Midsize U.S. law firms enjoyed a greater increase in client demand and suffered a smaller dip in productivity in the first half of 2022 compared with their largest counterparts, according to a new report released Thursday.
It marked the first time since 2015 that midsize firms on average outperformed the top 100-grossing U.S. law firms in terms of demand growth, according to the report by the Thomson Reuters Institute. The Institute is separate from Reuters but shares the same parent company.
In a year that has seen an overall cooling of demand for legal services, demand increased 1.7% for midsize firms through the end of the second quarter of 2022 compared to 2021, the report said. Demand decreased 0.2% for the 100 top-grossing firms as ranked by the American Lawyer, while firms ranked 101-200 saw demand increase by 1.8%.
Productivity, meanwhile, fell the most for Am Law 100 firms, dropping 3.3% in the first half, compared to 1.8% for midsize firms. Many of the largest U.S. law firms raced to hire additional lawyers last year amid a historic boom in corporate deals.
The report relied on monthly data collected directly from about 70 midsize U.S. law firms, which may range from 35 to several hundred lawyers, as well as larger firms. Midsize firms generally charge less than the biggest firms for legal work.
The midsize group saw a 6.5% increase in demand for real estate work, compared to 5.4% for Am Law 100 firms. Demand for labor and employment work was up 2.5% for the midsize cohort but declined 1.9% for the top 100.
"We're really seeing a flight to perceived cost effectiveness," said Bill Josten, manager of enterprise content at the Thomson Reuters Institute and author of the report.
In other practice areas such as tax, bankruptcy and M&A, however, midsize firms saw demand crater faster than larger firms. Demand for M&A work fell 10.2% for midsize firms in the first half of the year compared to 2021, while M&A demand was down 5.3% for all firms, the report said.