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After years of struggling with sluggish transactional work, law firms have finally seen a resurgence in this crucial area, just in time for a stock market crash. This recovery is significant for Biglaw firms, where mergers and acquisitions (M&A) work is a major revenue driver, even though M&A activity is still down compared to last year.
Financial Index Reflects Positive Momentum in Q2 2024
The Law Firm Financial Index from the Thomson Reuters Institute shows an 8-point rise to a score of 67, one of the highest in history. This improvement reflects a strong performance in the second quarter of 2024, with transactional practices bouncing back and solid fundamentals supporting the industry.
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Litigation Work Shifts to Smaller Firms
However, a noteworthy trend in the report is the shifting of litigation work to smaller firms. While litigation overall has increased, the top 50 Am Law firms have either seen a decline or slower growth in this area since early 2022. This quarter marked a significant divergence in this trend.
Potential Implications for Biglaw’s Future
The shift in litigation work might indicate that clients are increasingly looking for more cost-effective options, turning to smaller firms for their legal needs. While this could be a temporary adjustment in response to the current market conditions, it raises concerns about Biglaw’s ability to retain clients, especially during economic downturns when counter-cyclical practices become crucial.
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