Ever since Linklaters first launched in the U.S. 50 years ago with an office in New York, it has had a tough time trying to establish itself as a key player in the market.
Like many of its international rivals, it has found the U.S. to be a brutally competitive place where the culture and economics do not necessarily play to its strengths. Yet the U.K.-headquartered firm’s progress in the U.S. since it arrived in 1972 has been slower than its key competitors.
In the last few years, it has not grown its headcount substantially, nor has it increased its market share. It also has failed to make a mark in the practice areas for which it is known and admired elsewhere in the world.
Now Linklaters has made some key changes that could finally put it on the map in the U.S. But is it too little, too late?
Where Linklaters Stands
Linklaters’ hiring stateside has been noticeably less than the likes of other U.K-headquartered firms such as Freshfields Bruckhaus Deringer and Allen & Overy, which have pursued a more aggressive strategy in recent years.
To be sure, last year Linklaters hired a duo from Prudential Financial to launch a U.S. data solutions, cyber and privacy practice out of the New York office, and then a partner from Loeb & Loeb. But this pales in comparison to some of its competitors.
In 2021, Freshfields opened an office in Silicon Valley that has performed particularly well, while Allen & Overy launched in Silicon Valley and in San Francisco with an eight-partner team from White & Case. A&O then opened an office in Los Angeles with a group of 19 lawyers from Akin Gump Strauss Hauer & Feld, and in 2022 launched in Boston with a life sciences litigation team from Goodwin Procter.
Linklaters’ revenue from its operations in the Americas, which include an office in Brazil as well as two in the U.S., has also declined in recent years. According to the firm’s limited liability partnership accounts filed in the U.K., £92.4 million, or 5.7% of the firm’s global revenue came from the Americas in 2020. This figure dropped to £91.2 million, or 5.5% of the firm’s total revenue of £1.77 billion, according to its 2021 LLP accounts.
In comparison, Allen & Overy’s 2021 revenue from the Americas was up from the previous year, totaling £161.2 million, or 8.9% of its overall revenue. Freshfields’ revenue in 2021 from the Americas stood at £174 million, or 10.6% of its total, and Clifford Chance’s revenue from the Americas was £246 million, or 13.5% of its total, according to Companies House, which publishes LLP accounts in the U.K.
Tony Williams. Courtesy photo.
“The problem for the Magic Circle is they realise if you want to be a significant global firm, 15%, 20%—up to 35% of your revenue coming from the U.S. is what you need to have a strong longer-term capability,” said Tony Williams, former managing partner of Clifford Chance and principal of Jomati Consultants.
“If you are going to be serious, 10% revenue in the U.S. is the absolute minimum. You need to be adding around 5% every few years, otherwise you can’t say you’re a truly global firm. The U.S. is half of the world’s legal market, you have to be there,” he added.
Linklaters is notoriously tight-lipped on the issue, refusing to provide comment for this piece, but current Linklaters partners say that the need to grow in the U.S. market is high on the firm’s agenda.
“There’s a desire to look at all the possible areas where we can be expanding profitably—certainly within our U.S. offices. Our U.S. team and the scope of the transactions they work on is pretty big, but the firm is always keen to grow there,” said one London partner.
“There’s an obvious focus on the U.S. It’s always important to have a strong global offering, and to do so you need that U.S. strength,” another London-based partner added. “It’s a particular focus of the firm to boost its base there.”
Linklaters currently has 33 partners in the U.S.—located in offices in New York and Washington, D.C, according to its website, although insiders insist others based outside the U.S. work on U.S. matters. The firm’s Washington office was closed in 2002 and remained shuttered for a decade because there was “no economic justification to keep the office open,” a spokesperson said at the time. Linklaters reopened that office in 2012.
Playing To Its Strengths?
The firm’s strategy is to expand on its current strengths and reputation—something that is easier said than done.
“We are not really set up to compete on domestic work in the U.S.,” so Linklaters must instead play to its strengths of doing large cross-border transactions, one London partner explained.
Credit: Tobias Arhelger/Shutterstock.com
The firm plans to build up specific expertise in certain practice areas in the U.S., such as antitrust, tax and regulatory, according to one partner. In areas where the firm already has qualified people, it will mostly look to expand with internal candidates, partners said.
One person familiar with the matter said these practices are part of a wider U.S. focus and strategy. And that, according to Williams, is critical if Linklaters is to succeed with its expansion plan.
“The advantage of antitrust and regulatory is it having a global reach—there’s a breadth and depth there,” he said. “And I don’t say they wouldn’t be relevant but…how are you going to be a major player without the major corporates, financings and litigation? If you’re admitting you’re not playing with those heavy hitters, I don’t think it will be enough.”
Megan Ridley-Kaye(L) and Peter Cohen-Millstein(R), who left Linklaters to join Hogan Lovells. Courtesy photo
One area the firm will be looking to bolster is its U.S. corporate offering, following the departure of Peter Cohen-Millstein in February. According to Linklaters’ website, there is now only one M&A partner in the New York office, although it promoted three mainstream corporate lawyers in the city in early April.
“Linklaters, the Wachtell of the U.K., just lost their only real public M&A partner in New York and a big chunk of the practice is walking out the door,” a U.S. recruiter said of the move, comparing the firm to the top Am Law firm Wachtell Lipton Rosen & Katz, known for handling major M&A, shareholder litigation and other corporate work. “That’s a major loss for them. They were doing the very bare minimum to maintain a presence here and now as a result they are really losing their diamond.”
The firm has done 22 M&A deals with a U.S. involvement since the start of 2022, with a total value of $6.59 billion, according to data from Refinitiv. In 2021, Linklaters worked on 98 M&A transactions worth $38.5 billion. In contrast, arch rival Freshfields worked on deals valued at $259.6 billion and Clifford Chance’s deals were valued at $95.8 billion.
Linklaters’ standout year came in 2020 when it advised on 77 deals worth $102.9 billion.
For Linklaters to remain a player in the U.S., it will have to make an unprecedented number of promotions from associate to partner and make counteroffers to partners being recruited by other firms, the recruiter said.
Former partners are skeptical of the firm’s desire to grow organically through promotions. Some expected the firm to turn to the lateral market—and do so relatively quickly—but said it would face considerable challenges.
Matthew Bersani. Courtesy Photo
“I think they’re going to try to plug it quickly, I’m sure they’ll try to address it as soon as possible,” Matthew Bersani, a partner at the legal consulting and recruiting firm Cliff Group, said of the firm’s efforts to fill the gaps in its New York corporate practice. “But it’s a challenging market to do that.
“I think there is a lot to attract the right person to these platforms, it’s just that it is a little bit more of a startup environment than joining Skadden Arps or something,” he continued. “They do have a lot to sell, and I think they’ve got the money, I think it’s just the question of persevering in the face of a tough market.”
The firm’s progress is unlikely to have been helped by the abrupt departure of U.S. leader and senior partner hopeful Tom Shropshire in February 2021. Longtime partner Tom McGrath replaced Shropshire in the role in April 2021 for a four-year term.
A Cultural Conundrum
To increase the firm’s lateral hire ability, Linklaters modified its lockstep model at the end of 2021, making three key changes. Behind its decision was a desire to make the firm “more competitive in the U.S,” the firm said. But in practice, this does not appear to have yet been borne out.
“At their very core is their lockstep model. I’ve heard they’ve given themselves the power to change that, but I’ve seen them do that zero times”, said Keith Fall, a partner at the New York legal search firm Walker Associates.
A U.S. partner at another U.K.-headquartered firm agreed. “They’ve had a distracting discussion about changing their compensation system which didn’t result in a really noticeable transformation,” the partner said.
However, others are more optimistic about the firm’s ability to secure talent now that modifications to the lockstep system that provide more flexibility have recently been made.
“Really, it is a lockstep in name only—now they have flexibility,” consultant Williams said. “Linklaters had the courage in terms of changing their lockstep arrangements and I salute them for doing so because that was a truly cultural change.”
That cultural challenge is significant and has long been cited across the wider industry as a stumbling block in transatlantic law firm merger talks.
“You don’t want people who are of a completely different mindset and a wrecking ball to your wider firm culture,” Williams said. “The Magic Circle has spent decades getting their people to play nicely, give consistent high levels of practice and establish important quality clients. Do they always get it perfect? No, but certainly significant progress has been made. They’ll be reluctant to put that at risk.”
Fall, the New York legal recruiter, noted the difficulties that come with a U.K. firm that has hundreds of legacy partners and a particular way of doing things, trying to integrate with American lawyer culture.
“There’s ego at play, conservatism at play, I’m sure there’s inertia at play, and I’ll bet there’s jealousy at play,” he said. “If you’ve been at Linklaters your entire career, and waited your turn, climbed the lockstep one rung at a time, I’m sure sure it does not feel good for some lateral partners to join overnight and make more money than you, regardless of their portable business and what they’re able to bring in through cross-selling in New York.”
One recruiter who wished to remain anonymous said that Linklaters is very thorough when considering lateral hires and a great deal of emphasis is placed on finding the right fit. The process, the recruiter noted, takes a lot longer than at some of its peer firms.
And then there’s the question of money.
“It wasn’t until fairly recently that they increased [the lockstep] cap with special points for certain partners,” the recruiter said. “My impression is that it came too late.”
It is still unclear what Linklaters’ next steps will be, or whether the firm will achieve what it wants in the U.S. market.
“As we know,” noted one London-based Linklaters partner, “it is notoriously difficult for firms to get established in the U.S.”
Dan Packel and Christine Simmons contributed to this report.
In our inaugural episode of “Recruiter Stories”, NALSC President Mitch Satalof interviews Ross Weil and Keith Fall with Walker Associates in New York City. NALSC Board Member Scott Love interviews Pat Gillette, keynote speaker at the 2022 NALSC Conference in Scottsdale, Arizona. For more information on the National Association of Legal Search Consultants, visit us on the web at www.nalsc.org.
Law firms are on the hunt for new hires. Meet 15 top legal recruiting firms to know if you’re looking to make a move.Yoonji Han19 hours agoLegal recruiters draw on years-long relationships and industry knowledge to find the best fit for lawyers and firms.Major, Lindsey & Africa; Lippman Jungers; Greene Levin Snyder; Walker Associates; Samantha Lee/Insider
The ecosystem of law firms is an intensely competitive, often secretive one. Given the value placed on individual books of business and practice area expertise, demand for top talent can be fierce among firms looking to rev up their work.
Legal recruiters play an instrumental role in the industry, acting as matchmakers that discern the best fit between a firm’s needs and culture and an attorney’s skills and career goals, and orchestrating lateral moves that can shape a firm’s business. Many recruiters were themselves practicing attorneys, bringing firsthand knowledge to their work.
The pandemic, in spite of its initial challenges, brought with it a unique opportunity for firms seeking to boost their ranks. Although hiring in the last three months of 2020 was 28% lower than in the same period in 2019, total law firm hires saw an uptick of 44% from the third quarter to the fourth quarter last year, according to data from Firm Prospects —signaling a positive outlook from firms.
The fourth quarter, in fact, was “fantastic,” according to Major, Lindsey & Africa’s president, John Cashman, exemplifying theoptimistic outlookthat most recruiters across the legal industry have about the year ahead.
