Slowdown in mergers and acquisitions 'may hit profits at law firms'
September, 19th 2016
The number of finance directors at the top 100 law firms who fear that M&A weakness will hit financial performance has risen to nearly a quarter - up 8% compared to 2015, according to research by Thomson Reuters Legal.
Global M&A activity dropped 18% in the first quarter of this year compared to 2015, as firms grapple with a Brexit vote blow to business confidence, a slowdown in China, and the ongoing oil price slump.
The UK has also experienced a slowdown in initial public offerings on the London Stock Exchange, slipping from 137 in 2014 to 92 last year, separate research from PwC revealed.
Samantha Steer, Thomson Reuters UK&I Legal's director, large law segment, said: "The buoyancy in M&A transaction volumes last year was a key driver of profitability for law firms, but further growth was in question even before the Brexit vote and will be even more so now.
"M&A transactions are a vital source of work for law firms, both in themselves and because they generate a significant amount of workflow across a range of other practice areas. If fears that corporate finance activity is weakening are realised, that could rattle the sector."
Law firm finance directors have predicted a bright outlook for the technology sector, with 28% forecasting a rapid growth in work, the report said.
However, they are more downcast about the prospects for the mining industry, as they expect the sector to contract this year.
Ms Steer added: "The slump in commodity prices caused by a glut in world supply of metals and a slowdown in China has created an environment where 80% of finance directors expect work from the mining sector to stagnate or contract in 2016 - the highest proportion of any area of work."