Legal Services Market Definition
The legal services market consists of sales of law-related services and related goods by entities (organizations, sole traders and partnerships) that advise clients (individuals, businesses or other entities) about their legal rights and responsibilities, and represent clients in civil or criminal cases, business transactions and other matters, in which legal advice and other assistance are sought. Legal services undertake processes where human capital is the major input. They make available the knowledge and skills of their employees, often on an assignment basis, where an individual or a team is responsible for the delivery of services to the client.
Entities in the legal services industry can be segmented into offices of lawyers, title abstract and settlement offices and offices of notaries.
Legal professionals in the legal services industry can be segmented into solicitors, barristers and lawyers.
Legal Services Market Size
The global legal services market reached a value of nearly $766.3 billion in 2019, having grown at a compound annual growth rate (CAGR) of 5.4% since 2015.The global legal services market is expected to grow at a CAGR of 6.5% to nearly $986.7 billion by 2023.
Growth in the historic period resulted from strong economic growth in emerging markets and increased number of mergers and acquisitions across all industries. Factors that negatively affected growth in the historic period were regulatory challenges mainly affecting the practice of legal consultants outside their countries and skilled workforce shortages in the industry.
Going forward, global economic growth, increasing demand for transactional practice areas, deregulation of the legal industry, growing legal tech industry and globalization will drive growth. Factors that could hinder the growth of this market in the future include rising costs and decreasing margins of law firms, increasing demand for in-house legal teams, lack of transparency and consistent service quality, data security issues and global reduction in free trade.
Legal Services Market Drivers
The key drivers of the legal services market include:
Strong Economic Growth In Emerging Markets
Economic growth and increase in the size of the educated middle classes gives new opportunities for legal services firms looking for growth. Emerging markets growth was aided by rising disposable income, stable political environment and increasing foreign investments in these countries. For instance, according to the IMF, China’s GDP grew from $10.5 trillion in 2014 to $14 trillion in 2018. Additionally, according to a report by the IMF in 2018, emerging markets and developing economies together registered a growth of 4.3% in 2015 and this increased to 4.7% in 2018. . In 2017, about 40% of companies in the Fortune 500 companies were Asian. Most of these companies were automobile, technology, oil and gas and e-commerce companies which needed services in corporate, patent, real estate and tax laws. These factors had a positive impact on the demand for legal services in emerging markets in the historic period.
Legal Services Market Restraints
The key restraints on the legal services market include:
Regulatory Challenges
The legal services industry in the historic period was being extensively regulated by government and authorities restraining the market growth. According to a report by the OECD, accounting and legal services are the most heavily regulated professional services in OECD countries . For instance, since December 2015, in-house lawyers working in New York who were only admitted to practice outside the USA required registration within 90 days, instead of serving as foreign law advisors . New government regulations worldwide resulted in lower profits for law firms as they incurred costs in complying with mandated government regulations.
Legal Services Market Trends
Major trends influencing the professional services market include:
Emergence Of Alternative Legal Service Providers (ALSPs)
The emergence of alternative legal service providers (ALSPs) is a key trend in the market. ALSPs are non-traditional, niche companies that specialize in providing high-demand legal services such as document review, contract management, litigation support, electronic discovery, contract lawyers and staffing, legal research, and IP management. They are essentially focused on the “business of law”, leveraging a combination of legal, business and technology capabilities, to provide services to both corporates and law firms. Businesses are increasingly employing ALSPs for many routine legal services, and law firms are outsourcing non-revenue generating tasks, such as project management, business analysis, billing, and expenses, to ALSPs. The largest and fastest-growing ALSPs include the Big Four accounting firms – Deloitte, EY, KPMG, and PwC. Other ALSPs in the market include Allen & Overy, Axiom, Clifford Chance, Consilio, Elevate, Integreon, and Update Legal. ALSPs have high adoption rates in the USA. Around 65% of large law firms in the USA use ALSPs for e-discovery purposes. Corporations in the UK are also bringing ALSPs into their workflow. According to a study conducted by Thomson Reuters, the alternative legal services market was estimated at $10.7 billion in 2017. This market is expected to grow to $55 billion by 2025. The study concluded that the average growth rate for an ALSP not affiliated with a law firm was about 24% per year. The study also concluded that the services provided by ALSPs were rapidly moving up the legal value chain to include (among others) such sophisticated work as regulatory risk and compliance, project management, legal research, and corporate due diligence.
Digitalization
Companies in the legal services market are rapidly moving towards the process of digitalization following the emergence of information communication and technology. Investor expectations, rising competition, new regulatory pressures and increasing opportunities are putting organizations under pressure to digitalize their processes and management. Law firms are investing in various technologies, such as machine learning, mobility, cloud computing, performance tracking, and artificial intelligence to streamline the process, reduce operational costs, and increase efficiency. With machine learning and cloud computing, companies are digitalizing data, records, client history, briefings, reports, testimony and other information that enables them to quickly find relevant information According to LexisNexis DiscoveryIQ, analytics can save approximately 70% of the expenditures involved in legal information reviews . According to another survey by LexisNexis, 41% of the legal community believes that the data stored in the cloud is safe and 72.4% of the legal firms are in supporting cloud adoption.