“The market is roiling,” said Alisa Levin of legal search group Greene Levin Snyder.
Insider tapped its sources at law firms and legal search groups to identify 15 of the top recruiting firms that facilitate big industry moves. All of these firms specialize in partner and associate recruiting at the top Am Law firms, though some also do in-house placements and interim hiring.
Major, Lindsey & Africa
John Cashman, president of Major, Lindsey & Africa.Major, Lindsey & Africa
With 29 locations around the world and around 200 recruiters, Major, Lindsey & Africa (MLA) is one of the largest legal search companies in the industry. In 2020, it made around 300 permanent placements at law firms and approximately 340 in-house placements at companies like Facebook, Amazon, and McKinsey & Company, according to John Cashman, MLA’s president.
Law firms it’s worked with includeWhite & CaseandBaker McKenzie, among others.
“We are a truly global search firm, given our size and perspective,” said Cashman. “We start cultivating relationships in law schools, and work with those law students throughout their careers. ‘MLA for life’ is a slogan that we use, and it’s true.”
Lateral Link
Michael Allen, founder and managing principal at Lateral Link.
Founded in 2005, Lateral Link takes a “for attorneys, by attorneys” approach to recruiting. Its founder, Michael Allen, told Insider that he made the pivot to legal recruiting because he didn’t have an ardent interest in practicing law to begin with, but instead felt a “fire in the belly” for more entrepreneurial work.
Lateral Link has grown nationally since its launch, operating in 12 locations in the US and Asia with a network of around 50 director-level recruiters —includingDavid Lat, a name that may be familiar with the legal community as the founder of the blog,Above the Law.The company has placed associates and partners in major Am Law 200 firms, including Sidley Austin, Wilson Sonsini, and Gibson Dunn & Crutcher.
Its sister company, Cadence Counsel, focuses on in-house placements at corporations.
Parker + Lynch
Laurie Chamberlin, president of Parker + Lynch.
Parker + Lynch’s more than 300 executive recruiters cover the legal, finance, and tech spaces, with over 50 recruiters who exclusively deal with the legal industry. The company works with the gamut of law firms, from the Am Law 200 to regional, boutique, and local firms.
As part of the Adecco Group, a Fortune Global 500 staffing company, Parker + Lynch employs the resources of its larger global organization when making legal placements, and operates in over 70 countries worldwide.
In addition to subject matter qualifications and cultural fit, Laurie Chamberlin, president of Parker + Lynch, said that it emphasizes soft skills in candidates. “Top candidates demonstrate a strong entrepreneurial spirit,” she wrote in an email. “We are always on the lookout for business development, networking, social media, and thought leadership skills.”
Macrae Inc.
Joe Macrae, founder and chairman of Macrae Inc.
Joe Macrae began his career in legal search in 1990, co-founding two recruiting firms in London before starting Macrae Inc. across the pond in Palo Alto. It’s since expanded with four other offices in San Francisco, New York, D.C., and London, specializing in partner recruitment in the Am Law 50, including Latham & Watkins.
Most of the firm’s 15 recruiters —among them three new hires,announced on Tuesday —are former attorneys, and all take an intensely collaborative approach to recruiting.
“Each of our recruiters learns new data every day about deals and cases our clients are working on, specific needs clients may have, and nuances in the development of legal specializations in one market that may soon be relevant in another,” said Macrae in an email. “Our culture and systems enable us to share that information in real-time to the benefit of all.”
Mark Bruce International
Mark Rosen, chairman and CEO of Mark Bruce International.
Mark Rosen launched Mark Bruce International in New York City in 2001, and has since made a number of high-profile partner placements, including Cleary Gottlieb’s Ethan Klingsberg at Freshfields in 2019 and Cravath’s Scott Barshay at Paul Weiss in 2016. The placements of the two rainmakers were especially seen as major shakeups in the M&A legal industry, where moves of seasoned partners have traditionally been rare.
Mark Bruce also facilitates law firm openings and mergers.
Ginsberg Partners
Linda Ginsberg, founder and senior partner of Ginsberg Partners.
Linda Ginsberg, founder and senior partner of Ginsberg Partners, takes an especially personal approach to legal recruiting, which is reflected in the fact that the company’s core staff consists of Ginsberg herself and one other senior recruiter.
Based in New York, Ginsberg Partners focuses almost exclusively on partners and senior-level lawyers at elite law firms in the major US markets. Among the more than 225 partners placed throughout her career, Ginsberg has placed three partners at Quinn Emanuel this year and 29 partners at Latham & Watkins over the past 10 years, assisting in the steady growth of their intellectual property practice, Ginsberg told Insider.
Ginsberg’s 12-year experience practicing law —including as a litigator at Davis Polk &Wardwell and head of litigation at Viacom —allows her to understand “what makes lawyers tick” and take on a counselor role for both candidates and client firms. “My favorite questions to ask potential latereals are: What are you best at? What do you enjoy doing most? And what do you want to do more of?” she said. She advises firms to put themselves in the candidate’s shoes and realize that while for the firm, recruiting is mostly about business, for the candidate, the decision is very personal.
Lippman Jungers Bala
Mark Jungers, Sabina Lippman, and Divya Bala, partners at Lippman Jungers Bala.
Described as another recruiter as a “superstar,” Lippman Jungers Bala was founded in 2011 by Sabina Lippman and Mark Jungers, both former attorneys who cut their teeth in the recruiting world as partners at Watanabe and MLA, respectively. Divya Bala, who joined Lippman Jungers in 2013, became a name partner in January 2020.
Its team of 8 recruiters operates in major cities like Los Angeles, New York, Chicago, and D.C. According to its website, recent placements include those of partners at Sidley Austin, Paul Hastings, Kirkland & Ellis, and Latham & Watkins, among others.
Greene Levin Snyder
Alisa Levin and Susan Snyder, co-founders and principals of Greene Levin Snyder.
Alisa Levin, co-founder of Greene Levin Snyder, describes its team of 10 recruiters as “human search engines,” using deep industry knowledge to make partner and associate placements in major law firms —including Kirkland & Ellis, Freshfields, Weil Gotshal, Latham & Watkins, and Ropes & Gray —small boutiques, and in-house legal departments at corporations.
Levin, who practiced bankruptcy law at Cleary, Gottlieb, Steen & Hamilton, White & Case, and Fried Frank, said that she brings her knowledge of lawyers and law firms to find the best cultural fit on both ends. “No one size fits all,” she said. “We don’t throw spaghetti at the wall —you have to know the client.”
Watanabe
Larry Watanabe.
Larry Watanabe has been recruiting in the legal industry for more than 30 years, establishing a reputation as “one of the more prolific recruiters in the country,” according to Forbes. He founded Watanabe Schwartz in 1998, and specializes in partner and practice group moves among many elite law firms, suchas White & Case, Dentons, and Morrison Foerster, per its website.
Mestel & Company
Mestel’s Mary Rosenfeld D’Eramo, vice president of operations, and Avery Ellis, national executive managing director.
Mestel & Company specializes in permanent placements of associates and partners at Am Law 200, regional, local firms and small boutiques, as well as corporations such as Fortune 100 companies, hedge funds, private equity companies, and startups. Hire Counsel, its sister company, deals with contract work. “We can handle anything that touches legal for our clients —from soup to nuts, coast to coast,” said Mary Rosenfeld D’Eramo, vice president of operations at Mestel.
Founded in 1987, Mestel has eight offices across the country, and its 20 recruiters take a personal and metric-based approach to their work. Avery Ellis, national executive managingdirector, said that recruiters at Mestel perform due diligence by completing a
lateral partner questionnaire —used by many recruiting firms —that includes metrics like billable hours, originations, and clients.
“It’s a lot more than just three phone calls,” Ellis said.
Cardinal Search Partners
Nicole Spira, cofounder of Cardinal Search Partners
Headquartered in New York, Cardinal Search Partners runs a lean team of six recruiters, all of whom were practicing attorneys at top law firms. According to co-founder Nicole Spira, who previously worked at Big Law firms like Cravath Swaine & Moore and Weil, Gotshal & Manges, the search group has made placements for a range of boutiques and “virtually every Am Law 200 firm,” including White & Case, Cooley, Davis Polk, and Kirkland & Ellis.
“We identify, evaluate, and introduce strong attorneys for consideration to law firms and business organizations while simultaneously guiding and advising attorneys in making career choices in a challenging industry,” said Spira.
Corrao Miller Wiesenthal
Laura Corrao, Robin Miller, and Lauren Wiesenthal, partners and co-founders of CMW.
Located in New York, Corrao Miller Wiesenthal makes attorney and partner placements both nationally and internationally, with a focus on the New York tri-state area. The firm was founded by Laura Corrao, Robin Miller, and Lauren Wiesenthal in 1990 during an economic downturn in the United States, which has equipped it with the know-how of helping law firms make strategic hires in an unstable market, Miller said.
Corrao Miller Wiesenthal’s six recruiters, all of whom are former attorneys, has worked with top law firms like Paul Weiss, Latham & Watkins, Ropes & Gray, and Fried Frank. The “intentionally” small team allows the firm to take an especially cooperative and personal approach to recruiting. “We’re all rowing in the same boat,” said Miller.
It also makes in-house legal placements at other industries, with a particularly robust roster of clients in the financial services space.
Walker Associates
Ross Weil, principal of Walker Associates.
The four-person team at Walker Associates exclusively focuses on New York partner placements, working with firms likeDavis Polk, Baker McKenzie, and Mayer Brown, per its website. It was founded in 2006.
“We work with clients that have strategic needs and have really great stories about their platform,” said Ross Weil, principal of Walker Associates. “We bring that to the market and speak to candidates to match them to those needs and stories.”
Parrillo Search Group
Michael Parrillo, founder of Parrillo Search Group
Founded in September 2020, Parrillo Search Group is one of the newest firms featured in this list, but its founder, Michael Parrillo, brings with him 11 years of recruiting experience from Mark Bruce International. Its three recruiters are based in New York, and Parrillo said that he works primarily with partners and associates in the top Am Law 10 firms, like Kirkland & Ellis.
“We look to build long term relationships with our candidates by understanding their unique experience and goals, and serve as a market resource and sounding board,” Parrillo said. “We aren’t focused on one-off transactions. We are focused on building and servicing relationships.”
E.P. Dine
New York-based E.P. Dine has been conducting legal searches for law firms and corporations since 1975, both nationally and globally.
According to its website, the company has a team of 11 recruiters who facilitate in-house moves at a range of businesses like Time Warner, Bessemer Venture Partners, and BlackRock. On the law firm side, its client list covers prominent names like DLA Piper, Cleary Gottlieb, and Quinn Emanuel, among others. https://www.businessinsider.com/big-law-recruiting-firms-lawyers-recruiters-career-hires-legal-2021-2
Legal experts told Business Insider that changing the way firms pay their lawyers can be a defensive move to retain their top-performing partners. Maskot/Getty Images
Davis Polk & Wardwell, one of the most prestigious law firms in the US, announced Thursday that it is modifying their lockstep compensation model, which traditionally pays lawyers based on seniority.
