As more companies make the push to cut outside spend and bring more legal work in-house, law firms are starting to feeling the crunch.
The Hildebrandt Institute’s Peer Monitor Index (PMI)—which uses billing rates, demands, productivity and expenses to measure quarterly changes in law firm profitability—reveals that law firms are struggling to attract business while their expenses have jumped at the highest rate in two years.
According to Hildebrandt, a law firm with a score of 65 on the PMI is operating healthily. The third-quarter PMI dropped to 56, which is the first decrease in three quarters.
Although law firms’ overall litigation demand increased 1.5 percent, bankruptcy work dropped 6 percent, mergers and acquisitions work dropped 2 percent, and capital markets work dropped 4 percent from last quarter.
Additionally, law firms have increased their billing rates by 3.5 percent since last year. But Hildebrandt notes that the firms’ realized rates, or rates they are actually paid by clients, were at an all-time low this quarter.
Read Thomson Reuters for more information about Hildebrandt’s study.