Opportunities And Recommendations In The Legal Services Market
Opportunities – The top opportunities in the legal services market will arise in the B2B legal services segment which will gain $117.2 billion of global annual sales by 2023, and in the USA, where the market will gain the most at $48.0 billion. Market-trend-based strategies for the legal services market include broadening services with information technology solutions, investing in data security systems to safeguard sensitive client data, outsourcing non-critical functions to offshore centers to reduce operational costs and increase profit margins, and offering diversified services to their clients to sustain the competition from accounting firms. Player-adopted strategies in the legal services industry include expanding services to new geographies through partnerships and collaborations and enhancing services by increasing partners head count.
Recommendations –To take advantage of these opportunities, The Business Research Company recommends the legal services companies to provide cybercrime consulting services, offer online legal services, offer alternative billion/pricing solutions and collaborate or acquire with other legal companies.
Legal Services Market Segmentation
The legal services market is segmented by type of law firm, by size of law firm, by end users, by type of practice and by geography.
By Type Of Law Firm-
The legal services market can be segmented by type of law firm into
- a) B2B Legal Services
- b) B2C Legal Services
- c) Hybrid Legal Services
- d) Criminal Law Practices
The Global B2B legal service market was the largest segment of the legal service market accounting for 54.5% of the total in 2019. Going forward, the fastest-growing segments in the legal service market will be hybrid legal services, where growth will be at CAGR of 10.1%.
By Size Of Law Firm
The legal services market can be segmented by size of law firm into
- a) Large Law Firms
- b) SME Law Firms
The Global large law firms market was the largest segment of the legal service market accounting for 62.2% of the total in 2019. Going forward, the fastest-growing segment in the legal service market will also be large law firms, where growth will be at CAGR of 7.7%.
By End Users
The legal services market can be segmented by end users into
- a) Individuals
- b) Financial Services
- c) Mining And Oil & Gas
- d) Manufacturing
- e) Construction
- f) IT Services
- g) Other Services
- h) Others
The individual users were the largest end-user market of the global legal services market accounting for 43.4% of the total in 2019. Going forward, the fastest-growing segment in the end user market of global legal service market will be mining and oil & gas, where growth will be at CAGR of 15.6%.
By Type Of Practice
The legal services market can be segmented by type of practice into
- a) Litigation
- b) Corporate
- c) Labor/Employment
- d) Real Estate
- e) Patent Litigation
- f) Tax
- g) Bankruptcy
- h) Others (Regulatory, M&A, Antitrust, Environmental)
The litigation practice was the largest segment in the global legal services market accounting for 31% of the total in 2019.
By Geography
The legal service market is segmented into
- o North America
- o Western Europe
- UK
- Germany
- France
- Spain
- Italy
- o Asia Pacific
- China
- Japan
- India
- Australia
- o Eastern Europe
- Russia
- o South America
- Brazil
- o Middle East
- o Africa
North America was the largest market for legal services, accounting for 51.6% of the global market in 2019. It was followed by Western Europe, Asia-Pacific and then the other regions. Going forward, the fastest growing regions in the legal services market will be South America and Africa, where growth will be at CAGRs of 18.6% and 11.8% respectively. These will be followed by the Middle East and Eastern Europe, where the markets will grow at CAGRs of 10.4% and 10.0% respectively.
Legal Services Competitive Landscape
Major Competitors are:
- • Kirkland & Ellis LLP
- • Latham & Watkins LLP
- • Baker & McKenzie
- • DLA Piper
- • Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates
Other Competitors Include:
- • Sidley Austin LLP
- • Linklaters LLP
- • Allen & Overy LLP
- • Morgan, Lewis & Bockius LLP
- • Jones Day
- • B M Musau & Company
- • Osler
- • Advokatfirmaet Thommessen AS
- • Advokatfirman Vinge KB
- • Al Tamimi & Company
- • Allen & Gledhill LLP
- • Allen & Overy
- • Amarchand & Mangaldas & Suresh A. Shroff & Co and Nishimura & Asahi
- • and Skadden
- • Arps
- • Baker McKenzie
- • Bitala & Co Advocates
- • Bowmans
- • Castrén & Snellman
- • Cliffe Dekker Hofmeyr
- • Cravath Swaine & Moore
- • Dacheng Law Offices
- • Dentons
- • DLA Piper
- • Erward Nathan Sonnenbergs
- • Hengeler Mueller and Fidal
- • Herzog Fox & Neeman
- • Hoskin & Harcourt
- • Kim & Chang
- • Kirkland & Ellis
- • Latham & Watkins
- • Linklaters Garrigues
- • Lobo de Rizzo Advogados
- • Meagher & Flom
- • Norton Rose Fulbright South Africa
- • Slate
- • Tilleke & Gibbins
- • VJT & Partners Law Firm
- • Webber Wentzel
- • Wikborg Rein
- • Yigal Arnon & Co
- • ZICO Law
- • Beijing Yingke Law Firm
- • Borenius
- • Clifford Chance
- • Clyde & Co LLP
- • Demarest Advogados
- • Edward Nathan Sonnenbergs
- • Egorov Puginsky Afanasiev & Partners
- • GB Attorneys
- • Pepeliaev Group
- • Pinheiro Guimarães.
- • Rajah & Tann
