TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, January 15, 2013

2013 Law Firm Outlook

Citi Private Bank and Hildebrandt Consulting LLC have released 2013 Law Firm Outlook:

[W]e expect that the trends of the past four years will continue into the foreseeable future. Demand, revenue and profit growth will be modest, although overall potential for increased demand exists as financial markets settle down and the economy strengthens. Law firm leaders would be wise to draw from the lessons of the prior four years in leading their firms into the future. They can no longer rely on a rising tide that lifts all boats. In fact, the tide is out. And to paraphrase Warren Buffett, it’s only when the tide goes out that you discover who’s been swimming naked. Don’t get caught swimming naked.

Tax practice is projected to decline 2%, the fifth worst performance aamong seven practice areas: 

Chart 3

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Bankruptcy is going to decrease 4%? Bankruptcy increases during a recovery. Thus, if projecting modest increases in legal business based on modestly increasing economic activity, why would bankruptcy decrease?

Posted by: Publius Novus | Jan 15, 2013 7:53:41 AM

The Citi / Hildebrandt Report more or less suggests that law firms should turn themselves into hedge funds:

"Given that the cost of borrowing is at a historical low, it’s a good time to consider using a loan, in combination with the capping of a pension liability. A loan that is invested in a conservative, but higher performing portfolio
can help fund pension obligations."

Posted by: Anon | Jan 15, 2013 8:55:21 AM

"why would bankruptcy decrease?"

because people have learned to stop borrowing money? I think people are starting to remember grandma's ways of doing things. That is "if you ain't got the money you can't buy it..."

Posted by: Jason | Jan 15, 2013 12:18:48 PM

Bankruptcy -- corporate bankruptcy practice -- has been sliding for years. The reason has little to do with whether or not people or companies borrow money. Rather, financial institutions and their creditors have learned how to do workouts, refinancing and pre-packaged Chapter 11 arrangements without leaving almost anything to chance. ("Chance" is defined as the judicial system.)

Posted by: Ron Coleman | Jan 15, 2013 2:30:13 PM

@Ron Coleman. Thank you, but isn't what you describe just another part of bankrupbcy practice?

Posted by: Publius Novus | Jan 18, 2013 9:24:22 AM