Category Archives: BigGlobalLaw

2023 and Big Law’s Accelerating Contraction

It was refreshing to hear Jonathan Harmon, Chairman of 189 year-old Richmond-based McGuireWoods, declare last week what most of his BigLaw peers are or should be thinking:  “We are looking to grow and aggressively looking to talk to firms who are of the mindset.  I believe that the market’s consolidating and that you’re going to have to have scale.”  See McGuireWoods ‘Aggressively’ Seeks Merger Partner, Chairman Says.   The extent to which McGuireWoods will be successful in its efforts to find firms to acquire or with which to merge remains to be seen, but we have no doubt that they are more likely to be successful than firms waiting for opportunities to come in over the transom.  Mergers and acquisitions are inevitably fraught with obstacles and challenges, and thorough market due diligence of merger and acquisition opportunities obviously maximizes the potential to find suitable partners while minimizing the risk of stagnation and failure.  As Harmon elaborated: “Finding the right firm to acquire, merge with, is hard,” recollecting an acquisition a few years ago that turned out to be a “disaster” as the new attoneys “weren’t culturally aligned” with the venerable Richmond firm.  Id.  You have to be aggressive, you have to expect that most of your conversations will not lead to a marriage, and accept that nothing ventured usually equals nothing gained and a passive approach is less likely to yield positive results.  As Harmon put it, “I’m more frank about it.  If you’re coy and you’re pretending ‘Hey, I don’t want to date,’ you may not get one.”  Id.  

The good news for Harmon and like-minded firm leaders is that there is a substantial array of attractive merger candidates for robust and healthy firms.  As to McGuireWoods, with gross revenues rising 16% over the last five years to its current level of just south of $1B and profits per equity partner increasing at an even faster rate over the same period to just south of $2M, there can be no doubt that they will be seriously considered as a merger partner by more big firms whether those firms choose to remain coy about their respective appetites for exploring or not.  Moreover, as the geopolitical climate continues to feel unstable and financial markets remain volatile and at levels substantially off their highs of two years ago, major players are likely to be less brash and confident about their ability to thrive on their own or remain competitive merely through organic or individual or small group lateral growth.  Finally, law firms are continually facing new competition from non-attorneys operating ventures seeking to provide comparable legal services at lower rates.  See id.   All of which will lead to more firms talking to one another, and more mergers and acquisitions. See also Law firm mergers gained steam in 2022, with more on the way in 2023, and Wake Up Call: Law Firm Mergers Apt to Rise in 2023, Report Says.  And see McKinsey’s 10 Principles for Successful Law Firm Mergers, which succinctly notes as follows:  “Market forces have led to the consolidation of a number of professional services sectors. In accounting, for example, the Big Four account for more than 60% of the U.S. market. There is good reason for this: research has shown that across industries, organizations with a systemic M&A strategy delivered better shareholder returns. Organizations that relied solely on organic growth, on the other hand, performed relatively poorly.  Legal services are not immune to this trend: consolidation is well under way, albeit not to the same extent as in other sectors. In 2017, the largest five law firms by revenue accounted for 8% of the American Lawyer 200 revenue pool. By the end of 2021, that figure had risen to 14%… [A]s market pressures intensify and the first $10 billion firms emerge, the case for M&A is becoming stronger.”  Id.

So excellent work, Jonathan Harmon, and kudos to you for being so refreshingly straightforward.  We are certain that McGuireWoods’ future is bright, and are on board to assist you and like-minded BigLaw leaders in helping to take your extraordinary firms to even greater heights!

 

Covid 19, Fall 2021 and BigLaw 2

Since Hanover Legal’s founding in 2000, we have together experienced traumas that have shaken the foundations of BigLaw including the bursting of the dot-com bubble, 9/11, Enron, WorldCom, a war in Iraq and a global financial crisis — but none has impacted BigLaw like Covid 19.

When Covid made its ugly debut a year and a half ago, BigLaw’s reaction was predictable; fat cutting in the form of hiring freezes and layoffs, shedding real estate, re-prioritizing practice strengths and reinvigorized courting of old reliable and potential paying clients. No pundit however imagined that the following year and a half would see record BigLaw revenue and profits and firms leaner, meaner, with more cash-in-hand then ever before.  See, for example:  https://www.berdonllp.com/the-pandemic-paradox-law-firm-profits-rise-despite-covid-19/.;  and see https://www.law.com/americanlawyer/2021/01/25/the-lessons-and-implications-of-big-laws-stunning-2020-profitability/,  and https://www.economist.com/business/2021/07/15/americas-elite-law-firms-are-booming.

Moreover, BigLaw attorneys have been happier and more productive then ever as well.  By and large they are comfortable using the various video-meeting platforms and  don’t miss business travel and schlepping into the office every day.   And why would they?  Video-meetings are more cost and time efficient and pose no risk of contracting highly contagious and potentially lethal diseases, and what can beat working from home? And if any attorney is unhappy with their current firm for whatever reason, the cherry on the cake is that lateral hiring is booming .  See: https://www.law360.com/articles/1400812/lateral-hiring-plunged-in-2020-but-strong-rebound-underway,  and https://www.americanbar.org/groups/journal/articles/2021/new-data-shows-lateral-associate-hiring-happening-across-the-board/, and https://news.bloomberglaw.com/business-and-practice/surging-in-big-cities-lateral-hiring-is-a-hunt-for-higher-rates.

So as we ask the age-old question “Who knew?” we express our continuing gratitude for being privileged to remain on this journey with our BigLaw clients and reiterate our commitment to assist in any way while we navigate during these interesting times.

Recruiting During the Corona Pandemic

As the world struggles to cope with the Coronavirus pandemic and societies world-wide adapt in order to minimize risk of infection while remaining as productive as possible under the circumstances, most major law firms continue to recruit. What has changed primarily during this highly infectious crisis is merely the basic mechanics; firms are increasingly opting for telephone interviews instead of in-person meetings.

Perhaps more significantly, law firms like other entities are employing a gamut of strategic approaches to this crisis as in any other crisis; some viewing it as an opportunity to take advantage of diminished competition to recruit even more aggressively and realize gains that may have been unattainable in a relatively calm and stable environment, others plodding forward as if it’s business as usual, while a few more skittish players have paused recruiting altogether promising to reconvene only once the crisis has stabilized. We remind the attorneys we are privileged to represent that while we live in interesting times and how we react during heightened uncertainty can be defining to us, the same applies to the firms they are considering joining, this time of crisis providing a rarely available window for due diligence with respect to a firm’s culture and their way of conducting business.

We urge our law firm and attorney clients alike to proceed with the mindset that this too shall pass, and to resist the temptation to put recruiting on hold. On the contrary, view this as an opportunity to make particularly attractive gains in a largely panicked market that will likely be unavailable again until long after we have come to grips with this crisis as we have all the others that have preceded it.

Since Hanover Legal’s founding is 2000, we have together survived a number of other crises and can fully expect to see a few more once this one too has faded into memory. We assure all of you that as our understanding of the Coronavirus continues to evolve, we will remain on board with you here as well and eager to assist you in any way.