Corporate legal departments almost doubled the proportion of their legal budgets they spent on M&A advice last year, according to a new report from LexisNexis CounselLink.

The 2022 Enterprise Legal Management Trends Report showed that M&A represented 7.4% of total legal billing in 2021, up from 4.3% in 2020, reflecting the surge in deal activity last year. Firms also charged more for their M&A advice – the median partner billing rate for M&A work was $878 an hour, a 6.1% increase on 2020’s median rate. Average hourly partner rates also increased across the board, growing 3.4%. Insurance partners billed the least at $234 an hour.

Kris Satkunas, director of strategic consulting for LexisNexis CounselLink and author of the report, said: “Despite pandemic-related and other pressures for legal departments to reduce outside counsel spending, hourly rate increases paid to US firms showed no signs of slowing.”

The largest 50 law firms continued to account for the largest portion of US legal budgets, with almost half of all outside counsel spend (46%) paid to those largest firms, in line with previous years. That share was even higher for certain types of work, with 61% of M&A, finance and regulatory and compliance-related legal spend going to those largest firms. Almost 60% of in-house teams consolidated 80% or more of their legal work with 10 or fewer firms last year.

Corporate legal teams continued a 10-year growth trend of moving away from hourly billing. On average, some form of alternative fee arrangement was used in 14.8% of matters, while some form of alternative fee was used in 9.6% of billings. That compares to 12% and 7% respectively a decade ago. The types of work that most attracted alternative fee arrangements were IP, labour and employment and insurance. The matters that were more likely to be billed by the hour included environmental, commercial and contracts and litigation work.

Satkunas said: “In the current inflationary environment, it is increasingly important for corporate counsel to keep an eye on rate trends and work closely with outside counsel to manage costs.”