However, Next Few Months May Define What Actually Happens.
We were somewhat surprised by the results of a Wells Fargo Private Bank’s legal specialty’s group survey of April-May 2020 data for 52 of the top grossing law firms and 20 midsized/regional law firms, which chartered some trends during the coronavirus pandemic.
Overall, cash collections increased more than 3% in May 2020, with expenses basically flat as the surveyed firms decreased discretionary spending. 54% of reporting firms said client requests for discounts increased in May as compared to April 2020. 52% also said that there were more client requests for payment extensions in May of this year. Number of associates dropped by just .9%, while nonlegal staff positions dropped by 4.1%. Nonlegal staff layoffs occurred most often in jobs that did not lend themselves to remote work.
What practice areas have suffered? Answer: transactional, corporate and real estate. What practice areas have remained robust? Answers: bankruptcy; banking; labor/employment (with a host of labor issues raised by the COVID-19 pandemic).
Liquidity was better than expected, with 90% of the surveyed firms having the ability to cover three months of monthly expenses, excluding partner draws. More than 50% of the reporting firms cut of delayed partner contributions so there was more cash on hand.
The real test may be future collections in the next 3-4 months. That future may be testy, which may greatly influence how firms end up at the end of 2020.