Dive Brief:

• The largest 50 law firms increased their market share in the U.S. from 44.8% in 2021 to 47.3% last year amid rate increases across firms of different sizes and in all practice areas, according to a report from LexisNexis CounselLink.
• The median hourly rate charged by partners at the largest 50 firms in 2022 was $920, a figure 46% higher than the $630 median rate charged by partners at the second-largest tier of firms.
• Average timekeeper rates increased in 2022 at the highest levels since CounselLink first produced its annual Enterprise Legal Management Trends Report in 2013, with the average partner rate increasing 4.5%. By comparison, the average partner rate grew by 3.5% in 2020 and 3.4% in 2021.

Dive Insight:

The largest 50 law firms increased their U.S. market share by seeing the strongest gains in corporate, regulatory and compliance, and real estate work, according to a press release about the CounselLink 2023 Trends Report.

Partners handling regulatory and compliance work last year charged an average of $730 an hour, the second highest rate among practice areas.

“Matters in this area are generally viewed by GCs as being higher risk and critical to the business, so they want to engage the best firms to handle them,” said Kris Satkunas, director of strategic consulting at LexisNexis CounselLink. “It’s not uncommon for GCs to be willing to pay a premium rate for complex, high-risk, mission-critical legal work.”

The largest law firms also performed well in two other practice areas that command high partner rates on average, mergers and acquisitions ($955 an hour) and finance, loans and investments ($725 an hour). 

For example, the largest 50 firms handled 68% of M&A work last year. 

The CounselLink report defines the largest firms as those with more than 750 lawyers, and the next tier of firms as those with 501-750 attorneys.

Even though the gap between the average hourly rates charged by partners at the top two tiers of firms was 46% last year, that was down from the 54% gap seen two years ago.

“The narrowing of the gap occurred because the second tier of firms generally increased rates at a level that was higher than the largest firms,” said Satkunas, who authored the CounselLink report. “In part, this has to be because of revenue pressure the second tier of firms is feeling.”

The median rate billed at firms with 501-750 lawyers grew by 9% last year, while that figure grew just 3% for the largest firms.

Firms across the board raised rates as drops in demand for some types of work combined with inflation began to eat into their profits, according to Satkunas.

“At the end of the day, most law firms aren’t that creative in managing their profits,” she said. “They draw on two levers for the most part: rate increases and staffing cuts—usually administrative staffing cuts.”

The CounselLink 2023 Trends Report is derived from a database of more than $52 billion in legal spending across more than 420,000 timekeepers and more than 1.4 million matters.