Corporate lawyers in Texas were busier handling mergers, acquisitions and capital market transactions during the first half of 2026 than in any six-month period since 2021 and the tail end of the Covid-19 pandemic, according to new Citi Global Wealth at Work Law Firm Group data released exclusively to The Texas Lawbook.
The Citi data shows that Texas businesses’ demand for legal services and lawyer headcount were up slightly, while the legal fees charged by Texas lawyers were up an astonishing double digits.
But the data also shows a widening gap in demand and revenues between law firms headquartered in Texas and elite out-of-state firms operating in Dallas, Houston and Austin, which are growing faster and making more money.
“What really jumps out at me right now is the fact that we are off to such a very strong start in H1 2026,” Michael McKenney, managing director at Citi’s Law Firm Group, said during an exclusive Texas Lawbook webcast. “It was very strong both in our litigation book and in our transactional book, and it was strong across all regions.”
Texas-based law firms — Akin Gump Strauss Hauer & Feld, Baker Botts, Bracewell, Jackson Walker, Susman Godfrey, Vinson & Elkins and Winstead, for example — saw the demand for their legal services increase by 2 percent during the first six months of 2026.
The Texas-headquartered corporate firms grew their lawyer headcount by 2.6 percent during the first six months of 2026 and increased their hourly rates charged to clients by 10.3 percent — up from the 7.3 percent rate hike increases they saw in H1 2025, according to Citi.
McKenney said that it “doesn’t seem like there’s much pushback from clients” on the large hourly rate increases.
Despite these data points, Citi reports Texas-based firms actually saw their H1 2026 revenue decline by 4 percent. But McKenney said the Texas-based firms ended the first half of 2026 with a 13 percent jump in inventory (hours worked for clients but not yet billed or collected), which he said “positions [Texas firms] very well for what we think is going to be a very strong second half.”
“The other thing I would call out, and this is important, is that our cash collection cycle has lengthened about 18 percent,” McKenney said. “That work is largely lodged in the unbilled time category, and so the challenge for the second half of 2026 is going to be getting those invoices out the door.”
At the same time, expenses for the Texas-based firms jumped 6.7 percent in H1 — a 5.1 percent increase in lawyer compensation and an 8.2 percent spike in operating expenses.
“AI spending is not as high as some of the conversations might suggest,” McKenney said. “It’s still less than 1 percent of revenue, although it’s certainly rising fast. But the spending that we are seeing right at the moment is around occupancy. So as people are getting back into the office as headcount continues to grow, we’re seeing firms take additional space, and that space is built out to a higher spec and higher technical performance.”
“The other thing we’re seeing is the cost of our professional-staff organizations rising,” he said. “The mix of our staff is changing such that it is higher-value roles.”
By contrast, the Citi data shows that national law firms from four regions of the U.S. — California, New York, Chicago and Atlanta — are achieving record success, including an 11 percent jump in demand for legal services and a 16 to 18.5 percent increase in revenue for the first six months.
That’s not a coincidence, according to McKenney, as the corporate law firms with the best financial results from those regions have large and thriving offices in Dallas, Austin and Houston.
The California firms that have large operations in Texas include Gibson Dunn, Latham & Watkins, O’Melveny, Paul Hastings, and Sheppard. The Chicago firms include Kirkland & Ellis, Sidley Austin, Winston & Strawn and Katten. New York firms Simpson Thacher, White & Case and Willkie have seen major growth in Texas. King & Spalding, Alston & Bird and Troutman Pepper Locke, which merged with Locke Lord, are the Atlanta firms with the largest operations in Texas.
“I think what’s still happening is we’re seeing share taken away by the non-Texas-based firms,” McKenney said. “They are extremely active in the large-deal transactional market, and it’s far more likely that somebody will go to one of those AmLaw 25 or AmLaw 50 firms.”
Publisher’s note: Texas Lawbook Premium subscribers can see the entire webcast with Citi’s Michael McKenney here.