Legal recruiters that Business Insider spoke with say that the move, which comes at a time when law firms are shelling out big bucks to attract rainmaking lawyers, is a defensive one designed to keep talent at Davis Polk.
“Lockstep just doesn’t compete with what they’re willing to pay… With today’s world, everything’s on the table,” said one prominent recruiter.
Davis Polk & Wardwell, one of the country’s oldest and most established law firms, announced on Thursday that it is switching to a modified pay system.
The move leaves just a few firms, such as Cravath, Swaine & Moore and Debevoise Plimpton, as strongholds of the traditional strict-lockstep model, where lawyers’ compensation is determined by seniority.
“Davis Polk has long been a hold out on lockstep, but this is going to put more pressure on the remaining firms,” said Alisa Levin, principal of legal search group, Greene-Levin-Snyder.
The new modified system “recognizes and rewards the entirety of a partner’s contributions on behalf of clients and in support of firm priorities,” Davis Polk said in a statement.
Some think the change is a way for the firm to grow in an increasingly competitive market. In an interview with Bloomberg Law, which first reported the change, Neil Barr, a managing partner at the firm, said, “The firm is strategically focused on measured growth and we are cognizant of the market environment in which we find ourselves.”
Legal experts that Business Insider spoke with, however, see the move less as one geared toward attracting new talent, and more about keeping the talent they already have.
Fending off other law firms to keep “their best people in the door”
Davis Polk’s momentous move comes at a time when law firms have been using higher pay to tempt rainmakers at other firms.
On Monday, Cleary Gottlieb, which abides by the traditional partner compensation model, lost Neil Whoriskey, who co-led its M&A practice, to Milbank, as first reported by the American Lawyer. Cleary has been hit by a number of exits from their M&A practice to Freshfields in late 2019, per Above the Law. Freshfields abandoned the lockstep model earlier that year.
“Firms like Kirkland and Paul Weiss have shown that they’re willing to pay up for the top people,” said Avery Ellis, national executive managing director, and senior recruiter at Mestel & Company, adding that some firms have shelled out anywhere up to $12 million, or even more, to attract top-performing partners. The New York Times reported that Sandra Goldstein, who was a senior partner at Cravath, was poached by Kirkland in 2018 for a staggering $11 million annual salary for five years, plus a signing bonus.
Compensation experts told Bloomberg Law in 2018 that top partners at Big Law firms can earn between $3 million and $10 billion a year.
“Lockstep just doesn’t compete with what they’re willing to pay,” Ellis, who specializes in placing lateral partners, said. “With today’s world, everything’s on the table.”
Levin, a recruiter who’s worked with white-shoe law firms like Cravath and Kirkland & Ellis, added that she doesn’t see Davis Polk’s modified lockstep as a similar means of gaining new talent. “I don’t think Davis Polk is going to be the next Kirkland or Paul Weiss with very deep checkbooks,” she said. Instead, Levin thinks the firm will be focusing on retaining their rainmaking lawyers.
Ross Weil, partner at legal recruiting firm Walker Associates, said that the new payment system doesn’t necessarily lead to more profitability, but is rather about holding on to what you have. He said that star partners in corporate transactions, private equity, and restructuring practices were among the “most vulnerable to being picked off” by other firms.
Linda Ginsberg, senior partner of legal search group, Ginsberg Partners, and a former litigator at Davis Polk, said that while she sees the modified lockstep system has a defensive aspect, it also can be geared toward growth. Davis Polk, she thinks, will be better able not only to keep its top lawyers, but also to attract more talent with the increased flexibility.
Whatever the firm’s motivation, all four recruiters expressed that they weren’t surprised when they heard the news, since all lockstep firms have been revisiting their compensation models amid an increasingly competitive market for talent.
“If you stay in lockstep, there’s tremendous pressure to increase profits to push lockstep as high as possible,” said Ellis. “But when you have firms like Kirkland throwing around gigantic packages to attract rainmakers, you gotta do what you need to do to keep the best talent.”
What the modified compensation model means for Davis Polk and the legal industry
There will be some winners and losers at Davis Polk, Levin told Business Insider. Those who are top performers within their practice will be further financially incentivized to continue performing well. On the flip side, attorneys who aren’t perceived as contributing much — and had relied on their lockstep numbers for their high pay — will now be measured differently, and likely be paid less.
“The real test will be if Davis Polk’s collegial culture can survive this kind of tectonic shift,” Levin said. “It’s a food fight over slices of a finite pie.”
Cleary Gottlieb reportedly has also taken steps to modify its compensation system to reward more productive partners, per Law.com in May. Cleary did not respond to a request to comment.
“I think it’ll be the start of more firms protecting their assets by paying their people more,” added Walker Associate’s Weil. “It ultimately boils down to the fact that practicing law is a grueling business, and lawyers want to be paid fairly for their time and sacrifice.”
The fact that top-tier firms like Davis Polk are making changes to stay competitive is a “further statement that the legal industry has just become more and more of a business and less of a profession,” thinks Ellis, underscoring the increasing pressures on the law firm to act as corporate entities designed to generate profit. Davis Polk’s 2019 profits per partner were $4.5 million — up 2.5% from 2018 — ranking it fifth among the Am Law 100.
More broadly, legal experts see the trend toward modifying or wholly dropping the pure lockstep system as one that will continue.
Ginsberg said that the move was inevitable. “At some point I think it also has to happen at Cravath, Cleary, and Debevoise — the remaining old New York lockstep firms — because of the market today,” she explained, where the legal landscape has expanded to offer so many more choices of law firms for clients and candidates alike.
She added that the “old-school” lockstep model simply no longer matches up with this new reality of heightened competition in the industry.
Allison Miller, who is joining Stroock as a partner in its financial restructuring practice, had spent her entire career at Akin Gump in Washington, D.C., and New York, making partner three years ago. Her resume includes heading up transactional matters in the Sears, Avaya, iHeart Communications, SunEdison, American Tire Distributors and Seadrill restructurings.
Miller said that as an Akin Gump lifer, she had nothing but good things to say about the firm and hadn’t been looking to leave. But when a recruiter approached her about the opportunity in the fall, she liked what she heard.
“Their platform is perfectly suited for my core strengths—liability management, special situations and distressed transactions—in a fully integrated restructuring practice,” she said of Stroock. “It’s a smaller firm than Akin Gump, which was appealing to me because it can move more quickly on certain aspects and be more flexible and less structured than a bigger firm.” She said Stroock’s creditor-side practice was a draw, and so was a client base that is aligned with hers.
Miller’s move comes as bankruptcy and restructuring practice groups are expecting a busy period as a result of the coronavirus outbreak, which has shut down much of the country and mandated most employees work from home.
Many firms had already been working during the past few years to bolster their bankruptcy groups in anticipation of an economic downturn, which had yet to materialize. As law firms now adjust to the sudden onset of a recession, recruiters say lateral hiring will accelerate even more.
Keith Fall, a longtime recruiter at Walker Associates who facilitated Miller’s move to Stroock, noted that the coronavirus affected her transition even though the hire was set in motion before the pandemic took hold.
“There’s always a bit of stress at the end of a deal, which was magnified here with the timing of COVID-19,” Fall said. “But she has the benefit of being in a restructuring practice, which is countercyclical, and both she and Stroock have been extremely busy in the last few years. The space will probably only get busier, making this hire less risky than it otherwise might have been.”
Fall, who depends on lawyer moves for his livelihood, said he expects a resurgence in lateral activity in general as soon as the worst economic effects of the virus are contained.
“There’s a lot of cautious optimism from law firm leadership, who are confident things will go back to normal and then will want to pick [lateral recruiting] back up,” he said.
Fall said there’s a large degree of uncertainty in the market right now, with some law firms putting expansion efforts on pause while others are continuing their lateral hire strategy. But even as some law firms halt partner pay,furlough associates and lay off staff, his clients still have needs to be met, leaving an opening for hires even throughout the economic uncertainty.
“Firms will need to be specific with their needs as opposed to their wants,” he said, adding that while building up an investment practice may be a luxury many can’t afford, bankruptcy and restructuring expertise will be crucial going forward.
“Law firms are still accountable to their clients and need to service clients’ needs,” he said. “You can’t afford to have holes in any practices.”
Samantha Stokes, based in New York, is a staff reporter at American Lawyer covering the business of law. You can reach her at sstokes@alm.com or on Twitter: @stokessamanthaj.
Keith Fall is a partner with the New York-based legal recruiting firm, Walker Associates. He can be reached at Kfall@walkersearch.com
Rather than probing about candidates’ past earnings and future expectations, lateral recruiting teams would benefit by focusing on how candidates can address concrete business needs and growth.
Compensation. Remuneration. Base-and-bonus. Whatever term a recruiting team chooses, if they ask a lateral partner candidate about current earnings, they’re going to get pushback. Compensation is a touchy, personal subject. It’s also a topic that most partners would prefer to avoid, because, well, it’s complicated.
In New York, it’s been illegal to ask about a job applicant’s salary history since October 2017. More than two years later, however, when it comes to questioning lateral partner candidates, we find that about half of AmLaw firms choose to ask anyway. These firms (including some that are structured as corporations and pay partners as employees with a W-2), maintain that because the candidate seeks to join as a shareholder or partner, the rule banning compensation questions does not apply. This is a position that many employment discrimination experts contend is wrong. Meanwhile, the other half of firms opt to ask partner candidates about their earnings “expectations.” That’s an artful dodge, but the “expectations” question nonetheless triggers candidates’ anxieties by requiring a prospective candidate to self-assess—in a vacuum—their overall value to a new firm or else disclose their current compensation as an easy way out.
As New York-based recruiters who have placed hundreds of partners in New York City, we suggest that questions about a prospective partner’s past earnings or future expectations should become less relevant. The burden of coming up with a compensation figure shouldn’t be on a candidate. It should fall on the shoulders of the law firm’s management and hiring teams. Who else understands better how a firm’s compensation system works, and how much the firm can afford or stretch to pay an incoming lateral partner?
We have long recommended that firms map out—in advance of any search—the specific client demands and growth strategies that warrant bringing in lateral partner talent. Ideally, firm management will also have identified the particular business objectives they intend to achieve through lateral recruitment. According to Citi Hildebrandt’s 2020 client advisory, these planning tactics have taken hold: “Firms are now aligning their hiring decisions more closely with the firm’s overall strategy,” the report states.
Citi Hildebrandt’s latest findings also conclude that firms aim to resist the temptations of “opportunistic hiring.” In other words, unless hiring partners can state a compelling, business-driven rationale that their entire partnership will support, they’re increasingly reluctant to make offers that others might perceive as grandiose. Indeed, according to The American Lawyer’s2020 Forecast, up-and-coming leaders at AmLaw 200 firms are keen to increase harmony among their partners. “Keeping the trust of their colleagues,” the magazine said of next-generation leaders, “Is a high priority.”
Still, striking the proper balance between respect for loyal partners, and rewarding prospective lateral rainmakers, is no easy task. And multiple sources, including Citi Hildebrandt and ALM Intelligence, cite lateral partner hiring as a key component of most firms’ plans to grow revenues. Which brings us back to the delicate topic of compensation.
