Category Archives: Dissolutions

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!

Wishes and Predictions

While we are all relishing our last day of this holiday season and gearing up for 2019 and the inevitable challenges the new year will bring, we thought it may be worthwhile to offer a few predictions as to the landscape of BigLaw during the year to come:

  • At least one AmLaw 50 firm will dissolve or be acquired;
  • At least two AmLaw 100 firms will dissolve or be acquired;
  • There will be a record number of lateral partner moves among the AmLaw 100 firms;
  • There will be a record number of law firm mergers among the AmLaw 200 firms;
  • All but one of the current AmLaw 50 firms will post increased revenue over 2018;
  • 48 of the current AmLaw 50 firms will post increased profitability over 2018;
  • AmLaw 50 firms will see record numbers of partner departures leaving to join boutiques or start boutiques of their own;
  • No transatlantic merger of Global 50 firms will be consummated.

With those predictions on the table, we look forward to reviewing each of our major firms’ reports of their own 2018 performance and tracking their respective performances in 2019 — wishing all of them the best of luck as the gun goes off bright and early tomorrow morning and while we commence our own 19th year of offering support to their attorneys and managing partners as they face their inevitable challenges over the course of the upcoming twelve months!

The Shrinking Pack of BigLaw Front Runners

As we enter the final ten of days of calendar year 2017 and contemplate resolutions and goals for the coming year, we take a moment to shift our focus and glance into the rear view mirror at the twelve months we are soon to leave in our wake.   From the perspective of this market observer, BigLaw 2017 looks like mile 17 of a marathon, with a handful of firms racing neck and neck, leading a pack of elite runners which is growing smaller mile by mile.

In terms of strategy, dominance for law firms can theoretically be attained by organic growth, individual attorney or group lateral acquisitions, smaller firm acquisitions or the rare merger-of-equals, but with the race for global market dominance among the few remaining elite-of-the-elite international firms only gaining intensity and more major-city markets being effectively closed to potential late-comers, law firm mergers and acquisitions have increasingly been defining competitive strategy over the last two decades, with 2017 being a record-setting year with about 100 law firm acquisitions tracked.  See  https://biglawbusiness.com/law-firm-mergers-on-record-breaking-pace-in-2017/.

The venerable London based firm of Norton Rose is a case in point, its 2017 acquisition of former AmLaw 100 stalwart Chadbourne representing only a piece of their current merger plans and recent merger history.  See  http://www.legalweek.com/sites/legalweek/2017/06/30/chadbourne-name-disappears-as-norton-rose-merger-goes-live:  “Norton Rose, the product of a 2013 mega-merger between Houston-based Fulbright & Jaworski and London-based Norton Rose, has expansion plans beyond Chadbourne.  Since the February merger announcement with Chadbourne, the Swiss verein announced plans to unite with Australia’s Henry Davis York … Norton Rose has been through a succession of major mergers.  It merged with Australian firm Deacons in 2010, then in 2011 with Canadian firm Ogilvy Renault and leading South African firm Deneys Reitz. These were followed by a second Canadian merger with Calgary’s Macleod Dixon in 2012, while legacy Norton Rose’s union with US firm Fulbright & Jaworski went live in summer 2013. The firm also inked a deal with Vancouver-based firm Bull Housser & Tupper in September 2016.”

With AmLaw100 firms disappearing at the rate of about one every year and a half, the question of which among them will be the next to fade away is fodder for odd makers.   But look to 2018 to see more BigLaw acquisitions and consolidations than ever before as the leading pack in the race for global dominance continues to shrink and the rest of the market grinds to remain viable.

The Ever-Contracting Landscape of BigLaw

Chadbourne’s February 2017 melting into Norton Rose Fulbright continues the trend of AmLaw 100 firms dissolving or being acquired or absorbed by larger, stronger players at the rate of one every year or so since 1999, starting that year with Brobeck and since followed by other now fallen but once-titans Coudert Brothers, Rogers & Wells, Rosenman & Colin, Kronish Lieb, Brown Raysman, Thelen, Thacher Profitt, Howrey, McKee Nelson, Dreier, Heller Ehrman, Wolf Block, Dickstein Shapiro, Dewey & LeBoeuf and Bingham.   Current firm rankings thus inevitably cause BigLaw market observers to ponder which are the currently rising or waning power-players therein, which is the next to be doomed to the in-memoriam list, and which three in all likelihood before the end of this decade.  Who are the great sharks in the ocean of BigLaw and who are their likely prey?

