Law Firm Demand Up 3.3% in Q4; WasThere Really an M&A Dip?; Are Rates Too Low?

Law firm demand remained solid in Q4.  Hours worked across U.S. firms increased 3.3% year-over-year, according to the Thomson Reuters Law Firm Financial Index ("LFFI Report"), which tracks financial data from 171 U.S. firms across the Am Law 100, Second Hundred, and Midsize segments.

Growth was broad-based across practice areas, with litigation and real estate leading the way.

M&A Dip?

Some reporting described a 5% “dip” in Q4 M&A activity, but that characterization risks over-stating what primarily was a moderation in year-over-year acceleration, not a significant contraction in activity. 

The LFFI measures growth year-over-year, not sequentially quarter-to-quarter.

So when:

·       Q3 2025 shows 7.6% growth, and

·       Q4 2025 shows 2.6% growth

…it does not mean M&A activity fell 5%.

It simply means:

·       Q3 2025 was much stronger than Q3 2024, and

·       Q4 2025 was moderately stronger than Q4 2024.

In other words, Q4 still reflected positive demand growth.

For a true sequential comparison, Thomson Reuters’ weekly adjusted growth metric shows only a 0.6% slowdown from Q3 to Q4.

Rates Too Low?

Firms have pushed through significant annual rate increases in recent years, and many partners worry about the strain this puts on long-term client relationships.

However, according to Law.com’s recent Attorney Compensation Survey, most partners believe their rates are appropriate — or even too low.

Among equity partners:

·       49% of equity partners say their rate is about right

·       34% believe their rate should be higher

·       Only 17% believe their rate is too high.

The pattern is similar for non-equity partners.