Obviously, in order for any negotiation to move forward, the parties need to agree on some compensation parameters. We suggest that the law firm should begin that conversation by formulating a figure based on the candidate’s expertise and their portable book of business, aligned with the firm’s overall growth strategy and internal compensation methodology. When firms consider the compensation question this way, they’ll find that the business case for bringing in a lateral partner has very little to do with a lawyer’s past earnings.
Recent high-profile placements prove our point. Last October, for example, when London’s Freshfields Bruckhaus Deringer reportedly agreed to pay M&A expert Ethan Klingsberg $10 million a year through 2024 to head up its burgeoning New York corporate practice, the deal wasn’t a reflection of Klingsberg’s prior pay. In our analysis, Freshfields calculated that a $50 million five-year investment in a practice led by one of the top players on the worldwide M&A stage would be a solid strategic move in building a New York deal practice from the ground up. Granted, the recruiter who claimed credit for the deal, Mark Rosen, told Law.com that in moving to Freshfields, Klingsberg more than tripled his previous earnings at Cleary Gottlieb Steen & Hamilton. In our opinion, Rosen violated client confidentiality by revealing Klingsberg’s compensation, but his disclosure nonetheless supports our argument that prior compensation is irrelevant to determining a lateral’s worth.
The same could be said of Sandra Goldstein’s 2019 move from Cravath, Swaine & Moore to the New York office of Kirkland & Ellis. Under Cravath’s lockstep system, Goldstein, who had been a senior partner and its chief of litigation, undoubtedly took home a good deal less than Kirkland’s guarantee of $11 million-a-year for five years. (According to the AmLaw 100, Cravath’s 2019 profits-per-partner were $4.62 million.) But as we see it, Kirkland didn’t base its offer on what Goldstein made at Cravath. Kirkland proposed a deal that, in the firm’s view, reflected her overall value in the country’s most-competitive and high-priced legal market.
The Klingsberg and Goldstein examples illustrate how and why market demands and a firm’s business-driven hiring needs are far more important than a candidate’s past earnings or future expectations. Besides, as we mentioned at the outset, partners’ compensation histories are often complicated by factors that have nothing to do with their performance. A couple of years ago, for example, we worked with a partner whose compensation had been cut repeatedly despite his keeping pace with his past originations and collections. Firm policies linking seniority with pay caused the declines, which ultimately resulted in an annual pay cut of around 30 percent. We facilitated a lateral move for this partner, with a firm that brought his remuneration up to market—around what it would have been without the punitive policy.
Recently, we spoke with a New York partner at a highly respected litigation boutique who expressed an altogether different compensation-related concern. Although she made around $1.8 million on her own book of business, she said, compared with the city’s big-law salary standards, her pay was probably above-market. She nonetheless wanted to explore lateral partner opportunities among AmLaw firms with business platforms that meshed well with her client base. If management could assure her that the firm would support and reward her contributions going forward, she added, she would entertain opportunities that involved an initial pay cut. What’s more, if prospective firms were to ask this partner only about her prior compensation, those firms would have missed out on knowing that she was willing to take a step back in money to take two steps forward in opportunity.
Law firm leaders and lateral partner candidates alike could take a cue from this candidate’s realism and candor. At the end of the day, arriving at a compensation figure that satisfies everyone requires a complex and nuanced process. Although smart candidates will come to the table with a clear understanding of market demands for their services and the value of their practices, we believe it’s up to the hiring firm’s leadership to address, head-on, their compensation package and system.
Ross Weil and Keith Fall are partners with the New York-based legal recruiting firm, Walker Associates. They can be reached at RWeil@walkersearch.com and Kfall@walkersearch.com, respectively.
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This article was published by The New York Law Journal:
https://www.law.com/newyorklawjournal/2020/04/17/what-not-to-talk-about-in-lateral-partner-discussions/
With new headhunters entering the industry and big money that can be made as partner pay packages increase, the competition for candidates and credit has gotten fierce.
It’s a litigious time for law rm recruiters. In recent months, two high-prole lawsuits were led over fundamental concerns in the legal recruiting industry. One suit was led, and then settled (https://www.law.com/nationallawjournal/2019/11/22/major-lindsey-settles-suitagainst-rival-recruiter-mlegal-and-former-partner/), between headhunting rms Major, Lindsey & Africa and Mlegal Group over noncompetes and competition for clients. The other suit was led by Boston Executive Search Associates against Freshelds (https://www.law.com/americanlawyer/2019/11/19/recruiter-suesfreshelds-claiming-credit-for-cleary-rainmakers-move/) Bruckhaus Deringer over allegedly cutting the headhunters out of a lucrative lateral fee.
These suits are the latest disputes to be aired publicly in a eld where condentiality reigns and no one wants to be seen as a troublemaker. With new headhunters entering the industry and big money that can be made aspartner pay packages increase, some recruiters say the competition for candidates and credit has gotten erce. (Four partners at various New York law rms put the number of cold calls and emails from recruiters at between 1 and 12 per week.)
Now private disputes over fees are owing over to public court dockets.
Given occasional competing claims to placement fees and diculties that recruiters have in other industries, “it’s surprising there are not more lawsuits between law firms and recruiters,” observed one recruiter, Ross Weil of Walker Associates, adding his rm has “had no reason to ever be litigious” with clients.
Recruiters who say law rms cut them out of payments, even when they make the introductions to key laterals, are a top theme in recent litigation. That includes the suit that Boston Executive brought against Freshelds over the lateral partner group led by Ethan Klingsberg. In 2017, the same recruiting rm also sued Simpson Thacher & Bartlett over an allegedly unpaid fee; the case settled (https://www.law.com/newyorklawjournal/2018/09/19/simpson-thacher-settles-withrecruiter-over-sullivan-cromwell-hire/)in 2018.
In July, New York-based Austin & Devon Associates sued (https://www.law.com/newyorklawjournal/2019/07/10/recruiter-sues-windels-marxseeking-3-million-for-ip-group-placement/) Windels Marx Lane & Mittendorf for a $3 million fee it said it was entitled to; the parties have agreed to arbitrate that matter. In Los Angeles, Kossoris Search is about to go to trial (https://www.law.com/texaslawyer/2019/09/09/katten-cant-escape-recruiters-caseover-dallas-groups-placement-fee/) against Katten Muchin Rosenman over a placement fee for a group with a $20 million book of business.
One recruiter’s unpaid-fees suit led this year had an unusual twist: the recruiter wasn’t named (https://www.law.com/texaslawyer/2019/06/21/search-rm-sues-2-kilpatrick-townsend-lawyers-alleging-unpaid-placement-fee/), possibly in a bid to preserve its reputation. An entity called USPLS, which purports to have been assigned a claim by a headhunter, sued two partners from Kilpatrick Townsend & Stockton‘s Houston oce, claiming they breached a yearlong search contract by cutting the recruiter out of a deal to launch their rm’s Houston oce. Law.com has since reported (https://www.law.com/texaslawyer/2019/12/10/in-suit-againstkilpatrick-townsend-partner-pair-mystery-recruiter-idd-as-james-wilson/) that the unnamed recruiter was James Wilson of Partners Legal Search.
Competition among recruiting rms is also an element in some lawsuits. The relationships a recruiter builds on the job can be extremely valuable, as the suit between recruiter Lauren Drake of Mlegal and her former rm Major Lindsey made clear.
Unlike lawyers, who are generally prohibited by ethics rules from agreeing to limit their practice in any way, some recruiters are bound by noncompete agreements.
While noncompetes are not universal in the recruiting industry, MLA said in its suit that Drake had signed one that prevented her from working in legal recruiting within 50 miles of the Major Lindsey oces where she’d worked over the two years before she left, or from working with candidates or law rm clients that she learned about at Major Lindsey for an entire year. No such agreement applied to two other Major Lindsey alumni who went to work at Mlegal, however, according to the suit.
Code of Ethics
Today’s competitors can be tomorrow’s collaborators. Deals to split fees on lateral placements where multiple recruiters played a move often arise, said several recruiters, as is the feeling that the other recruiter is getting too big a slice.
A falling-out over such agreements was at the core of a dispute that was settled last year (https://www.law.com/texaslawyer/2018/08/23/recruiters-suit-sheds-light-on-erce-lateral-market-in-texas/) in Texas between Carrington Legal and Johnson Downie, two big-name recruiters in the Lone Star State.
Though much is up for negotiation, there are standards within the industry. For example, the National Association of Legal Search Consultants, which lists 197 members in its online directory, has a code of ethics (https://www.nalsc.org/code-ofethics/) that prohibits recruiters from “placing out” of a rm they just placed a candidate into for a six-month period.
Sometimes, such restrictions are enshrined in the contracts that recruiters often have with law rms to supply them with candidates. These restrictions, in turn, can prompt lawsuits.
Cole Schotz, a midsize law rm mainly on the East Coast, sued (https://www.documentcloud.org/documents/6572764-Cole-Schotz-v-Lucas-Groupcomplaint.html) Lucas Associates in Manhattan Supreme Court last month for allegedly convincing an associate that Lucas itself had placed at Cole Schotz in 2015 to move again in 2019. Their contract, attached as an exhibit (https://www.documentcloud.org/documents/6572765-Cole-Schotz-v-Lucas-Groupexhibit-to-complaint.html), states, “the search rm shall not solicit any of [Cole Schotz’s] attorneys for the purpose of placing or seeking to place them at another law rm, corporation or any other organization while this agreement is in eect.”
Glenn Kazlow, who is Cole Schotz’s general counsel and signed the contract with the recruiting agency, didn’t respond to a call seeking comment. The Lucas Group didn’t respond to emails. The day, while several recruiters’ disputes have landed in court, many other headhunters don’t want to set foot in a courthouse. For them, keeping one’s name unsullied is a top priority.
“I’m absolutely never going to get in a lawsuit with a law rm,” said Linda Ginsberg, a New York-based recruiter at the rm Ginsberg Partners. “It’s ridiculous for one individual to sue a law rm and expect to have an ongoing, high-road reputation in the industry.”
A strong litigation practice can have a significant impact on a firm’s ability to compete effectively as well as drive revenue for the firm in all areas of practice.
According to BTI Consulting’s Litigation Outlook 2020, the U.S. litigation market is poised for its third consecutive year of growth with clients expecting more litigation in 2020. Yet many AmLaw firms hesitate to invest in litigation practices because of concerns about the potential ebb and flow of litigation work. This is short-sighted, especially considering the prospects of an economic downturn, continuing client pressures, and litigation trends. A strong litigation practice can have a significant impact on a firm’s ability to compete effectively as well as drive revenue for the firm in all areas of practice.
Preparing for a Slow Down
The current U.S. economic expansion is in its 11th year, but financial analysts see slow growth in 2020 with concerns among law firms about a recession. Litigation is often thought of as a practice area that increases as others start to fall off during downturns. Some of this is already evident in the BTI survey. Clients report that they expect to spend more and see more litigation in 2020, particularly related to high-risk matters, which will create more new spending and drive the need for outside counsel to handle this complex legal work.
