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Midsize Law Firms Competitive in Race for Legal Spend by Global Companies

 Insights from the latest BTI Forecast 2014: Survey of Corporate Legal Spending



Spending on U.S. law firms by global companies is soaring—and 75% of their U.S. law firm hires are outside the AmLaw 50 . That is the conclusion of BTI Consulting Group based on its ongoing 13-year evaluation of now more than 3,700 interviews with decision makers in corporate legal departments. BTI finds that outside counsel’s share of the now $100 billion U.S. legal market “continues to slip,” while spend on internal legal resources continues its “slow steady climb.” 


BTI shared excerpts of its BTI Premium Practices Forecast 2014: Survey of Corporate Legal Spending with the LexisNexis® Corporate Counsel Advisory; the complete version of the Survey is available for purchase in the Publications section of the BTI website―www.bticonsulting.com―along with other valuable studies on the legal industry.


BTI reports that legal spend in the U.S. by global companies jumped from 30% in 2010 to today’s share of 40%. “We find global companies are more active in developing markets, building sales channels, and creating and filling product pipelines while investing in infrastructure and talent. The global companies operating in the U.S. have become a market unto themselves.”


Much Legal Work “Up for Grabs”


“Global companies are propping up the U.S. corporate legal market, as corporate legal spending by the Global 500 borders on a boom by today’s standards. U.S. spending by global companies is growing at a compound annual growth rate of 7.2%. Non-global companies’ U.S. legal spending is shrinking at a rate of 2.7%. Global companies show vigorous interest in working with every size and manner of law firm. While the largest litigation and M&A will find its way to global law firms—the rest is up for grabs,” BTI reports.


The study reveals that midsize law firms definitely have a place in the hearts―and wallets―of global companies. “Global companies show an especially strong interest in using both mid-sized as well as larger firms in litigation, employment, intellectual property, intellectual property litigation, regulatory, corporate and small- and mid-sized M&A. Again, large M&A and cross-border transactions will remain the province of large and global firms. The law firms successfully targeting U.S. spending by global companies are focusing their pitches to discuss the more unique aspects of global companies. These include: Foreign Corrupt Practices Act, antitrust, transfer pricing, labor-related issues and regulatory issues. The pitches are tailored and customized for each client—and almost all come from firms who got their start in an advisory role. Global firms are most impressed by what [law firms] know about them and their U.S. operations.”


2014 Market Drivers


BTI identifies eight key factors that will drive legal spend in 2014.


1. The U.S. corporate legal market has two clear segments with global companies increasing spending and U.S.-centric companies shrinking spending.

2. Global companies operating in the U.S. are increasing legal spending as they build market position all over the world—including the U.S.—producing demand for almost everything but litigation. 

3. “Resolution Revolution” continues—clients resolving large number of matters at lower cost. 

4. Labor & Employment slowly gains more attention from corporate counsel—as global companies adapt to U.S., and U.S.-centric companies face regulatory shifts and workforce changes.

5. Shifting legislative and policy landscape driving bursts of spending in regulatory. 

6. Strategic M&A provides selective opportunities to build market share, revenue stream and product lines through smaller and midsize transactions. 

7. Changing economics will bring about the occasional megadeal in more mature industries. 

8. Intellectual property litigation continues to pose substantial strategic and operating risk to companies with all sectors driving spending. 


Opportunity Zones


BTI identified what it calls “opportunity zones” for firms, areas where global companies are directing more of their legal spend in the U.S. Here are the industries examined and the practice areas BTI considers growth areas:


Banking:                    Securities, Corporate, Regulatory

Chemical:                  Litigation, Intellectual Property

Energy:                      Environmental, Regulatory

High Tech:                Employment, Intellectual Property

Insurance:                 M&A

Manufacturing:         Employment, Intellectual Property, Corporate, Regulatory

Retail Trade:             Employment, Environmental

Utilities:                      M&A, Environmental, Investigations, Regulatory

Wholesale Trade:     Securities, Litigation, M&A, Employment, Regulatory


As GCs continue to adjust their resources following the 2008/2009 financial crisis, internal legal departments are becoming an increasingly viable competitor to outside firms, and companies continue to push to settle disputes rather than engage in litigation, BTI reports.