There is a major ‘squeeze’ on the law firm business model and it is not going away

“There is a major ‘squeeze’ on the law firm business model and it is not going away” is the title of an inimitable Edwin Reeser piece.

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The major lenders to the legal industry have been beating the drum about compression of profits every year. The major publishers of legal industry news have spewed forth mountains of articles and analysis. Recruiters and consultants have been vocal about what the issues are, and there have been many suggestions about what to do about it. The failure and collapse or liquidating merger of more than a dozen major law firms have been dissected and widely explained. Here is a partial list of some very fine law firms that are no longer operating, though parts of some of them were absorbed into other firms: Brobeck |Heller | Thelen | Coudert | Howard Rice | Luce Forward | Thacher Proffitt | Wolf Block | Dewey | Howrey | Edwards Wildman | Bingham | Holme Roberts | Dickstein Shapiro | Patton Boggs. There will be others joining the list, in the natural course of business.

The only publicly expressed reason for not engaging in change that would enable survival and sustainability of firms has more or less been, “That can’t happen to us, because we are different.”

The absence of change is not because the need for it is not understood. It is because those who make the decisions don’t want to make the changes. Most will be getting off the bus very soon. How much do you want to pay for a seat in  that bus? How much are you willing to pay to get off that bus?
Ed cites The Am Law Daily on August 1, 2017, in which Julie Triedman wrote Warning Signs for Big Firms as Report Sees Demand Drop-Off: “Back in May, Citi Private Bank’s law firm group reported an extremely strong first quarter—and suggested that the industry could expect the pistons to keep firing into the next quarter.  Well, the first second quarter results are in, via Thomson Reuters’ Peer Monitor, and they don’t look good: Law firms were “blindsided,” Peer Monitor said, by a drop in demand across nearly all practices. The 0.9 percent decline breaks a streak of nine consecutive quarters of increased demand, the longest such streak since the 2008-9 financial crisis, Peer Monitor said.” (Pay wall)
And Ed concludes, then, with apologies, take a look at this now seven-year-old summary of the situation, and ask ourselves what has changed? Do Partners Really Want to Save Their Law Firms? | JD Supra

QED: There is a major ‘squeeze’ on the law firm business model 

But, if you still need convincing and more hard evidence that there’s a  major ‘squeeze’ on the law firm business model, read this detailed analysis of BigLaw business model firms’ profit trends and drivers by my colleague, Ben Farrow: Has the juice been squeezed from BigLaw’s business model?

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