As Outsiders Took Local Market Share, Texas-Based Firms Saw Slower Growth in 2019
While revenue growth and demand growth lagged at Texas firms in 2019, the region pulled in the highest increase in billing rates.
February 18, 2020 at 05:56 PM
4 minute read
Revenue growth and demand at Texas-headquartered law firms trailed the rest of the legal industry in 2019, but the Lone Star State firms led the market in making rate increases stick, a new survey shows.
At first glance, the numbers seem to contrast with a national zeal for Texas growth, expressed by large firm leaders from other regions and playing out in office openings and group lateral moves. But as those out-of-state players seize on opportunities in this hot market, it may be taking away from the performance of locally founded firms.
The mixed results for Texas firms contrasts with a year of solid growth for the legal industry in 2019 that built on even stronger 2018 results, according to a 2019 report by Citi Private Bank's Law Firm Group. Nationally, revenue grew more than expenses, and demand growth accelerated as the year progressed, while rate increases were the strongest since 2008, the report said.
Revenue at Texas firms grew by 3.4% in 2019, less than the 5.3% growth for the industry.
Demand in Texas dropped 1.6%, the worst of the 11 regions in the country, compared with an increase of 1.1% nationally.
But on the upside, billing rate increases by the Texas firms were the strongest for the industry, coming in at 5.7%, compared with only 4.5% growth in billing rates nationally, said Gretta Rusanow, head of advisory services in Citi's law firm group.
The Texas statistics are derived from the results of 10 firms founded in Texas that are included in the national survey. National results come from a total of 201 respondents of various sizes, from Am Law 50 firms to boutiques.
Rusanow said the Texas-founded firms faced a challenging demand environment in 2019, because so many out-of-state firms have opened offices in Texas, "taking clients and matters into their fold."
Because of that, she said, the 1.6% contraction in demand is "not a full picture of the Texas legal industry."
The robust increase in rates charged by Texas firms may be related to using more senior lawyers on firm matters, Rusanow said, noting that lawyer head count at the Texas firms grew only marginally by 0.1%. Head count was up by 1.9% nationally.
"The rate growth number could be the mix of who is doing the work, as well as rate increases being passed on to clients," she said, noting that 2019 marks the second straight year of strong rate increases across the industry.
Expenses were up 4.5% at the Texas firms, a marker that's trending higher than revenue growth. Rusanow said the expense growth was primarily driven by a 5.1% increase in operating expenses.
Inventory at year-end was up 4.9% for the Texas firms, which Rusanow described as a "decent number," even compared to the national statistic of 7.1%. Inventory includes unbilled time and accounts receivable.
Additionally, Rusanow said, the collection cycle lengthened by 1.4% in Texas in 2019, suggesting that the revenue growth in Texas was largely driven by rate increases.
She noted that the Texas firms may be in better shape to start 2020 than 2019, because their inventory was down at year-end 2018 and the firms had shortened the collections cycle, indicating a big collections push at the end of 2018. This year, they started off in the opposite position.
In the Citi report last year, the legal industry posted the best results in a decade, but in Texas, native firms struggled to grow revenue and demand declined.
|Read More
Law Firms Posted Impressive Growth in 2019, Citi Survey Finds
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllFrom ‘Deep Sadness’ to Little Concern, Gaetz’s Nomination Draws Sharp Reaction From Lawyers
7 minute readDLA Piper Sued by 2 Houston Companies, Alleging a 'Fake Lawyer' Represented Them in Argentina
3 minute readTrending Stories
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250