Law firms’ merger activity is thriving and lock up days are reducing
Posted On October 6, 2015 By mhauk
Our Professional Practices Benchmarking Report 2015 points to encouraging signs of growth as firms feel the benefit of the improving economy, most notably through an upturn in commercial and residential property work.
This year has shown a much more positive outlook across most firm sizes, helping to ease the considerable financial pressures experienced in recent years.
This year’s results show how wider economic growth is driving up demand for legal services in commercial and residential property sectors, with confidence also returning to many practices active in corporate transactions.
- Wage costs are still reducing as a percentage of fee income and turnover.
- Practice costs of rent, marketing, IT and professional indemnity insurance all saw an average reduction as a percentage of income.
- There has been significant growth in the average turnover for firms with 11-24 partners and 25+ partners.
- Lock up days have improved for all sizes of practice.
- Total fee income has increased for all sizes of practice, but this has not been reflected in profitability figures.
As the results from last year predicted, personal injury work-in-progress signed up before the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) is dwindling, meaning a reduction in income as a result of diminished success fees. Many firms have looked for new areas of litigation to replace the falling workload. Legally aided funded practitioners are experiencing further cuts to income levels and are under continued fee pressure.
Overall the results are positive in relation to income, showing increases in total fees across all sized firms. There is significant percentage growth in fee income per equity partner, especially in the 25+ partner practices, where merger activity has generated growth, with strategic plans keeping the equity ownership group smaller.
If you would like to discuss any issues raised in the report in more detail or you would like to speak with a member of our team, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with your local representative.