Clients are certain about their plans despite uncertainty surrounding the legal industry and the world. Fully 52% plan to increase spending on outside counsel. Another 37% are holding steady at 2022’s pace. This leaves only 11% cutting spending.
BTI Consulting Group’s recent study based on more than 340 interviews with top legal decision makers reveals these tailwinds include:
- Record levels of workloads for the 3rd year in a row
- Higher spending on outside counsel than last year
- Certain industries increase spending at much faster rates than others
We found 6 industries with the largest increases planned:
- Private Equity
- Family Offices
- Life Sciences
- Big Pharma
- Health Care
These investors are sitting on record levels of fresh capital. They are looking for the right valuations. They are also taking on more of the deals themselves instead of relying on lenders. The funds are starting to invest and acquire public companies. These funds are buyers when large companies sell off non-strategic business units. Private equity investors are jumping headfirst into the credit business — becoming lenders as well as investors.
These clients look to large firms for the biggest deals and small and midsize firms for smaller deals.
Family offices are the fastest growing segment of private equity investing. These investors believe they bring a different approach than private equity firms. Family offices offer a longer time for receiving their returns. They are often passionate about the industry from which they came and are more prone to bring operational help to their investments.
Family offices are looking for law firms to understand their unique needs and structures. Family offices are building infrastructure and expect law firms to refer deals, and make introductions to co-investors. They also want law firms who can help build a talent pool and are passionate about the same industry they are. Family offices are expected to grow quickly for the foreseeable future.
Despite battered down stocks and regulatory scrutiny tech companies are spending on outside counsel. They continue to make acquisitions, sell to private equity firms, and protect their IP assets. They are busy strategizing about the impact of the proposed FTC ban on non-competes. Employee activism is on the rise. All this creates continuing demand for legal services at almost every size of tech company.
More life sciences companies are betting on blockbuster drugs with enormous market size. Companies are becoming more aggressive about protecting their IP and managing the regulatory process. Development-stage companies are looking for deals to raise capital while larger companies loom to build out their pipelines. All this boosts spending for law firms who can speak the language.
COVID-19 introduced a race to develop vaccines at warp speed. This race is spreading to other vaccines and drug development in general. Big Pharma is looking to develop faster than ever, acquire products, or both. These companies are strategizing about pricing and upcoming public scrutiny. Big Pharma has been active in M&A despite market uncertainty. Big Pharma is also navigating changes at both the FDA and FTC.
Hospitals and health care delivery systems are still reeling from COVID-19 and employee activism. These organizations are facing waves of litigation and new demands from the workforce. At the same time, health care systems and private investors are working feverishly to consolidate health care delivery systems.
The top growth practices for 2023 include:
- Labor & Employment
- Data Privacy/Cyber
- Class Actions
Labor & Employment
An overwhelming number of clients in the US describe themselves as awash in changing regulations around labor. These clients see employee activism at 40-year highs. Discrimination claims are growing as are wage and hour. Few companies feel immune and almost all clients are looking for counsel and advice.
With 5 states having their own data privacy regulations, clients are trying to see how and where they are impacted — and remain in compliance. Companies feel they are exposed on numerous fronts and want state-of-the-art training and compliance. 40% of top legal decision makers say they get no meaningful outreach from their primary law firms on offering these services.
Companies are feeling a need to be above reproach. They are quickly launching investigations as soon as any allegations arise. In addition, top legal decision makers see government investigations growing. They believe political winds are blowing against big business.
Clients’ litigation caseloads are at record levels — and are heading up. The growth is in the complex cases and new litigation including social media, ESG claims, and new types of discrimination. Few clients see an end to the stream of litigation. And they all want to know your approach and early assessment before hiring any law firm.
More companies face class actions than last year. Look to employee activism, increased regulations, and new actions arising out of ESG. Plaintiffs are emboldened and the claims are getting larger.
The opportunities will go to the firms bringing unmatched industry understanding and early thinking about the strategy for the matter at hand — the earlier the better.
You can get all the details and target business development strategies for 18 industries cross-referenced against 15 practices for the best opportunities in the newly released BTI Practice Outlook 2023.
You can also view our discussion and analysis of industry opportunities in the newly posted recording of BTI’s 14th annual BTI Client Service Review and Market Outlook 2023.
Best in the market ahead.
The Mad Clientist