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Law associates keep Biglaw on its feet as Wells Fargo publish 'grim' outlook for 2012

Posted by: Laurence Simons 18/09/12

In 'yet another dim view of the future of Biglaw' news, a new study conducted by legal lending firm Wells Fargo took yet another dim view of the future of Biglaw this week. Uh oh.

According to Wells Fargo, which surveyed 115 firms on their half-yearly performance back in July, costs were outpacing revenue growth both on the whole and across the board. And that especially goes for firms whose profits per partner rate dipped below $2 million (£1.2 million), whose revenues seemed to struggle more than those in the upper echelons of Biglaw.

"The results were not stellar," said Jeff Grossman, national managing director for Wells Fargo's Legal Specialty Group. "We think the second half of the year is going to be softer than the first half… you tend to see transaction work slow down during an election year."

So the bad news is that between January and June, overall revenues were up three per cent - but costs were hiked by an average of 6.5 per cent. That's a lot of new hires and fancy new laptops being bought up that are eating right into that juicy, juicy revenue stream. Which - Economics 101 refresher coming up - is not how to run a successful company.

For those highly profitable Biglaw firms who despite the economy are making it rain revenue-wise, there is very little to worry about: Wells Fargo reckons that is set to continue. But for those boutiques and smaller firms that dip below the magic $2 million profits per partner figure, the downward trajectory could be set to continue. And the solution? Get those partners up and doing.

As analysis of those firms surveyed showed, the productivity of law associates was up despite tepid demand for legal services and the general market downturn. But partners increased their total hours worked by less that one per cent between now and last year. As the Wall Street Journal Law Blog notes, those partners could better serve the company by putting on their best suit, girding their liver for a heavy lunch and speaking to investors about raising capital.

"Firms are busy sandbagging against future hard times by amassing capital," said WSJLB's Jennifer Smith. "Lots of firms are raising capital - and some do it every year." It's either that or you 'do a Dewey'. Your choice.