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Legal Services: Slow Improvement in 2012

By Mark Green

Kentucky’s law firm managers forecast 2012 as a year of selectively improving business conditions for the legal services sector.

The economy remains below the general business activity levels seen before the financial crisis hit in fall 2008 and the United States went into a steep recession, but the number of transactions and deals requiring legal support are increasing as overall optimism in the commercial world slowly brightens.

Law firms are focusing on niche strengths and improving service to their customers. Some managers expect merger activity among firms seeking stronger long-term financial positions.

There are signs of life in the corporate and commercial real estate sectors. Expectations that government policy will continue to evolve in healthcare, financial regulation, taxation and environmental compliance is generating a need for more legal business. But many of those customers, who themselves have been forced to tighten up operations in the upheaval of the past few years, are driving harder bargains for legal services.

There also is wariness that the confrontational political climate in an election year could continue to block policy resolutions and sustain the uncertainty that has helped dampen overall business activity the past couple of years.

Despite the unpredictability that continues to keep business decisions distinctly conservative, an improving economy should provide better operating results for the legal services sector in 2012.

“In 2012, Stites & Harbison believes there will be a carryover from the improving economic activity in 2011. Transactional activities continue to pick up, indicating companies are beginning to loosen their purse strings and invest in their businesses. Our healthcare practice will continue to grow in Kentucky, in both primary care and assisted living. Our intellectual property group, one of the largest in the Southeast, expects to experience strong growth yet again. Overall, we are optimistic for 2012.”
“The economy is still unpredictable and uncertain. One month there are positive and encouraging signs of recovery, but the next may bring global events or ineffectiveness in Washington that erode confidence in the kind of investments that drive growth. That said, we see more ‘deal’ activity than at this time last year andbelieve that trend will continue. Money has been sitting on the sidelines since the early part of the recession, and we are optimistic the time has come for people and companies to begin putting it to good use. We make it a point to know and understand our clients’ businesses, to be responsive to their needs, and to deliver what they ask for at the time they ask for it or before.”
“2012 will be an interesting test for law firms. A more robust economy – particularly in energy, which is important to our markets – could well result in stronger operating results for many firms, leading to the risk of amnesia as to the lessons that should have been learned from the revolutionary upheaval in our industry triggered by the 2008 financial crisis. The strong law firms five years from now will be the firms that have restructured their business model through alternative fee structures for more rational pricing of services, project management for more efficient delivery of services, and more collaborative and understanding partnerships with their clients.”
“Any predictions for 2012 need to take into consideration the political stalemate that is taking place in Washington. Even in an election year, we can’t afford more brinkmanship with things like the debt ceiling. It is very difficult for businesses to make long-term investments in financial and human capi tal when there is so much uncertainty. Without investment, the economy will continue to suffer. If we can avoid those kinds of self-inflicted wounds, we hope and expect to see gradual improvement in the Kentucky business climate for 2012. The ‘deal’ and ‘dirt’ lawyers in our corporate and real estate teams are seeing gradual increases in activity at the end of 2011 and the beginning of 2012. This gives us hope.”
“As the economy continues to rebound, we believe we have positioned ourselves with our business clients to find solutions to meet their needs. Our newly merged firm gives us a larger regional presence and greater depth of experience. Our attorneys will continue to focus in niche areas, providing a full range of service for clients seeking to keep their representation within one firm. With anticipated regulatory changes in banking, financial services, healthcare and employee benefits, we expect growth in our corporate, litigation, labor and intellectual property practices, as well as environment and estate planning.”
“When it comes to the economy, we are still living in unpredictable times. The fact remains that clients are more conservative with their spending than ever. Our profession is no different, as companies continue to evaluate risk. Today, it takes even more to be a good lawyer as clients are sophisticated and seek out more than just expert advice from their counsel. The law firms that take time to investigate what clients are prioritizing and those firms that are committed to client-centered relationships will benefit more when the economy rallies. Firms that invest in deeply understanding their clients’ goals will bring ‘real’ added value to their business and industry opportunities.”
“Government initiatives in the natural resources, healthcare and financial industries plus looming changes in labor and employment law create prospective obstacles for clients. Evolving legislation and increased regulatory scrutiny will force clients to be more proactive in compliance matters, highlighting a need for experienced legal counsel as tension grows between increasing compliance costs and maintaining profitability. The quest for economic stability is likely to lead to more consolidation and to mergers between smaller and mid-sized firms.Larger firms will be looking to expand: to enter new markets, enhance their capabilities and add depth to their bench to increase revenues.”
“It’s going to take a substantial uptick in the economy to bring the overall practice of law back to the point where we are hiring a vast number of people. When you have a recession like we’ve had, it doesn’t come back up with the speed the turn went down. There are so many issues we don’t have control over: the European economy, the global economy, what the U.S. Congress decides to do about the debt crisis. I have seen positive business with our clients; it leads me to believe things are coming back.”
“The 2012 outlook for the legal community is cautious optimism. Demand for legal services will increase in certain areas but still seem sluggish compared to 2008 and before. Businesses will continue to defer expenditures on less critical legal issues and seek to quickly resolve conflicts through alternative dispute resolution.Sturgill Turner expects practice growth in healthcare, long-term care, employment, e-discovery, civil litigation and ADR (alternative dispute resolution). Successful firms in 2012 must recognize client concerns about legal costs. Due to increased technology and a saturated hiring market for lawyers, small and mid-size firms will be able to provide many legal services with equal expertise as large regional firms but at a more reasonable cost.”

“We have all come a long way, and business is better than it was during the 30 or so months we were in the recession. Our firm has noticed an upswing in the areas of bankruptcy and foreclosure, litigation, labor and employment law, healthcare and real estate, and we have hired several new lateral-move attorneys to help keep up the momentum. 2012 could be a challenge to corporate practice groups, with many companies experiencing decreases in deal flow; the global economy will continue to play a big role in what happens in the business sector. We will continue to keep our eye on the long term, making business decisions that are in our firm’s best interest and focus on client satisfaction.”
“As a firm with significant concentrations in the areas of litigation, creditor’s rights and commercial real estate, we experienced both the highs and the lows of the economy on the demand for legal services. Clients in litigation and creditor’s rights talk about pent up demand, but predictions of the release of such demand remain largely unrealized. For 2012, my optimism that there will be a greater need for commercial real estate legal services is tempered by the reality that it is an election year with uncertainty regarding the outcome as well as predictions of continued stock market volatility. Litigation and creditor’s rights will remain strong areas even though the number of foreclosures is trending down. Employment law – litigation in particular – is an area that we expect to continue to expand and help offset a continued lag in other areas.”