Legal Market

Spectral analysis

Revenue growth of 20% is a fairly good financial outcome for 2018. The increase in profitability was recorded in all key market segments. But lawyers still earn in the main from resolving various kinds of conflict situations


The total income of the top 50 leading law firms of Ukraine for 12 calendar months (IV quarter of 2017 and I–III quarters of 2018) came to UAH 6.5 billion, which is 20% more than was recorded in the previous survey period. At the same time, the income structure, both in terms of individual directions of legal practice and in terms of main customers of legal services, did not change dramatically. This gives lawyers reason to be cautiously optimistic both in assessing the results of the outgoing year, and in the forecasts for the coming year.

"The legal services market is extremely sensitive to two factors: sustainable economic growth and entry of foreign investors", Denis Mirgorodsky, the managing partner at Dynasty Law Firm, emphasizes. According to his observations, there are some prerequisites for the slow growth of the market, although the volume of orders in 2012–2013 won't be caught up soon.

Denis Lysenko, managing partner at Aequo Law Firm, commenting on the market situation in 2018, noted the limited growth of total volume, due in the main to a further increase in the dispute resolution segment, as well as increase in the number of regulatory practices. "Transaction work was distributed unevenly, with considerable distortion towards 10-15 top players, and its volumes varied significantly in different quarters. Unfortunately, a boom in M&A and capital market transactions is not expected in the coming year, because, against the backdrop of a slowdown in the global economy, the country risks of Ukraine are still too high in the eyes of investors with the necessary liquidity. Exceptions (including activity in the alternative energy sector) only confirm the need for special incentives to attract strategic investment in our current macroeconomic and geopolitical situation. Improving the rules of procedural codes and strengthening the Bar’s role in judicial proceedings in 2019 are more likely to lead to a sustained increase in the volume of work in judicial practice, especially in view of the presidential and parliamentary elections and potential structural changes in the Ukrainian economy resulting from them", Mr. Lysenko said.


Facts and figures

Within the framework of the "Top 50 leading law firms of Ukraine in 2018" survey, participants were invited to specify the main specializations holding the largest share in income generation of their law firm. On the basis of data obtained, it is possible to determine both the most common and the most profitable practices (highlighting the share occupied by a separate practice in the total profitability). We surveyed individually clients from industries which contributed to filling the budgets of law firms practicing in Ukraine. And since participants of the survey are law firms representing all sectors of the business-oriented market of legal services in terms of both scale and geographical activity, the data obtained is quite representative.

So, according to the data obtained, the most common practice is dispute resolution, as expected: judicial practice provided 19.2% of budget revenues of law firms, and international arbitration — 5.03%. The business protection practice brought law firms 4% of their income during the survey period. The volume of work with distressed assets is in a downward trend and decreased compared to the previous year: for example, the bankruptcy practice provided only 2.6% of the financial income of law firms, and debt restructuring — 2.9%. The popularity of criminal law practice is confirmed by objective data — 5.8% of the market in terms of profitability.

Corporate law and M&A practice as the second most common and profitable practice provided 14.1% of the financial revenues of law firms. This figure is still far from the achievements of previous years, but it has increased compared to the previous year and seems to have a reserve for further growth. As for "pure" M&A, 69% of survey participants mentioned the existence of the corresponding practice, and this is 10% more than a year earlier, its profitability increased proportionally, providing 6% of financial revenues in the top segment of the legal services market in 2018.

The three budget-forming practices traditionally include tax law with a stable indicator of 11% of total revenue. Banking and financial law practice is in fourth position again this year, with a yield of 6.6%. At the same time, the banks lead the way in terms of requests to lawyers, providing 15% of financial revenues to the legal market.

The competition law and intellectual property practices are traditionally niche ones. And the situation here is almost unchanged compared to the previous year.

The trend in sectoral specialization of law firms is continuing. Energy, pharmacy and the agricultural market were among the most profitable practices. However, despite the declared adaptation of services to the specific industrial needs of clients, few market participants practice sectoral structuring of their law firms, respectively, revenues received from agricultural or pharmaceutical companies are taken into account within the framework of "classical" practices (most of the issues which clients come across are beyond the industrial plane and are somehow related to dispute resolution, bankruptcies, restructuring, corporate law (including few M&A) and, of course, taxation). At the same time, law firms that have stated the profitability of industrial practices themselves are, indeed, leaders of the relevant industries, in some cases with boutique specialization in pharmacy or the agricultural sphere.

The main employer of law firms, as already mentioned, was the banking sector (15%), with energy in second position this year with 12.5% (the increase is obviously due to the active implementation of renewable energy projects), agriculture and food industry (11.1%) ranked third, real estate/construction and FMCG/trade closed the top five leaders with shares of 8.9% and 6.8%, respectively.