Growing Demand and Role of Litigation Finance
The economy is not the only factor influencing the demand for litigators. Litigation finance is also having an impact. According to the 2018 Litigation Finance Survey, there has been a 237% increase in litigation finance since 2012. Since the recession, clients have been pressuring firms to keep legal fees low and provide alternative fee arrangements. If the economy slows further, those concerns will only grow. Litigation finance is one answer to clients’ complaints about high fees, providing a potential solution for both firms and clients.
For law firms, litigation funders provide nonrecourse financing in exchange for a portion of future legal receivables. As a result, firms can take on cases with less risk. The funding enables firms to offer alternative fee models and better compete for clients, yet have the flexibility to use the capital to meet the firm’s needs whether it is to finance attorney fees and out-of-pocket costs or for other business purposes. As noted by Steve Susman of Susman Godfrey, a firm that offers litigation funding, “third-party funding is something every trial lawyer, including me, your biggest competitor, should welcome if the results are the filing of better cases and the more efficient handling of those cases that are filed.”
Funding also benefits clients by allowing them to pursue litigation that otherwise would be cost-prohibitive, as well as to hire the best firms to handle the matter. As litigation finance becomes more prevalent, we are likely to see more growth in litigation work for law firms.
Pressures To Innovate
As litigation increases, so does competition among law firms. Another BTI survey, the Legal Innovation and Technology Outlook 2019, noted that general counsel and corporate decision makers are looking for innovation from law firms. However, “innovation isn’t simply using new technology or offering a new product or service. Innovation comes when you find a new approach your client hasn’t seen before to meet their needs.” In particular, clients notice the law firms that are “[d]isrupting the legal industry by doing things other law firms don’t … with no limits. From embracing new strategies, strategically hiring lateral partners (or groups), investing in targeted office openings, or moving away from the billable hour, these firms drive more recognition in the market as true movers and shakers than other firms.”
This idea was echoed by Morgan Lewis & Bockius, which has appeared at the top of multiple BTI lists of firms that excel in specific litigation segments. Managing partner Steven Wall explains their success as follows: “We bring the entire litigation function of Morgan Lewis, no matter where you might be housed, to serve the client. Every day, we’re using attorneys to staff where appropriate, and we’re not beholden to some artificial boundary as to what practice group you actually belong to.” In addition, the firm has offered alternative fees, which account for almost 30 percent of the firm’s revenue.
While AmLaw firms recognize they need to be more strategic and better meet clients’ needs, they hesitate to make big changes. As a result, smaller firms and boutique practices are stepping in to fill the void. For example, Selendy & Gay is a litigation boutique spun off from Quinn Emmanuel Urquhart & Sullivan. As noted by founding partner, Andrew R. Dunlap, the firm has invested in recruiting, training associates to be “well-rounded litigators who are excited about their careers,” significantly changing the partner-associate model at many large firms. He argues this approach benefits the associates, the firm and clients creating teams at the top of their game. Boutique firms like Selendy can take advantage of new technology and flexible staffing. As noted by leading law firm consultant, Bruce MacEwen of Adam Smith Esq.: “If you choose the boutique, you’re only going to get the A team. There is no B team.” If smaller and boutique firms can innovate like this, why can’t big law?
Despite the loss of attorneys to Selendy, Quinn Emmanuel is one of BTI’s Fearsome Four litigation firms, which rates them as one of the firms GCs and other firms fear seeing across the table. Yet how many big law firms can say the same? Large firms risk losing business if they continue the status quo.
Additional Benefits of a Strong Litigation Practice
A litigation practice is good protection against a recession, providing the diversified practice that all big firms need. However, it also is valuable in recruitment for other practice areas. According to Michael Rynowecer, founder of BTI Consulting: “The ability to come in and address all of [a company’s potential exposures] in one conversation will be crucial [for law firms].” Clients are looking for firms who can handle all their concerns, as are attorneys. Lateral hires in corporate and real estate want law firms that can service their clients’ needs. Litigation is an important part of this service. A firm with a strong litigation practice will be appealing to litigators bringing their practice to a new firm.
Litigation also offers the firm valuable publicity opportunities. A success can be promoted and gain the kind of awareness that corporate deals don’t get because so much must remain confidential. This publicity is also helpful in recruitment and business development as attorneys and clients seek out the well-known firms.
According to BTI, clients want big, strong law firm teams for complex work and are looking for firms they believe can scale up to a larger team if the need should arise. AmLaw firms should be embracing litigation practices and expanding their lateral hiring if they want to compete for this work.
If you are a litigation partner, it is also time to ask yourself whether your firm is committed to building a robust and innovative litigation practice that serves your clients’ best interests.
Keith Fall and Ross Weil are partners with the New York-based legal recruiting firm, Walker Associates.
Many firms seem to view real estate as secondary in importance after corporate and private equity work when looking to increase profitability. In New York City, however, it is a missed opportunity, and some Am Law firms are proving exactly that.
The law firms, Holland & Knight, Akerman, Vinson & Elkins, Sheppard, Mullin, Richter & Hampton, and McDermott Will & Emery all have something in common: They are all non-New York based firms that have added significant groups to their real estate practice in New York in the last 18 months. Many firms seem to view real estate as secondary in importance after corporate and private equity work when looking to increase profitability. In New York City, however, it is a missed opportunity, and some Am Law firms are proving exactly that.
Why a Strong Real Estate Practice Matters Although New York may be known best for corporate legal work, real estate is not far behind. Despite modest declines in recent years, the New York City real estate market is solid and appears to be improving. Increases in investment sales, office leasing, mergers and acquisitions, competition among lenders and other matters have provided steady work for real estate attorneys in the last year. As reported in The Real Deal’s 2018 survey, the top 10 New York City real estate practices worked on nearly $25 billion of lender-side loans and nearly $14 billion of borrower-side sales. In addition, there were 1,117 real estate lawyers working at the top 20 firms, up nearly 7 percent from 2017 and more than 11 percent from 2016. The New York real estate market represents a lucrative practice area that generates significant revenue on its own, but even more so when you consider how it leads to other business for a firm. While the Am Law top 10 firms may not feel the need to focus on the strength of their New York real estate practices, the rest of the top 100 can benefit substantially by concentrating on this market to fuel their growth. As is common with many industry groups, real estate has the ability to spin off substantial additional revenue to other practice groups, such as tax, corporate, litigation, etc. This benefit was noted by Vinson & Elkins’ chairman Mark Kelly when discussing the firm’s recent addition of 15 real estate attorneys and staff. He stated, “the addition of this team is a natural complement to our broader transactional group and will be beneficial to the firm and our clients as we continue to grow in a variety of practice areas in New York.” In addition to leading to more business for law firms, a strong real estate practice also gives credibility to those outside the Am Law top 10 competing in the New York market. In particular, those firms based outside New York can demonstrate their commitment to New York with a solid real estate practice. This point was echoed by Joe Guay, the leader of Holland & Knight’s national Real Estate Section when announcing five new attorneys to their real estate leasing group. “The addition of this outstanding group of lawyers further expands the services that our New York real estate practice can offer clients, as well as enhances our reputation in this key market.” Competing in the New York Market Many top Am Law firms look to their corporate practices for growth, including representing private equity companies and financial institutions. That is not surprising given these practices command the highest rates and can be tremendously profitable. Real estate work generally does not command the same billing rates. As a result, they can be neglected by these firms providing an opening for other Am Law 100 firms to step in. These firms can offer a wealth of benefits to real estate clients and partners considering moving their business. Among the advantages of a real estate practice is that it is often significantly more portable to another law firm, as opposed to traditional corporate work for public companies and similar institutions. Those clients are hard to acquire and not likely to switch firms when a partner leaves. However, many real estate clients are loyal to their attorneys, even as executives change employers, or develop off-shoot businesses. While these clients want their legal work done by a well-regarded law firm, they are often most concerned about working with top-notch attorneys. Pejman (Pej) Razavilar a real estate partner at McDermott Will & Emery said “Over the years, I’ve seen many clients move to other companies as well as start their own businesses to pursue a more entrepreneurial path and continue to use prior counsel they trust and have regularly relied on.” For a real estate partner or practice group who may be looking for new opportunities, the portability of their practice enables them to seek out firms that can offer them a highly visible and important role in the firm’s growth strategy. Law firms like Akerman with its top-rated real estate practice are not simply adding real estate attorneys in New York, they are acquiring specialized and highly credentialed partners and putting them in key positions. Competing in New York City is not easy. The law firms that will be the most successful are those that achieve a critical mass. A few partners do not make a real estate practice. To establish credibility, firms must commit to building a team capable of handling all aspects of real estate transactions and litigation. Even firms like Sheppard Mullin which may be less well-known in real estate, are focused on building their credibility by bringing in partners with “outstanding East Coast real estate credentials” with a specialized practice that complements the firm’s existing strengths in real estate. The benefits of a strong fully developed practice also includes helping firms demonstrate they can serve their global clientele where and when they need assistance, which is often in New York. At McDermott, Jeffrey Steiner, global head of the firm’s Real Estate Finance Group, commented that “As market demand increases at the intersection of real estate and finance, [our New York partners] will enhance our unique position to serve the growing needs of both foreign and domestic institutional clients in highly sophisticated transactions.”
An Alternative to Merger or Acquisition It is notable that the firms mentioned in this article are adding real estate groups that provide a strategic fit for the firm. For instance, Holland & Knight New York Real Estate Practice Group leader, Stuart Saft, emphasized how “[o]btaining a significant commercial leasing practice … has been a strategic priority, … complements our existing strengths and will be an important driver of our future growth.” Such carefully chosen expansions have the power to be a viable alternative to a merger or acquisition in enabling firms to achieve significant growth. Acquiring key real estate practice groups offers tremendous potential for law firms looking to increase revenue, particularly in the New York market. Best expressed by Cliff Thau, co-head of Vinson & Elkins’ New York office, “Expanding V&E’s breadth of practice in New York is an important part of our overall growth plan, and we are committed to strategically expanding here and across the firm.” This should be an impetus to other firms. In addition to competing for corporate work, concentrate on building a strong real estate team that will provide the foundation for your long-term success in the New York marketplace. And if you are a real estate partner, do you feel your firm has shown commitment and is trending towards being a powerhouse in real estate? If not, consider taking the headhunter’s call. Ross Weil and Keith Fall are partners with the New York-based legal recruiting firm, Walker Associates. They can be reached at RWeil@walkersearch.com and Kfall@walkersearch.com, respectively.
As the Am Law 100 firms continue to show strong growth, individual firms are focusing on hiring as one of their top strategies for improving revenue and profitability. The recession hit law firms hard, resulting in over 8,000 job losses among the Am Law 100 firms. Despite improvements in headcount in the last few years, some firms are still hesitant to make significant changes in how they hire. However, lower demand, fee pressures and increased competition mean that firms cannot afford to maintain the status quo. Continuing growth is necessary to assuring clients and attorneys that the firm is positioned to best serve clients’ needs. Today’s legal environment requires that law firm leaders be strategic, proactive and nimble in growing the firm. If they are not doing that, then partners need to take action to change management. Unfortunately, some firms hinder those changes. Trust and accountability are lacking, which is felt in ineffective lateral hiring practices and in turn hurts the firm’s competitive position.
