Despite weak demand, a decline in productivity and lower hourly rate increases than the national average, corporate law firms based in Texas experienced major increases in revenue and profits per partner in 2025, according to a new report by Citibank’s Global Wealth Law Firm Group.
Citi’s Michael McKenney said 2025 started slow for the business law community with fears about a federal government shutdown and other macro concerns but ended the year in record fashion.
“The strength of Q4 is actively carrying law firms into 2026, thanks to large cap transactions,” McKenney told The Texas Lawbook. “The fourth quarter was the strongest year in history for M&A dealmaking by volume at $947 billion, which was mostly from the technology, power and industrial sectors. Sponsor-backed M&A activity was also at record levels.”
The Citi Law Firm Group data shows that:
- Texas-headquartered firms saw 2025 revenues climb 13.7 percent in 2025, which compares to 12.1 percent nationally;
- Demand for legal work for Texas firms increased by a mere 0.5 percent, while nationally it was 2.5 percent;
- Lawyer headcount at Texas firms grew by 2.3 percent, versus 3 percent nationally;
- Texas-based firms increased billing rates by 7.3 percent, compared to 9.7 percent nationwide;
- Expenses at Texas firms jumped 7.5 percent, well below the 9.9 percent nationally; and
- Profits per equity partner soared 20 percent last year, compared to the national average of 16 percent.
“I’m not seeing the same pace of bill rate increases that I am seeing in other markets,” McKenney said. “The market has provided Texas firms cover from larger rates increases, but the Texas firms are not being as aggressive as they could.”
McKenney attributes the revenue increases in Texas to an “acceleration of the collection cycle.”
“Firms got to cash collections faster,” he said. “Texas firms seem to pull other levers of profitability very effectively.”
The Citi data shows that inventory — lawyer hours worked but not yet billed or collected — stood at 14.7 percent nationally, but only 7.6 percent for the Texas-based law firms.
McKenney said Southern California-based law firms saw 2025 revenue increase the most — up 15.8 percent.
That number is also great news for lawyers in Texas because several Southern California-founded firms, including Latham & Watkins, Gibson Dunn, O’Melveny & Myers and Paul Hastings, have large Texas offices.
Texas-based law firms increased their equity partnership numbers nearly three times more than the national average — up 1.4 percent versus 0.5 percent.
“Texas firms are using equity partnership as a defensive strategy for retention,” McKenney said. “Instead of lose them to a competitor, they can promote them to partner and immunize them from that pitch.”
McKenney said the “challenge for Texas firms is going to be attracting those new matters.”
“Macro events tend to throw forecasts into turmoil,” he said. “We don’t know what is going to happen to interest rates. We thought we knew what we had with the new fed chair. We assumed lower interest rates causing M&A transactions would accelerate in the middle market. As we sit here today, who knows?”