Covid 19, Fall 2021 and BigLaw 2

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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.

BigLaw’s Heartbreak Hill

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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!

Recruiting During the Corona Pandemic

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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.