State of the Legal Market
According to the 2018 Report on the State of the Legal Market, law firms overall are continuing to experience sluggish growth in demand for their services. However, the exception to this are the Am 100 firms who have “significantly outpaced both Am Law Second 100 and Midsize firms in a number of key indicators including percentage growth in demand, worked rates, fees worked, overall revenues, and cash collections.” Notwithstanding these results, the legal market remains challenging for even top firms. Am Law firms are increasingly moving into secondary cities like Boston, Philadelphia and Minneapolis to help fuel their growth; in some cases, acquiring regional law firms or practice groups. This in turn is creating more competition and disrupting the legal landscape for local and smaller firms. The smaller firms are competing with top firms not just for clients, but for attorneys. As a result, their recruitment efforts must be particularly effective, and in some cases, they are meeting these challenges by hiring attorneys in new markets drawing them away from top firms.
In addition, while Am Law 100 firms are doing better than other firms, growth is not distributed evenly. As noted by Bruce MacEwen, the President of Adam Smith, Esq., in his analysis of 2017 Am Law 100 data: “[t]he Am Law 100 is not remotely a ‘normal’ distribution; it’s a power curve, with a few big players, a lot more in the middle, and a long tail of smaller fry.” What can firms do to make sure they are among the ones enjoying the improved revenue and profitability?
Reviewing Hiring Practices
Law firms admit that increasing headcount is an important growth strategy for them. An Altman Weil study from 2017 found that 56 percent of law firm leaders believe headcount growth is a requirement for the firm’s success and two-thirds of respondents planned to add groups of laterals. A recent ALM Intelligence study similarly found that “85 percent of Am Law 200 firms reported that hiring laterals was one of their two most important revenue growth strategies for the coming year.” If firms believe this, then why are so many failing to do it effectively?
Despite many firms’ “commitment” to growth, in our experience, they often put obstacles in the way of effective hiring. The reasons often involve issues of trust and power. Within some firms, partners are reluctant to delegate hiring decisions to management. Instead, they create a bureaucracy where too many partners have a say in hiring which in turn means firms cannot move quickly or be proactive in seeking candidates.
These obstacles also make it difficult for firms to make strategic hiring decisions. Often individual partners are focused on their own practice group needs and may not have the time to analyze how developing other practices or geographic areas may be a better choice for the firm. In addition, many firms succumb to opportunistic hiring—that is, they see a resume of someone with a big book of business and hire the individual regardless of whether it fits with their hiring strategy. In contrast, a management committee charged with hiring is better able to focus on the needs and priorities of the firm with less interference from partners. They are also better equipped to do the necessary due diligence to ensure the lateral is a good fit and will be a successful hire.
Changing Management Infrastructure
When firms refuse to delegate decision-making to management, they risk losing out to their competitors. Am Law 100 firms are too large to have partners getting involved in every decision. Studies have shown that having a more corporate structure can have substantial benefits as firms grow, including a positive impact on profits per equity partner. Some firms are even turning to business professionals to manage areas like Human Resources and Recruiting. Regardless of whether firms employ a Chief HR Officer or rely on a hiring committee, the point is that large firms must assign responsibility to a specific group for more effective hiring. Partners need to focus on their own practice and not get involved in minutia.
This won’t happen, however, until there is management accountability. At some firms, the partners don’t trust the firm’s chair and management committee because there is no ability to vote them out of their position whether because of the firm’s rules or internal politics. That’s why building an effective law firm management infrastructure must empower both sides—management to make hiring decisions and partners who can “fire” those who are not satisfactory.
The first step is to have true open management committee elections on a regular basis. This means fostering a democratic culture where elections aren’t merely to confirm the status quo and trust is cultivated and earned. This enables partners to have a voice in the firm’s management but let’s them feel comfortable delegating every day decisions to trusted leaders. The most successful firms are embracing openness and collaboration with strong leadership focused on strategic growth. Holland & Knight managing partner, Steven Sonberg said it well: “What I’m good at … is trying to develop collaboration and consensus of ideas, and generally leaving people alone to do things they do well.” Similarly, Ira Coleman, chairman of McDermott Will & Emery, credits the success of the firm in achieving $1 billion in revenue to an agenda focused on “indispensability to clients; high achievement, productivity and profitability; and a happiness factor” among the firm’s attorneys.
Firms who don’t develop this kind of culture risk losing partners to competitors unless they can demonstrate stellar results in growing the firm. For example, firms like Goulston & Storrs have already benefited from recruiting partners looking for a law firm that encourages collaboration and trust. As noted by Martin Fantozzi, co-managing director of the firm, “The intimacy you can have in this environment and the personal connectedness you can have in this environment is different.” Deborah Manus, managing partner of Nutter McClennen & Fish agrees saying “a lot of people like to work at a place that is a true partnership.”
The reality is that lower demand for legal services and more competition requires that firms look to lateral hiring to increase revenue and profitability. Firms who engage in strategic hiring and adopt a process which centralizes decision-making and provides accountability will be more successful than their competitors. Although many law firm leaders may object to changing their practices, in this business and legal environment, firms who don’t grow will be left behind.
This year’s new partner classes are advancing at a watershed moment in U.S. history: In 2019, U.S. Census data predict, Millennials will replace Baby Boomers as the biggest segment of the country’s population. In raw numbers, among big firm attorneys, Millennials now outnumber Boomers by almost 2-to-1 (47,000 to 24,000 according to 2017 data from 400 firms analyzed by ALM Intelligence). However, younger attorneys, born after 1984 account for just 5 percent of partners. By contrast, the same analysis found that 40 percent of the firms’ partners ranged in age from 53 to 71.
In our experience as legal recruiters, especially in the New York and tri-state markets, a growing number of Big Law firm partners are choosing to continue working well into their 60s and beyond—even if doing so requires a lateral move. And while a popular old tale holds that investing in senior laterals is an overly risky and expensive growth strategy, we beg to differ. Recent lateral moves that have made headlines support our argument, and illustrate how some law firm managers are creating fresh opportunities for older partners:
• Last November, Chris Smith left Shearman & Sterling after 40 years. At 67, he lateraled in to the New York office of DLA Piper, becoming co-chair of the firm’s 600-lawyer real estate practice.
• Last April, Buckley Sandler announced it had recruited from Jones Day the celebrated white-collar defense lawyer Henry (Hank) Asbill. A self-described “child of the sixties,” Asbill has 40-plus years of trial experience.
• Drinker Biddle recently recruited from Carlton Fields a 17-lawyer litigation group headed by insurance and financial institutions specialist James Jorden.
Since 2014, we’ve been involved in more than a half dozen lateral partner moves for lawyers born in the boom years between 1946 and 1965. We’ve worked with partners who, despite having thriving practices, sensed that they were being sidelined by their former firms. (Two of the senior partners we helped place had annual books-of-business worth more than $10 million.) Some had seen their compensation drop off solely because of their age. Others jumped ship to escape mandatory retirement policies. Without exception, these accomplished lawyers made lateral partner moves that have recharged their professional lives and revived their sense of purpose with firms that share their values and their aspirations for growth.
Of course, every deal has two sides, and in order to succeed, every senior lateral partner move requires that both the firm and the partner make express commitments concerning transition and integration. The strongest deals hinge on two core components:
(1) The partner candidate must present an ironclad and long-range business case. It’s not enough for a candidate to prove that their practice is portable and profitable. They must also map out how they personally will contribute to the firm’s growth strategies 3 to 5 years out.
In mid-2018, we played a role in a senior international arbitration expert’s move from one AmLaw 100 firm to another. The partner was motivated to make the move in part because his prior firm had scaled back the resources it once committed to supporting his practice. At the same time, although his collections had not fallen off, the firm had cut his compensation. His new firm has not only restored his earnings, it’s also investing in associates and other resources he requires to grow his practice.
(2) The partner candidate must be a genuine fit with and serve a clear purpose in the hiring firm’s growth strategies in terms of practice area, geographic region, or industry. At a time when clients search out law firms with improved differentiation and preeminence, lateral candidates need to enhance a firm’s competitive brand as well as its bottom line.
In mid-2018, we were involved in a deal that came together in large part because the acquiring firm’s growth strategy aligned with that of the candidate partner, who is a well-known and widely respected real estate finance expert. Although his former firm is a recognized leader in the space, on balance, the partner saw a greater long-term opportunity and sensed a better cultural fit with a close competitor. Indeed, the new opportunity was so attractive, several of his colleagues decided to move along with the partner we advised.
Although the examples cited in this article suggest a promising trend of leaders in Big Law cultivating a renewed appreciation for older lawyers, we hear about age-based biases often, and law firms would be well advised to remember the cautionary tales of Sidley Austin and Kelley Drye & Warren. In 2007, after a hard-fought battle against the U.S. Equal Employment Opportunity Commission, Sidley agreed to pay $25.7 million to 32 partners it had demoted. And in 2012, the EEOC ordered Kelley Drye to pay $574,000 to a lawyer who opted to keep working after he hit 70. At the same time, the firm agreed to rescind its policy of requiring partners to give up their equity stakes at 70. As the EEOC’s general counsel explained in a statement released at the time: “There is no reason why attorneys who are capable of continuing to practice at 70 either should be forced to retire or otherwise be dissuaded from continuing to work in their chosen profession just because of their age.”
We encourage law firm managers to keep an open mind when considering senior lateral partners. Double down on your due diligence, but also be prepared to give them ample business development and other professional support necessary to ensure a successful transition. The positive results will surprise you.
On February 4, when global research firm Savills released its Tech Cities in Motion survey results, it validated many law firms’ decisions in recent years to aggressively pursue New York’s technology-driven startup and investment sector. Among 30 cities worldwide, Savills announced, “New York has emerged as the premiere Tech City, overtaking San Francisco.” The report hasn’t receive much coverage in the legal trade press, but as recruiters who have gained a wide-ranging knowledge of the local market while facilitating lateral partner moves, we’ve learned that law firms have played important supporting roles in Silicon Alley’s ascension. We’ve identified three key strategies deployed by recognized law firm leaders in the space.
According to Tech:NYC, the city’s so-called “technology ecosystem” now boasts a value of $71 billion. It’s home to some 7,000 startups, backed by close to $40 billion in venture capital. And these days, every law firm in town wants a piece of the action. In one recent high-profile move, last October, New York-founded Kramer Levin Naftalis & Frankel recruited globally recognized IP and technology commercialization expert Harry Rubin. A former co-chair of Ropes & Gray’s international practice group, Rubin has since launched Kramer Levin’s IP and technology transactions practice.
Big Law’s chase after New York emerging companies work began to gain steam in 2016. That’s when Palo Alto-based Fenwick & West, the firm that incorporated Apple Inc. and handled the IPOs of Oracle and eBay, as well as numerous multibillion dollar deals for Cisco Systems and Symantec, opened a modest seven-lawyer New York office. Last year, having grown to 45 lawyers, Fenwick became the first to host an office in the Flatiron District, Silicon Alley’s birthplace. Founded in 1972 by four New York City expatriates, Fenwick showcases the number one strategy other firms would do well to consider in seeking to expand their emerging companies practices: Link arms with entrepreneurs before their business ideas become the next big thing.
