During 2024, law firms underwent major changes. On the one hand, competition to attract top professionals intensified, leading to higher-than-usual salaries being offered to certain key associates and professional partners to prevent their departure. While this served to retain talent, it also forced the partnership to rethink compensation systems that had long been the basis of its success.
At the same time, technology-especially artificial intelligence-began to influence legal practice. The big question was how much to invest and how to adapt processes to incorporate these tools in an agile but cautious way.
The start of 2024 was “slow”, but the second half of the year showed a recovery in the mergers and acquisitions (M&A) market in Latin America, especially in Brazil, Mexico and Chile, which helped firms meet their turnover targets. In Colombia, although growth was more moderate, the financial, insurance and retail sectors showed positive signs. Against this backdrop, the key question is: what could be the most pressing challenges for firms in 2025?
- The competition for talent: This will continue to be one of the great challenges. Several prestigious firms are competing to recruit high-performing lawyers or to bring in partners with very strong client portfolios. In this regard, some firms have opted to create nonequity partner categories or restructure internal compensation scales. However, there is always a risk that the expected business will not be generated, which could lead to partnership adjustments and a natural market adjustment in the medium term.
- Mergers and organizational growth: In the most consolidated markets with stable economies, mergers have been consolidated creating huge firms, with hundreds or even thousands of lawyers in different countries. This trend, common in Europe and the United States, is beginning in Latin America, although still on a smaller scale, but in a relevant way. Although economies of scale are not always a priority for law firms, growth can be key to competing in three markets: attracting partners, attracting clients and retaining talent.
However, these integrations require in-depth strategic analysis, careful operational planning and a realistic valuation of each party involved. Sometimes, reaching a certain size is no longer just a matter of strategy, but a matter of survival. That is why firms must remain alert to merger or integration opportunities in their environment, knowing that each operation involves challenges such as strategic management, process unification and accurate assessment of the value that each firm brings to the table.
- Rate adjustments and new forms of billing: In major Latin American markets, some top-tier firms have managed to increase their hourly fees to match those in European markets such as Spain, something that previously seemed elusive. However, this rate increase is not uniform: large firms involved in high-value transactions have been able to impose such rates thanks to their reputation and prestige, while smaller firms face difficulties in raising them because their clients tend to be more price-sensitive. At the same time, larger firms requiring legal services are able to negotiate more significant discounts, while smaller firms suffer from a lack of bargaining power. This has led some firms to opt for fixed prices or more flexible service packages to retain clients who cannot afford such high fees, although this strategy can have immediate consequences on their positioning, since reducing their fees penalizes the margin of partners and the salary they can offer associates, which pushes them to compete with less prestigious firms. In the end, the challenge for all firms lies in demonstrating the value of their services, as those that manage to justify the price increase will be the main beneficiaries of this upward trend.
- Artificial intelligence: In terms of innovation, analyzing how artificial intelligence can help or affect in the short term is a key point. Many firms have formed committees to evaluate what technological tools they could implement, such as automatic redaction systems, intelligent document search or predictive case analysis. Although investment is still low, it is certain to increase, although it is too early to know how and where. The challenge is to intelligently choose the right solutions and train the team to use them with maximum security and efficiency. It is not just a matter of acquiring software, but of modifying internal processes and ensuring the protection of confidential customer information. Firms that take good advantage of “AI” will be able to offer faster and higher quality service and become competitive leaders in the market. But it is probably still too early to go out on a limb and make decisions.
- Market size: Finally, the mergers and acquisitions (M&A) market continues to be a mainstay for firms advising companies on the purchase and sale of other companies.
A recovery has already been noted in 2024. Even so, it seems foreseeable that 2025 will bring more activity, especially if domestic demand is reactivated and global trade continues to revive, especially that resilient sectors such as technology, finance and fintech and FMCG, will maintain a solid pace of investment, and firms that are working closely with these sectors may benefit from their operations.
In conclusion, 2025 will be a year full of challenges for law firms and especially of opportunities for those that know how to adapt to such a dynamic market. Firms that strike the right balance between attracting talent, expanding through mergers, effectively implementing “AI” and setting competitive rates will be in a better position to serve their clients’ needs and strengthen their reputation.
- Antonio Gómez Montoya, partner of Black Swan Consultoria