To be clear, 2011 was marked by stability in the world of BigLaw only in a relative sense, 2009 being characterized as perhaps the most tumultuous year in the history of major law firms and 2010 by paralyzing risk aversion and the refrain “flat is the new up.” Lateral hiring of associates and other service oriented attorneys picked up a trickle as the strongest of our major players sought to regain some of the bench strength they had let go in the aftermath of the 2008 Wall Street collapse, the leading pack ever thinning. Trimming and efficiency remained priorities as corporate clients continued to enjoy growing leverage over their law firm advisors, and law firm mergers and acquisitions were abundant as more players found themselves struggling merely to stay afloat while those not fortunate enough to accurately gauge the dangers around them or find healthier players on whom to link were swallowed up by the relentless waters around them.
By the end of 2011, Cleveland’s Squire, Sanders & Dempsey had merged with London based Hammonds; Atlanta’s Kilpatrick & Stockton with San Francisco based Townsend and Townsend and Crew, Boston’s Edwards & Angell with Chicago based Wildman Harrold, Indianapolis’ Baker & Daniels with Minneapolis’ Faegre & Benson, San Francisco’s Howard Rice with Washington, D.C. based Arnold & Porter, and U.S. global monolith DLA Piper with Australia’s Phillips Fox adding about 600 lawyers to create the world’s largest law firm with more than 4,000 attorneys. In the meantime, Howrey declared bankruptcy and dissolved, many of their productive partners finding refuge aboard Chicago’s Winston & Strawn.
While corporate work diminished and civil litigation by and large stagnated amidst decreasing deal work and companies’ reluctance to gamble, white collar criminal work continued to flourish. Whether or not the languishing economy was in part to blame for the white collar uptick, the year saw its biggest insider trading case in history against the Galleon Group family of hedge funds and its founder Raj Rajaratnam, in which two former Ropes & Gray associates were deemed complicit. The American Lawyer reported that aggregate gross revenue among the largest 100 U.S. based firms increased by four percent in 2010 negating a virtually equivalent loss in 2009 and the number of attorneys affiliated with these firms decreased by 2.7 percent, together with other cost cutting measures leading to an overall jump in profits per partner at the largest U.S. 100 firms to almost $1.4 million. However these findings were called into question by the Wall Street Journal, which opined that more than half of the top 50 U.S. law firms may have exaggerated their profits per partner numbers citing an industry analysis prepared by a unit of Citigroup Inc. indicating that about 22 percent of the top firms overstated the 2010 measure by more than 20 percent.
To name a few major firms, Weil, Schulte, O’Melveny, Dechert, Cadwalader, White & Case, Shearman & Sterling and Debevoise announced falling revenue for 2010, whereas Paul Weiss, Patterson Belknap, Fried Frank, Cahill, Proskauer and Gibson Dunn announced increased revenue and profits, the latter reporting that it broke the one billion dollar mark in gross revenue for the first time in the firm’s history. Overall, the legal industry lost about 3000 jobs in 2011, outsourcing becoming an increasingly popular trend among the nation’s largest firms in response to unrelenting pressure from clients to reduce costs and amidst fierce competition for their business.
In the absence of significant economic policy initiatives emanating from Washington and a languishing global economy, it seems clear that the the pack of leading firms will continue to thin in 2012. The more profitable and less risk averse firms will continue to venture into opening emerging markets in Brazil, China, Turkey, South Korea and Israel, and the strongest players like Cahill, Sullivan & Cromwell, Simpson Thacher, Cleary and Cravath will continue to outpace the rest of the market by implementing such token measures as awarding mid-year bonuses to their associates. Rainmaking partners will be at even more of a premium on the lateral market in 2012, and will be especially drawn to the aforementioned dominant players able to attract top associate talent. Firms will continue to expand their white collar practices in response to enhanced regulation and more vigorous financial crimes prosecutions while firms world-wide will face an even harsher competitive environment for business. With law schools continuing to churn out record numbers of graduates seeking employment, students will increasingly opt for non-legal options in industries where their skills and talents are likely to add substantially more value.
As more firms struggle to stay afloat and both the supply of and demand for rainmakers heightens, our consultants at Hanover Legal expect to be busy in 2012 advising prospective laterals and firms alike as to how to act prudently in the current market. As always, we warmly welcome your inquiries.