Consider, for example, Fenwick’s six-year relationship with pharmaceutical cancer drug company Loxo Oncology. The firm began advising Loxo during its $33 million Series A financing back in 2013. This past January, Fenwick went on to represent Loxo in a friendly tender offer of $8 billion from Eli Lilly and Company. Fenwick’s experience underscores that the upside potential of investing in erstwhile entrepreneurs and introducing them to prospective investors is practically boundless.
Two firms that proved that upside potential early on—and that continue to do so in New York—are Cooley and Goodwin, founded in the older technology corridors of San Francisco and Boston, respectively. Cooley, with a fleet of 200 startup attorneys, has for a decade ranked as the nation’s number one law firm advising venture capital-backed companies in IPOs, and Goodwin has been recognized as among the top five. Both firms have achieved that status in no small part by offering entrepreneurs access to a trove of free market analysis, insights and resources. CooleyGo, launched in 2014, includes sample US and UK incorporation documents, offer letters, non-disclosure agreements and term sheets, as well as forms for running a business and ensuring compliance with cutting-edge website security protocols. Goodwin’s founders workbench, begun in 2010, represents a similar platform, and serves as an extension of that firm’s 230-lawyer emerging companies practice.
By affording entrepreneurs access to a wealth of accumulated expertise free-of-charge, Cooley, Goodwin and other industry-leading firms become magnets for early-stage work that’s evolved into relationships that span companies’ entire life cycles. Along the way, they’ve also captured legal work that’s unrelated to company formation, financing and transactions, including tax, employment, and litigation matters.
In addition to experimenting on the free-expertise model, firms that are serious about expanding their startup practices should also be prepared to write off time and devise alternative fee structures. This principle applies even when pitching for work from a well-capitalized company. “We have spent a lot of time and effort on the transactional side with our outside counsel coming to alternative fee arrangements,” noted the former General Counsel of WeWork, Peter Greenspan, in an August 2018 interview with Law360: “With respect to most of the work that we do with our outside counsel, we either have a fixed-fee or capped-fee arrangements, and the way we’re able to get those is really creating partnerships with our law firms.” (According to the Wall Street Journal, as of early 2019 WeWork had a valuation of $36 billion.)
In addition to being flexible on fees, firms should encourage associates as well as partners to support and network among the city’s varied incubators and accelerators. Entrepreneurs Roundtable, which has fostered 178 technology companies with cumulative valuations exceeding $2 billion, is the largest, and there are more than 100 more. Event planners within these startup hubs are always looking for money to host a meetup, and by donating the cash equivalent of a few hours’ partner time, firms can promote brand recognition and engender goodwill. Last year, for instance, Loeb & Loeb’s New York office, sponsored a daylong event organized by Transact-Tech-NYC, where banking, retail and FinTech companies mingled with startup founders and VCs, to “build strategic relationships and secure new opportunities.” Similarly, the emerging companies and venture capital group at McCarter & English organized an event at which Female Founders Fund partner Suiton Dong, among others, led a discussion on diversity and inclusion in the local startup community.
Firm-backed outreach endeavors like these illustrate a third important tactic for attracting New York startup clients: Adopt an entrepreneurial culture that promotes diversity. The city’s elite corporate law firms have historically mirrored the hidebound mores of Wall Street investment banks and Fortune 500 clients, but New York’s young, technology-driven companies embrace an entirely different set of values. As Bloomberg Technology reported a little less than a year ago: “New York provides a contrast to Silicon Valley, which has been criticized for tunnel vision, being insular, out of touch with the rest of the country and overly homogeneous.” When it comes to winning over startups, law firms that have made genuine gains and support robust programs recruit and promote women, racial minorities and members of the LGBTQ communities enjoy a substantial advantage.
It’s been three years since Mayor Bill de Blasio unveiled FutureworksNYC, an ambitious plan to create 100,000 high-paying jobs in automated manufacturing and robotics, cybersecurity, and health and life sciences, and the opportunities for law firms to tap into New York’s thriving technology sector have never been greater. The firms that experiment with the strategies outlined above will be among those most likely to succeed.
If there’s a single practice sector that law firms should seek to grow in 2019, it’s deal work from middle-market private equity firms. Renowned for transforming lackluster companies into top performers ripe for a profitable spinoff or an IPO, private equity funds in the lower and middle market typically buy, build and sell. It’s a value-added investment approach pioneered in the early 1980s by Bain Capital Private Equity, among others. In the decades since, these funds’ managers have not only delivered impressive returns, they’ve also proven themselves shrewd and relentless M&A players. And that, of course, makes private equity funds naturally attractive for any law firm seeking to add depth in corporate and finance.
We spend a lot of time helping partners in New York expand their capacity to serve clients in the emerging technologies sector. For long-term growth, lawyers in these firms are solidifying their relationships with early-stage and growth companies. For more instant gratification, they’re expanding deeper into deal work for private equity funds, including those that target companies in the lower middle market. Multiple authorities, including PitchBook, which tracks private equity and venture capital investing, recorded a record-breaking volume of deals in 2018. Through the third quarter of 2018, deals in the vast middle market (ranging in value from $10 million to $1 billion dollars), totaled $311.7 billion, according to PitchBook, “almost double the $169 billion deal value of 2008.” Having amassed a staggering $3 trillion in uninvested capital, private equity firms are now in a fierce competition to snap up controlling stakes in companies they can reorganize and build to scale (often through add-on acquisitions) within a holding period of three to seven years.
While the top quartile of Am Law 100 firms might have a firm hold on deals from the biggest and oldest players (Kohlberg Kravis Roberts, The Blackstone Group and The Carlyle Group, for example), we see an opening for other firms to tap into the market further downstream. Specifically, there’s a strong opportunity to capture work from private equity shops that target early-stage and other growth-oriented companies operating in the lower middle market—where deal values range from $10 to $250 million. As Mergers&Acquisitions reported in October 2017, a “new generation” of up-and-coming private equity professionals are deliberately seeking lower-cost deals: “These new firms are thinking small to grow big.” Am Law firms seeking new sources of revenue would do well to follow suit.
A frenzy of recent lateral partner hires shows that even firms with deep roots in the sector are pursuing growth. In November alone, three lateral shifts made headlines:
The Paris office of White & Case recruited Orrick, Herrington & Sutcliffe’s former head of M&A and private equity in France, Saam Golshani.
The New York office of Paul Hastings took in private funds expert Ira Kustin from Akin Gump Strauss Hauer & Feld.
The hedge fund-centric Kleinberg, Kaplan, Wolff & Cohen brought over Christian Gloger from Schulte Roth & Zabel.
These moves followed Willkie Farr & Gallagher’s announcement last June that it had lured back Matthew Rizzo, along with Jessica Sheridan, who had both been at Sidley Austin. As these and other firms have learned, private equity funds throw off a bounty of lucrative work. Consider, for example, just one set of deals launched by New York private equity firm CIP Capital in 2014 and handled by Willkie. After acquiring OnCourse Learning, CIP completed seven back-to-back acquisitions and investments in sales, marketing and technology initiatives. CIP built OnCourse Learning into a leading online distributor of courses in the health care, financial services and real estate markets. Last November, with advice from a team led by Rizzo (who began his career at Willkie), it spun off the learning company to Bertelsman Entertainment Group.
Of course, today’s private equity deals are in some respects newfangled forms of yesteryears’ leveraged buyouts. And many top Am Law firms with well-established private equity practices, including Debevoise & Plimpton, Latham & Watkins and Simpson Thacher & Bartlett, learned the ropes during the colossal deal boom of the 1980s, which climaxed with KKR’s $26 billion takeover of RJR Nabisco Inc. (Simpson Thacher has been deal counsel to KKR since its inception in 1976.) Since the financial crisis, however, private equity firms have pivoted away from the old KKR playbook, and the current market brims with new managers who think differently from their predecessors, both in terms of the industries they identify as appealing to investors and in how they execute their plays.
“There’s been an increasing variation in deal structures,” noted Ropes & Gray partner and private equity group industry leader Neill Jakobe in a recent presentation organized by his firm. (Rope & Gray enjoys a longstanding client relationship with market leader Bain Capital, and was named “Law Firm of the Year” in US New & World Report’s 2019 ranking of firms for leveraged buyout and private equity law.) “We’re also seeing unusual divestitures,” Jakobe added. “Including divestitures by private equity firms.”
The latest breed of fund managers in the lower middle market are fluent in cost-efficient digital technologies. They’re responding to stepped-up competition with data analytics tools that speed up the due diligence process and strengthen their ability to spot sector-specific market trends fast. And while they might pay law firms a premium for helping them source deals, they’re loathe to spend much up front for legal services on deals that don’t pan out. According to Axial, an online network that connects middle-market companies with buyers and investors, some small private equity fund managers find it too risky to sink $100,000 into legal and accounting due diligence fees. Law firms seeking to latch onto these funds managers must therefore be flexible on billing rates and also willing to take a long-range view.
The same principles apply when it comes to recruiting. As recent lateral partner moves illustrate, there’s stiff competition. For law firms that are serious about amassing expertise in the private equity arena, we suggest expanding their talent search to include lawyers with budding practices—young partners on an upward trajectory, as well as star senior associates clearly on track to make partner. These lawyers might not own enough client allegiance to keep entire teams busy, but they’re aligned with a market that thrives on forward-looking technologies and break-out business models.
It’s also worth remembering that many stars are born young. Daniel Lennon, now chief of Latham & Watkins’ corporate empire, was a junior associate in his mid-20s when he started working on deals for the Carlyle Group. Thirty years later, Latham’s fortunes continue to rise alongside Carlyle’s.
As The American Lawyer reported in October, all great private equity relationships have an origin story. What’s yours?
The world of financial services is being upended by new technologies—from virtual currencies and blockchain to peer-to-peer lending and enhanced mobile banking—that are capturing customers, as well as the attention of Wall Street investors and industry regulators.
While it may be too early to tout financial technology as its own well-defined practice area, the innovations and industry disruption associated with fintech should have law firms and lawyers snapping to attention. For law firms, it’s certainly a moment to market their expertise across practice areas to clients, to recruit the right talent and to ready themselves for potential business opportunities.
Several firms are already marketing fintech industry groups staffed largely by lawyers in existing practices. Among the Am Law 200 firms on Chambers & Partners recent ranking of blockchain and cryptocurrency specialists were Goodwin Procter; Davis Polk & Wardwell; Perkins Coie; Morrison & Foerster; Polsinelli; Cooley; McDermott Will & Emery; and Baker & Hostetler.
To bolster their ranks, firms and in-house departments have also stepped up the competition for lawyers with fintech bona fides. In February, for instance, Marco Santori, one of the best-known lawyers on legal issues surrounding blockchain and virtual currency, moved from Cooley to become president of the bitcoin services company BlockChain. Santori had been one of the leaders of Cooley’s fintech group and had moved to the law firm from Pillsbury Winthrop Shaw Pittman in December 2016 along with Patrick Murck, another virtual currency expert.
Baker McKenzie recently beefed up its financial technology practice with veteran IT practitioner Daniel Logan, a Toronto-based partner who moved from McCarthy Tetrault. And last October, a three-lawyer team led by partner Lee Schneider jumped from Debevoise & Plimpton to McDermott to help boost that firm’s fintech efforts. (Schneider is also a thought leader on financial technology legal issues and co-hosts the fintech podcast “Appetite for Disruption.”)
