November 12, 2015
By Emily Field
NEW YORK – A rapidly evolving cybersecurity landscape will continue to make privacy one of the fastest-growing practice areas in 2016, according to a recent survey of top legal decision makers, and an increasingly aggressive plaintiffs bar means more class action work for firms.
In interviews with more than 300 corporate counsel at businesses with at least $1 billion in revenue, BTI Consulting Group identified in its BTI Business Development Opportunity Zones report mergers and acquisitions as another practice area set for growth next year, fueled in part by a steady rise in companies seeking out midsize deals.
But privacy will continue to grow at a much faster rate than other practice areas as companies of every size must navigate changing cyberrisks and regulatory demands, according to BTI President Michael Rynowecer.
High-profile data breaches, a heightened public awareness of cybercrime and ongoing debates in Congress over cybersecurity legislation are driving the need for companies to seek out legal advice to manage their cybersecurity risks, according to the report, which projects the market size in 2016 to $1.67 billion from $1.5 billion this year in spending for outside counsel.
“I don’t see anything in the future but growth in this area,” Robert Denney of management consulting group Robert Denney Associates Inc. said, noting an increased public worry about hackers and cybersecurity.
Cybersecurity is seen as one of the biggest risks in business right now, Rynowecer said, as companies are looking for advice on not only how to prevent a data breach but also what to do if their information is compromised.
“Not surprisingly, the biggest areas are some with the most sensitive information, such as banking, financial services, retail trade — [which have] lots and lots of small pieces of data about people and financial information,” Rynowecer said.
But he added that corporate counsel don’t see a lot of firms with deep experience in this area.
“There are lots of firms, with pockets of experience, but no one firm has emerged that can claim a stake in this area,” Rynowecer said.
Firms can take advantage of this area by reaching out to clients and teaching them about their cybersecurity risks before a breach occurs, he said.
In 2015, the number of companies facing at least one major class action rose almost 10 percent, according to the report, which forecasts a growth in spending for outside counsel in this market to $2.14 billion in 2016 from $2.10 billion in 2015. Major areas for class actions include food and beverage labeling, data security, Fair Credit Reporting Act and consumer fraud, according to BTI.
“The plaintiffs bar is getting more creative and moving faster than it used to in trying to initiate suits,” Rynowecer said.
Along with privacy and M&A, class action is another “very hot” market, legal recruiter Larry Watanabe of Watanabe Nelson said.
Clients are looking for firms that not only understand the legal risks posed by a class action but the business risks as well, such as one to a company’s brand or its ability to distribute a product, Rynowecer said. They want attorneys who understand the business implications, so they have the full knowledge of what the exposure is.
“The legal risk may be 50-50, but it may be affecting a product line that provides 50 percent of the company’s profits,” Rynowecer said.
The M&A market is experiencing a resurgence, according to BTI, due to an increased interest in midsize deals by companies seeking out strategic transactions to expand customer bases, acquire new technologies and enter new geographic markets.
“There’s an insatiable appetite for midsize deals,” Rynowecer said. “Non-U.S. based companies, for example, are very aggressively seeking out many midsize acquisitions.”
This renewal is driven by an improved economy, legal industry experts said.
“We have healthy economy going into 2016, and M&A is driven entirely by the economy,” Watanabe said, noting that firms now have the capital to acquire raw businesses — although that could change on a dime if the economy stumbles and interest rates aren’t raised.
According to the report, spending in this market for outside counsel should grow to $5.32 billion next year from $5.15 billion.
Global enterprise transactions will also help to buoy this market, Rynowecer said, adding that having the capability to execute deals and understanding how clients want the transactions structured will help firms compete in this area.
Exceptional client service is also key to having a toe hold in this market, Rynowecer said.
“The only reason corporate counsel will refer a law firm is because of its client service,” he said.