It is no secret that not only the biggest and strongest U.S. based firms have an increasingly whetted appetite for smaller firms which will enable them to enhance their global major market presence, but their London-based competitors are particularly hungry as well (see, for example “British Firms Still Trying to Conquer New York“, and “Are we about to see more UK-US law firm mergers?”).   Law firm sharks generally first seek prey not only with compatible and ideally complimentary practice areas, profitability and billing rates, but also displaying signs of weakness.   We refer our readers to our earlier post entitled  37 Signs That Your Firm May Be Sinking for indicators as to when a firm may become an especially attractive potential acquisition candidate.

In the meantime, our smaller and weaker players are increasingly frenzied to overcome the threat of falling victim to the hunt generally by one or a combination of several means:  merger with a relative equal in stature and profitability, see, for example, “Law Firm Mergers Off To Hot Start In 2017” ; “Law Firm Merger Mania Continues in First Quarter of 2017“;  “Law Firm Mergers Keep Pace with 2015’s Record”);  so called “one-off” individual lawyer or practice group lateral acquisitions, see, for example, The Lateral Report: Moves Hit a Post-Recession High;  Lateral Love: A Near-Record Year for Lateral Hires” or developing or enhancing a special niche or other competitive advantage.  See, for example,  “5 Reasons Large Companies Are Turning To Boutique Firms“;  “Boutique Law Firms: The Future of the Legal Profession?

In short, in the ever-increasingly treacherous ocean of BigLaw, it’s now more than ever be or be eaten.  Our consultants at Hanover Legal remain on call to assist all our clients in assessing how not only to survive, but grow faster, more efficient and thrive.

Brexit and BigLaw Stability

According to a report published on law.com on October 6, 2016, “global and European M&A deal volumes fell to their lowest levels for three years during the third quarter of 2016, following Britain’s vote to leave the European Union this June. Mergermarket data shows that 3,595 global deals were announced during Q3, the lowest quarterly figure since the second quarter of 2013 (3,546), and the worst Q3 since since 2012, when 3,296 deals were announced. Global deal volume fell by more than 20 percent on Q3 last year, when 4,501 transactions were announced. Meanwhile, the European market saw 1,323 deals during Q3 – the lowest figure since Q3 2012 (1,271).  Total deal values were also affected, with $8.13 trillion worth of global deals announced – 15 percent down on the same period last year, when total deal values stood at $9.58 trillion.”  This report has naturally sent chills down the spines of some of our attorneys.  So, how worried should we be?  Is the sky now really falling?

The answer in our view is yes and no depending on the strength of your firm’s platform, which is essentially a function of its current financial and cultural health, its ability to withstand short-term turbulence, and the extent to which it is balanced and diversified in terms of practice areas and geographic scope.  To put Brexit in perspective, BigLaw has recovered from other significant turbulence over the last few years, including, since 1999, the bursting of the dot.com bubble, September 11, Enron, WorldCom, the Iraq Wars, and the CMBS frauds leading to our most recent financial crisis.  With respect to Brexit, White & Case M&A global co-head John Reiss and Freshfields corporate head Simon Marchant offer the following calming observations:   “After Brexit,” says Reiss, “commentators struck the death knell for M&A.  It has had some impact, particularly on certain industries in the U.K., but its impact is, and will be, limited.”  Marchant similarly posits:  “What we saw during the aftermath of the financial crisis was that the market and clients can absorb quite a lot of uncertainty and nevertheless get on with their business…”  Id.  See also an article published shortly after the Brexit vote in the Financial Review entitled:  London Law Firms Shake Off Brexit as Revenue Rises:  “The elite group of “magic circle” law firms with headquarters in London increased their revenues last year and signaled that the global nature of their work would help them weather any UK downturn resulting from its decision to leave the EU…  Andrew Ballheimer, A&O’s global managing partner, called Brexit “the largest demerger in history”, adding that it would be “unbelievably complex”. He stressed that A&O’s business was “well hedged”, with just 35 per cent of revenues coming from Britain.  Matthew Layton, managing partner at Clifford Chance, said his firm too was “well hedged” to withstand any future UK slowdown.”

This is not to say, however, that the decreased global deal flow attributed to Brexit will not effect any of our BigLaw players.  We advise our attorneys to be wary of potential red flags with respect to the stability of your firm’s platform, to stay current as to the relative financial and cultural health of competing firms, and to be in as good a position as possible to jump to a more stable ship if the need arises.