After 15 years of earnings growth, the average law firm saw its profits tumble between 8% and 12% last year, according (subscription required) to The Wall Street Journal.That decline is sparking layoffs, salary freezes and lower bonuses at law firms large and small, and a few former titans have closed their doors altogether. The firms that have been squeezed the most have been mid-sized practices that have cost structures that make it difficult to persevere through a downturn -- but lack the cache of the elite large-sized firms.
Investors will likely recoup only pennies on the dollar for their losses in this global meltdown, but it will be a godsend for lawyers.
The practice areas that have done well of late are, not surprisingly, bankruptcy and securities law. Mergers and acquisitions billable hours have declined along with the private equity boom and according to the Journal, "Litigation, often counted on to carry firms through downturns, has become less profitable as clients increasingly settle big cases, forgo lawsuits altogether, or pressure firms to discount their fees, lawyers say."
But there may be some good news on the horizon: The economy will eventually pick back up but the trillions of dollars in losses over the couple years should provide billions and billions in legal fees over the next decade or more. Back in March, securities lawyers involved in the $7.2 billion Enron lawsuit settlement sought $688 million in legal fees. For one case. Now multiply that by Lehman Bros, Madoff, Bank of America (NYSE: BAC), Citigroup Inc. (NYSE: C), Bear Stearns, etc. etc. etc. and you start to lose your sympathy for the tough times lawyers are going through right now.
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Reader Comments (Page 1 of 1)
1-26-2009 @ 10:57PM
erinrite said...
These are truly amazing times we are going through. If we live long enough, one day we'll look back like the seniors do today when they talk about the Great Depression. (By the way, what was so "great" about it?)
You know, there is opportunity lurking all over out there. There are people making strategic moves and will make a fortune from this period. Everything is on sale: businesses, real estate, stocks, etc. It just comes down to having the liquidity to start taking advantage of the bargains.
We will shake our heads at the missed opportunities when we look back.
EVERYTHING WILL REBOUND!
1-27-2009 @ 4:57AM
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