A recent Law 360 story by Aebra Coe, “Larger Law Firms are Pulling Away From the Pack on Rates,” reports that partners at large law firms have traditionally charged more for their services than those at smaller firms, but new data released show the rate gap between the biggest firms and the rest of the industry has widened dramatically in recent years.
Average partner rates at law firms with more than 750 attorneys cost $575 per hour during the 12 months ending April 30, according to the LexisNexis CounselLink Trends Report 2019 released. That’s 53% higher than rates at law firms with between 501 and 750 lawyers. In 2017, that gap was 45% and in 2016 it was 40%, CounselLink found.
“There’s always been a significant gap between those largest law firms and the next tier,” said Kris Satkunas, CounselLink director of strategic consulting. “The trend has been there, but I think this was the biggest leap I’ve seen in that change.” The average partner rate among law firms with between 501 and 750 lawyers was $375 per hour, with the rate decreasing for each category of law firm smaller than that, down to $250 for law firms made up of 50 or fewer attorneys.
One likely factor impacting the ability of the largest firms to charge more, on average, for their partners’ time is the type of work they secure from clients, according to Satkunas. The report found that the largest tier of law firms were responsible for 74% of mergers and acquisitions billed to clients during the 12 months ending April 30; 58% of finance, loans, and investment work; 55% of corporate, general and tax work; and 52% of regulatory and compliance work.
Those four categories of work demand higher rates than any other practice area or category, the report found. The average M&A partner hourly rate was $706 per hour; while partners focusing on corporate, general, and tax work charged $608 an hour; regulatory and compliance partners charged $593 an hour; and finance, loan and investment partners charged $583 hourly.
Compare that to partners with insurance, general litigation, and real estate practices, whose average hourly rates were $200, $367, and $404 an hour, respectively. “The fact is that firms will continue to raise their rates. It’s a reasonable business model,” Satkunas said. “It’s just a question of how much and at what point do corporate counsel start pushing back on those increases?”