After a bump in revenue and demand over the first six months of the year, things slowed a bit in the third quarter for large Atlanta and Southeastern law firms, according to a report released by Wells Fargo Private Bank’s Legal Specialty Group.
The results for the region tracked with the performance of the legal market nationally, though Atlanta’s third-quarter slowdown was less pronounced than for the rest of the Southeast or the U.S. at large.
“After a six-month bounce, firms overall are still up for the year, but they gave some of it back,” said Jeff Grossman, senior director of banking for The Private Bank.
Grossman said the six-month uptick could reflect a bounce back from uncertainty surrounding the U.S. presidential election sparking a lull in capital markets and M&A activity late last year.
“Now things are flattening out from the bounce,” he said.
Revenue grew 3.9 percent year-to-date through three quarters for the 20 Southeastern firms in Georgia, the Carolinas and Virginia surveyed by the Wells Fargo legal group—a slightly higher rate than the 3.7 percent revenue growth rate for the 135 large firms that participated in the survey nationally. The respondents included 70 Am Law 100 firms, as well as Am Law 200 and regional firms with revenue of at least $100 million, Grossman said.
Biggest Firms Move the Needle
Atlanta firms accounted for almost half of the Southeastern firms in the survey, with eight participating. The group did better than its Southeastern and national cohorts, with a 4.4 percent uptick in revenue.
Revenue per lawyer was up 3.9 percent for the Atlanta firms, substantially better than the 2.1 percent uptick in RPL for the Southeastern group and the 2.3 percent RPL growth nationally.
“The big Atlanta firms drive the results for the Southeastern group,” Grossman said, adding that, similarly, the positive performance of two or three large Atlanta firms drove the results for that group.
Demand, measured in total lawyer hours, was flat for both the Atlanta firms (down 0.5 percent) and the Southeastern group (down 1 percent). Demand nationally increased 1.4 percent for the nine-month period, compared with a 1.6 percent uptick at mid-year.
Hours per lawyer were down 0.9 percent year-to-date for the Atlanta firms (tracking with an 0.8 percent decline for the Southeastern group) but even so lawyers at these firms billed 1,698 hours on an annualized basis, compared with 1,607 hours per lawyer for the Southeastern firms, Grossman said.
“The hours per lawyer of this group are really high,” he said, adding that two Atlanta firms with very high hours per lawyers pushed up the average.
Grossman said that nationally as well there are a relatively small number of firms driving the results—for example a couple of firms in the Am Law 50 with double-digit revenue growth, which did not come from a merger.
“Whether we look at Atlanta or the Am Law 50, the results are skewed by a few firms outperforming everyone else,” he said.
Even though financial growth slowed for the legal market during the third quarter, firms are still doing alright, Grossman said. “Revenue is up three to four percent every year on average, and RPL is increasing slightly overall.”
“We all want to see the world back to where it was in 2008. It’s not, but it’s still good,” he added. “Some firms are challenged, but most firms are OK. They are raising rates every year and keeping pace.”
Grossman forecast that year-end results would look similar to the third-quarter report, noting that Am Law 50 firms continue to outperform lower-grossing firms.
“We’re going to match those results as a whole is my expectation,” he said. “There is no sign of activity slowing down in the fourth quarter—and with inventory built up, if firms collect even half of that it should be a pretty good year.”