A Better 2012 for BigLaw (With Big Asterisks)
Feb. 7. (Bloomberg Law) — Law firm profits at a selection of the nation’s largest firms increased by 4.3 percent in 2012, but “we do have some concerns about what drove the results,” Dan DiPietro, chairman of Citi Private Bank’s Law Firm Group tells Bloomberg Law’s Lee Pacchia.
At the 179 firms Citi surveyed (80 Am Law 100 firms, 49 Am Law 200 firms, and 50 additional firms), demand grew at just 0.2 percent. Revenue grew at 3.6 percent in 2012, but much of that was because of deal work that began, ended and was collected in the fourth quarter because of concerns about increasing tax rates in 2013, he says.
A major law firm bankruptcy also affected the numbers, DiPietro noted. [It was Dewey & LeBoeuf]. Citi recalculated its 2011 figures, taking the firm’s data out of the equation. If it hadn’t backed out those numbers, demand in 2012 would have fallen rather than risen, and revenue growth of 3.6 percent would have been cut by about a percentage point.
Citi expects 2013 demand to exceed the almost flat level of 2012, because it “would be hard to do worse than that,” DiPietro says. Revenue growth could be slightly better than it was last year, he says, and profits this year should again be up in low single digits. And Citi’s watch list of law firms that may be on the verge of significant financial trouble has shrunk “a bit,” thanks to improving results, he says.