BigLaw’s Heartbreak Hill

Anyone following the market of BigLaw is aware that over the course of the past two decades, AmLaw 100 firms have collapsed or been acquired at the rate of one every year-and-a-half or so, remembering with either nostalgia or disdain once venerable names like Brobeck, Coudert Brothers, Heller Ehrman, Thelen, Brown Raysman, Thacher Profitt, McKee Nelson, Dreier, Howrey, Dewey & LeBoeuf, Wolf Block, Bingham McCutcheon, and Chadbourne.  The demise of most of these firms can be attributed primarily to one fatal flaw which manifested during the various crises we’ve collectively experienced since the onset of this millennium: irrational exuberance and the dot-com bubble, greed and the sub-prime bubble or lack of practice area-diversity and the great recession. Others took stock during periods of relatively stability, arriving at sanguine decisions to salvage what remained viable and attach to a stronger ship or simply dissolve. Either way, the market of BigLaw is contracting quickly and in constant flux, the current pandemic offering no respite.

At the onset of Covid-19, BigLaw by and large halted lateral partner hiring. But as the pandemic continued on with no end in sight, while weaker and more risk-averse firms stagnated on the lateral partner acquisition front many simultaneously suffering increased rates of lateral partner departures, stronger and less risk-averse firms solidified their respective bases acquiring aggressively on the lateral partner market thus increasing revenue and profitability gaps and rendering weaker and less aggressive firms more vulnerable and further diminishing their ability to effectively compete.

Specifically, over the course of this pandemic during which lateral partner activity has dropped approximately thirty percent from pre-pandemic rates (see https://www.law.com/dailybusinessreview/2020/10/08/dragged-down-by-finance-and-energy-the-lateral-market-has-cratered/), firms that have pushed hard and achieved net gains on the lateral partner acquisition front thus widening the gap between them and their competitors include King & Spalding, McDermott, DLA, Greenberg Traurig and Cozen O’Connor (see https://www.law.com/americanlawyer/2020/10/12/opportunity-in-crisis-these-firms-seized-on-an-unusual-lateral-hiring-market-in-2020/, citing data accumulated by legal consultancy firm Decipher)). In contrast, from January through August 2020, Boies, Schiller & Flexner hemorrhaged 50 of its 142 partners or over one-third of its partnership while only adding two lateral partners during the same period. (See https://www.abajournal.com/news/article/these-larger-law-firms-had-the-most-partner-exits-one-firm-says-pandemic-changed-career-plans/).

Over the next few months we can expect to see more firms coming out of lateral partner hibernation and anticipate hiring approaching pre-pandemic rates, with continuing strong lateral activity in bankruptcy and data privacy and increasing movement in labor and employment, white collar and other regulatory specialties. That said, as our fiercely competitive market works its way through these current challenging times, the pack of leading firms will continue to dwindle in number and distance itself from weaker or more risk-averse firms, some of which will inevitably be acquired or dissolve as BigLaw further contracts.

Thankfully and much more importantly though, now with an effective Covid-19 vaccine apparently only months away, we may finally be approaching the top of this particularly excruciating Heartbreak Hill. In the meantime, we at Hanover Legal remain on call and available to assist law firm managers and partners with whom we are privileged to work towards the achievement of their goals with respect to the market, as we have during the previous challenging periods we have experienced together since our founding in 2000.

Stay safe and healthy and Happy Holidays!