The U.S. Legal Marketplace: A Global Leader

Most of the top spots in the Global 200 rankings are taken by U.S. law firms.

The U.S. Legal Marketplace: A Global Leader

The United States has long been recognized as the world’s largest and most profitable legal marketplace. This dominance is reflected not only in the sheer size of the market but also in the influence and reach of U.S. law firms globally.

Market Size and Growth

The U.S. legal services market has been growing steadily over the years. According to Grand View Research, the market was valued at $372.6B in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 2.5% from 2023 to 2030. These values only include spending on legal services by companies with over $1B in revenue.

The global legal services market size was valued at $901.8B in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 5.3% during the forecast period. Once all spending on legal services is included, the U.S accounts for almost half of the global legal services market, making it by far the largest market in the world.

The Influence of U.S. Law Firms

One of the reasons why the U.S. has a disproportionately large legal services market, relative to the population and economy of other sectors such as Europe and China, is the connection many of the global BigLaw firms have with the United States. 

Of the largest law firms in the world in 2018, only three were not founded in the United States (Dentons, Clifford Chance and Allen & Overy). These large global firms generally base the highest portion of their workforce in the U.S. and often run any large multinational projects from their U.S. office.

Factors Contributing to U.S. Law Firms Legal Dominance

There are several factors that contribute to the dominance of the U.S. in the global legal marketplace:

  1. First-mover advantage: Many dominant firms are the first “important” competitor in their industry. These firms can set a benchmark for competitors and consumers regarding expectations of product and service offering, technology, convenience, quality, or price.

  2. Innovation: Firms who place greater importance on product innovation often have an advantage over firms that do not. The significant links to AI are apparent, and in conjunction with empirical evidence, research has attempted to explain whether more dominant firms or less dominant firms innovate more.

  3. Brand Equity: Referring to the value that branding adds over a generic equivalent, Brand Equity can contribute to gains in market dominance for firms who choose to capitalize on its worth, whether through charging a price premium or other business strategy.

  4. Economies of Scale: As firms expand, production becomes more efficient and costs lower. It has been shown empirically several times that there is a clear link between profitability and market share, and thus market dominance.

  5. Political and Legal Factors: The political and legal environment in a country can significantly affect the global market. The U.S. has a relatively stable political environment and a well-established legal system, which provides a conducive environment for law firms to operate and grow.

  6. Market Dominance: A dominant firm possesses the power to affect competition and influence market price. A firm’s dominance is a measure of the power of a brand, product, service, or firm, relative to competitive offerings.

The prosperity of the largest commercial law firms in the U.S. is not solely due to the magnitude of the American economy. Rather, it’s the performance of the U.S. transactional market and the strength of the dollar relative to other global currencies that are driving their success.

To illustrate this point, these facts should be taken into account:

  • Despite a decline in Mergers and Acquisitions (M&A) activity in Europe, Middle East, Africa, and Asia-Pacific since 2021, M&A value in the Americas saw an increase in the first half of 2023, as reported by PwC.

  • The dollar is currently trading at near-record highs against major currencies such as the pound, euro, and yen.

  • Ernest & Young reports that Initial Public Offering (IPO) proceeds in the Americas have surged by 86% year-to-date. In contrast, IPO proceeds have dropped by 40% in Asia-Pacific and 50% in Europe, Middle East, and Africa.

In essence, these trends indicate a shift in transactional market share from other regions to the U.S.

Global 200 Rankings

The Global 200 rankings provide a clear picture of how U.S. law firms dominate the global legal marketplace. This annual ranking lists the world’s 200 largest law firms by gross revenue. 

In 2021, many of these spots were occupied by U.S.-based law firms, including Kirkland & Ellis, Latham & Watkins, and Baker McKenzie. These firms generated a total revenue of almost $131B in 2022.

As we look to the future, it’s clear that the U.S.'s position as a global leader in the legal marketplace remains unchallenged.

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