Category Archives: BigLaw

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.

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.

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.