger firms to disruption and overcapacity.
But even at Am Law 100 firms like Greenberg Traurig, which reported a strong start to 2017 and saw revenue grow more than 4 percent to nearly $1.4 billion, executive chairman Richard Rosenbaum said the firm intends to step back from a focus on growth, given the economy and political environment. It will focus on quality, efficiency and profitability “and not so much on any full boats of lawyers,” he said.
The firm reported three fewer lawyers in Florida this year.
To combat competitive pressures, some full-service firms have focused on blanketing their particular state. Florida-based GrayRobinson, for example, has added 14 full-time equivalent lawyers since last year, raising its headcount to 300. And it has moved up a notch on the Review 100, now occupying the No. 4 spot. GrayRobinson president and managing director Mayanne Downs said 2016 was the firm’s 25th consecutive year of increased revenues.
While the firm has a wide variety of practices, Downs said its work with government relations, lobbying and representing government across the state are the factors that differentiate it from others.
Similarly, Weiss Serota Helfman Cole & Bierman focuses on a variety of practice areas, including real estate and corporate transactions. But the largest percentage of its work involves local government, municipalities and the people who deal with them. While increased competition has had a small effect on the private side of business, as of June 1, the firm was up four attorneys from last year’s Review 100.
“There are not that many firms that serve as the city attorney for 18 municipalities and also represent private clients. This gives us a unique perspective in the market place,” said Weiss Serota Helfman managing director Jamie A. Cole. “We feel that this focus differentiates us from nearly every other law firm in South Florida.”
Other firms have further localized the regional strategy. Bilzin Sumberg, which has 84 lawyers working out of one office in Miami, touts its lawyers’ nonprofit work and their involvement in the community.
Similarly, Trenam in St. Petersburg differentiates itself with long historical roots in the Tampa Bay region and business relationships that go back 47 years, said Trenam managing shareholder Marie Tomassi. The firm attributes its success to its long-term commitment to community nonprofits and organizations.
“We don’t just show up out of nowhere for three or four years to try to get work; We’re there because we’re from here,” Tomassi said. “We get people coming in from other firms because they are looking for that kind of connection to the client and the community.”
Tomassi believes the firm’s ability to keep its prices down has also protected it from the commoditization of legal work. Clients feel they are getting value, she said. Of course, the firm looks at metrics. But Tomassi believes client satisfaction is still key.
“You can have a down year financially, but if you’ve built up your clients so that they are successful and happy with us, and see us as part of their team, work will go back up,” she said. “You can argue chicken and egg, but if you have happy successful clients you, as a law firm, are going to be successful.”