Category Archives: In the Press

CORONA, PUTIN AND BIG LAW’S LATERAL HIRING RODEO

These last two years may have been the wildest ever in the history of BigLaw lateral hiring.  Before recruiting at major law firms came to a virtual standstill In March 2020 when much of America shut down in the hope of curbing the COVID epidemic, we had been enjoying boom market conditions for about a decade since the end of the sub-prime crisis of 2008 and the resulting Great Recession.  But we were ready to hit the brakes fast and so we did.  An interesting indicator of the extent to which COVID-related fears impacted hiring is simply noting the number of job postings that were eliminated from law firm websites in March 2020 in comparison to the previous four-year average for March;  while from 2016 to 2019, on average only 730 attorney job listings were eliminated from firm websites, almost three times that number (1857) were erased in March 2020.  See Lateral Hirings Plummet Amid COVID-19 FearsSee also Lateral Hiring Fell in 2020 – You Can Probably Guess Why – The Texas Lawbook

It is no overstatement to recall that many felt the end of the world was upon us, and law firm hiring managers were no exception;  the vast and brutal devastation caused by the new deadly virus was all around us and the utter helplessness we felt in defending against it was paralyzing for all but the most steadfast law-firm hiring managers as corporate clients tightened belts, keeping more and more legal work in-house and in many cases delaying payment on law firm bills for services already rendered.  But hiring freezes was just step one; most major firms reacted quickly to shed every ounce of fat possible from their overhead, many cutting into lean meat as well in order to enhance chances of survival with attorney and staff pay cuts, layoffs and reduction of real estate commitments being the primary means of preparing for the worst.  See BigLaw Associate Layoffs in 2020 Were ‘Reminiscent Of 2009 And the Great Recession, see also Wake Up Call: Goodwin Unloads Associates Via ‘Stealth Layoffs’: Report (noting that some 69 law firms had announced pay cuts for associates and non-equity partners by May 2020 in reaction to the COVID pandemic), and see Skadden is latest firm to announce layoffs; experts say more law firms will follow, and see More Associate Salaries on the BigLaw COVID-19 Chopping Bloc.

But lo and behold, as 2020 progressed and business leaders proved deal hungry resulting in increased demand for legal services, law firms found themselves not only leanly staffed but busier than ever, enjoying record revenues and profits and compelling law firm hiring managers to shift gears from pedal-to-the-metal reverse to first gear forward.  See Law Firm Revenue Shoots Up in Booming First Nine Months of 2021And see Big Law Firms Prosper Despite Covid-Impaired Economy.

This dramatic shift resulted in a hiring frenzy for service attorneys accompanied with the adoption of record base-salaries and bonuses in order to effectively compete for talent.  Davis Polk was the first firm to swing its wad, offering pandemic bonuses to service attorneys ranging from $7,500 to $40,000 as a function of seniority, many other elite firms quickly following suit.  See Top 20 BigLaw Firm Matches Salaries That Go Up To $415KSee also Salary Wars Scorecard: Firms That Have Announced Raises (2022).   And see A Quarter of U.S. Firms Raised Wages, Gave Bonuses in Covid Era.   At the same time, service attorneys who had become accustomed to working remotely during the pandemic expressed their sense of heightened power vis-a-vis their law firm employers by rejecting calls to return to the office at least three days per week when the pandemic began to feel more under control:  See Wake Up Call: Lawyers Reject Three Days in Office, Survey Finds

That said, the euphoria among service attorneys and managers alike appeared extreme and it felt to market observers that many of them seemed to forget that such good times always eventually end (see, for example The legal talent war that broke out in 2021 shows no sign of slowing down) despite warnings that restraint was in order.  See, for example ‘The pay rates for lawyers are unsustainableSee also Big Law’s Soaring Profits May Be Next Pandemic Darling to FalterAnd see Law Firms Reverse Coronavirus Cuts, but ‘Triage’ Not Over Yet.  

Then, just short of two years from the date the music stopped in March 2020, Russia invaded Ukraine and, when the invasion was met with more resistance than Putin anticipated, the unthinkable happened: he threatened the use of nuclear weapons if he alone deemed that measure necessary.  While BigLaw pulled out of Russia in an expression of outrage, see, for example, Dentons, DLA Piper End Ties With Russia as War’s Toll Mounts, the thought that one irrational actor could unleash a nuclear arsenal on the West helped send deal activity and equity markets tanking, along with them all those vast paper profits, Paul Weiss reporting that in March 2022 U.S. deal count and total deal value decreased 29% and 34%, respectively among other similarly sobering statistics.  See PowerPoint Presentation (paulweiss.com).

It’s still too early to tell for sure, but this legal recruiter anticipates another quick switch of the gears to reverse on the part of law firm hiring managers, law firms once again anticipating struggles to make good on compensation guarantees and other financial commitments entered into during the euphoria of COVID-era record revenue and profits and corresponding demand for legal services.  At Hanover Legal, we constantly urge restraint, caution and due diligence in exploring options, reminding our clients that since the dot-com bubble burst of 2000, on average one AmLaw 100 firm has collapsed every year and a half, the most recent being LeClaire Ryan after a string including once venerable giants Brobeck, Heller Ehrman, Wolf Block, Thelen, McKee Nelson, Thacher Proffitt, Bingham McCutcheon, Dewey & LeBoeuf and Chadbourne.  See, for example Law firms had another big quarter, but associate pay is taking a toll.  Unfortunately, we believe that the question is not if but when a major law firm or two will be bucked off this raging bull.  We also anticipate an increase in law firm merger activity as a hedge to ensure survival.  Come what may, Hanover Legal remains on board to assist our law firm and attorney clients in any way.

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!

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.