Increasing Scrutiny
The lateral moves and cross-industry practice groups have occurred amid a flood of headlines about virtual currency, its value and its future. Litigation and regulatory questions are already erupting for clients, and are only expected to accelerate as the digital currency market matures.
On the regulatory front, the most recent action has centered on digital currency trading. In January, the Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission issued a warning that they would bring enforcement actions over digital currency offerings. The CFTC did, suing three companies over their cryptocurrency efforts. At the end of February, the Wall Street Journal reported that the SEC had “issued dozens of subpoenas and information requests to technology companies and advisers involved in the red-hot market for cryptocurrencies.” A few days later, a U.S. District Court judge ruled that cryptocurrencies such as bitcoin could be regulated as commodities, a direct result of one of the CFTC lawsuits. Also, in early March, the SEC warned that cryptocurrency exchanges risk operating illegally over disclosure issues.
International regulators have been weighing in as well. China said in March that currency-related technology requires more centralized regulation. And the European Union in February signaled that it will increase regulatory scrutiny of virtual currency if the industry does not do more to address investor risk and prevent money laundering.
That kind of regulatory scrutiny, and the ongoing volatility surrounding bitcoin’s value, may not seem like a recipe for an enduring legal practice. But digital currency is just the best-publicized of an array of developing financial technologies that require firms’ attention. Robo-advisers such as Betterment are already using algorithms to automate investment advice for customers. “Insurtech” and “regtech” applications are relying on technology to help simplify insurance and compliance. Such tools as Mint are linking financial institutions to help customers manage their money in one place.
Many of the fintech players are deploying blockchain, which is the technology underlying digital currency. Blockchain is a digital ledger that keeps real-time chronological and public records about transactions made in bitcoin or another cryptocurrency. The technology removes the need for a third party, such as a bank, to verify a transaction and to keep records about it.
“Proponents,” Bloomberg wrote in January, “believe potential blockchain applications go far beyond the cryptocurrency world, and could have an internet-like, transformational effect on the way business will be transacted across sectors, from health care to finance.” According to Investor’s Business Daily, blockchain usage will accelerate dramatically in the next few years. “Blockchain is estimated to have delivered $4 billion in business value-add or technology innovation in 2017, with that growing to $21 billion by 2020, $176 billion in 2025 and $3.1 trillion by 2030,” the newspaper said.
Remaining Flexible
The potential for explosive growth is pushing companies to invest in blockchain and to begin testing its potential application in their businesses. Bloomberg noted that MasterCard is now allowing businesses to send money over a blockchain platform, and IBM and a unit of Comcast are now supporting a blockchain investment startup fund.
Naturally, lawyers are being hired to help startups, larger companies, and investors capitalize on the technology, defend intellectual property and grapple with the myriad cybersecurity issues inherent in blockchain. Expect more of the same as additional venture capital enters the space.
That’s just a start. Because blockchain represents a fundamental shift in the way digital data is processed, stored and shared, it’s likely to create profound legal questions that cross regulatory and industry boundaries. “I feel like everybody is talking about blockchain like an industry that needs to be separately regulated, where in fact blockchain is a technology that gets implemented in different industries,” McDermott’s Schneider told Bloomberg. “So if you’re going to use blockchain in health care, you need to figure out what health care laws apply, if you’re going to use it in the energy sector, you need to figure out what energy regulations apply.”
As law firms work to respond, they’ll need to avoid overspecialization and instead embrace a flexible, cross-practice approach that will allow them to pivot as necessary to adapt to a fast-changing and relatively new sector. Schneider offers a prime example. His online biography presents his blockchain and financial services tech credentials, noting that he works with transactional lawyers on ICOs (or “internet coin offerings”). Yet it also touts his ability to counsel “clients on a wide range of matters, including regulatory and enforcement issues, conduct of business questions, and general corporate concerns.”
Similarly, firms that have created groups to respond to fintech clients are wisely offering expertise across a number of practice disciplines. Perkins Coie, which has actively marketed its fintech expertise, says on its site that it counsels fintech companies on regulatory compliance, consumer protection, privacy, intellectual property and business transactions. Perkins Coie lists more than a dozen specific capabilities, from “decentralized crypto-currency programs” to “loyalty and membership cards and ‘points’ programs.”
Firm Needs
Among the laterals who have moved to fintech groups in the last few years, many share backgrounds in emerging companies, venture capital, and cybersecurity practices. Cooley’s Murck, for instance, was previously involved in a number of startups as an employee, entrepreneur and adviser and was a co-founder and former general counsel and executive director of the Bitcoin Foundation. In addition, robust securities litigation, banking regulatory, corporate/transactional, and tax backgrounds are in demand.
In other words, firms that hope to capitalize on fintech should understand that, at least for the foreseeable future, this will be a multidisciplinary space. They should be prepared to handle a very diverse array of potential matters from a disparate group of clients. Successful fintech players will be representing traditional financial institutions and Fortune 500 corporations alongside blockchain and other emerging technology companies.
As for talent, firm managers will need individuals with a keen interest and expertise in technology and data, and who are entrepreneurial when it comes to generating work. The space is relatively new and requires lawyers with relevant contacts to build a book of business. Those lawyers will need to actively network with individuals and organizations forming in the fintech space and to have their fingers on the pulse of the tech market of their regions.
They’ll also need to be deeply aware of Washington’s role in the industry. Regulation could alter the playing field overnight. The Office of the Comptroller of the Currency, in particular, is being closely watched to see if it will support the creation of a national banking charter for fintech firms. An initial proposal by OCC has been met with litigation from state regulators.
Given the potential legal issues at play, it’s entirely possible that fintech will require its own, specialized area of practice in the years to come. The law and the technology are still developing. That doesn’t mean, however, that firms and lawyers should wait to make a move. The potential for industry and economic disruption is immense in the short and long term, particularly where blockchain is concerned. Firms with a stake in the financial services industry should be looking to make connections and building a talent pool if they want a piece of the business to come.
In our new series for Lawjobs.com, we’re asking legal recruiters for their insider tips about where the biggest job seeker opportunities are, and for advice on how candidates can best position themselves to get them.
This Q&A is with Keith Fall of Walker Associates, a legal recruitment firm based in New York city. He specializes in working with Partners and groups as an expert matchmaker and trusted advisor. He has been in the field since 2005.
What skills are most in demand in the legal industry right now?
Corporate and transactional attorneys continue to be the highest in demand, with virtually every law firm seeking to proactively grow with both revenue producing partners and very talented 3-5 year associates. Firms continue to hire litigators opportunistically, but there seems to be less of a strategic emphasis on lateral growth in that area with any kind of urgency.
Where are the biggest growth areas?
FinTech is a burgeoning area of growth that law firms are just beginning to wrap their heads around. The world of financial services is being upended by new technologies – from virtual currencies and blockchain to peer-to-peer lending and enhanced mobile banking – and it’s affecting an increasing amount of existing law firm clients, all while new potential clients open up every day. FinTech is an interesting industry in that it touches upon a large variety of more traditional practice areas within a law firm, including corporate, regulatory, tax, cybersecurity, securities litigation, banking/finance, amongst others, and the industry is asking new legal questions in a space that has yet to be fully defined. For those reasons, we’ll continue to see an increased focus on growth with legal expertise that touches on all areas of FinTech.
What traits are your clients looking for in candidates?
Clients want a clear understanding of why a candidate is considering a change, and what they’re hoping to accomplish with a move. If as a law firm they’re not going to be able to solve whatever platform deficiencies the attorney is presently experiencing, the likelihood of the match lasting is minimal. Naturally, the business case has to be there as well, so it’s critical to them that almost any Partner level candidate demonstrate a client following, and an ability to develop further client relationships with upside. Lastly, law firms are taking their cultures increasingly seriously, and tend to have less and less tolerance for someone they think will be a problem for them in the future. We’ve seen many situations where someone is viewed as ‘difficult’, and despite having a large book of business, they get passed on routinely.
What’s the biggest mistake candidates make in the recruitment process?
The worst thing a Partner-level candidate can do when interviewing with another firm is to inflate their portable business expectations. It paints a target on their back, and when the practice doesn’t materialize, there is a lot of tension between themselves and the leadership of the firm, in what otherwise should be a harmonious relationship.
What’s the coolest job you ever recruited for?
I love working with different kinds of individuals and groups, and getting to know their personalities and what makes them tick. The people I get to work with are always overwhelmingly more interesting than the job they’re interviewing for.
Do you have any career advice for our readers?
You’ll never have more leverage in your career than when you have a client following. Whether you’re a big-time producer or are just starting to develop a book of business, you should be spending time every day thinking about how you’re going to market yourself and the firm, and pounding the pavement to get new client relationships in the door. Second, and this may sound counterintuitive coming from a recruiter, but the grass is not always greener on the other side of the fence. Before deciding to conduct what potentially could be a time-consuming search, talk to some resources you trust to get other input on whether a move could truly be worthwhile. Finally, when you’ve decided it’s time for a change, work with a recruiter that takes the time to get to know you and your practice, and is able to make good suggestions about what firms and opportunities you should be aware of. Making a career change is a big deal, and you want to work with someone who will take it as seriously as you will.
Originally published on March 13, 2018 on Law Jobs
Wall Street and Fortune 500 clients drive corporate business for most New York law firms, a completely understandable position given the city’s status as the world’s leading financial center.
We would like to posit an alternate path for corporate lawyers and law firms in the Big Apple—one that’s far more common on the West Coast than in New York: a focus on emerging growth companies and venture capital.
Although Silicon Valley gets most of the attention in this practice area, New York City is no sideshow. For lawyers with an entrepreneurial streak and who hope to build their own books of business, an emerging company focus can blaze a clear path to future career success (and, dare we say, happiness). Law firms, too, can win by building practices that capitalize on the emerging company market, and by attracting clients who, as they mature and grow, are often loyal to the firms who bet on them early.
Let’s consider a few facts. According to recent Money Tree reports on venture capital investment, VC spending has been rising rapidly in New York City. The market is No. 2 in the United States, behind the San Francisco Bay Area, with more than $7 billion in VC funding in 2016 and just under $5 billion in the first two quarters of 2017.
New York-based startups like Group Nine Media, which owns Thrillist and several other digital media properties, online mattress retailer Casper, and Peloton, the digital spin-class and fitness bike seller, have all raised more than $150 million from VCs this year alone. In a pair of deals over the summer, WeWork, whose shared office spaces house a host of startups across the five boroughs, pulled in a stunning $1 billion to expand in China, South Korea and Southeast Asia. That’s on top of the $200 million in VC funding it received in 2016.
Many of the players scoring significant investments have a distinctly New York flavor. Media, advertising, real estate, fashion and lifestyle companies have been generating strong VC interest. The makeup of the city’s workforce, with its marketing and finance expertise, is also driving start-up activity, as is a business climate that is open to international companies and overseas customers.
Such a large and growing start-up community is a relatively new phenomenon for the city. Despite New York’s status as a financial leader, its tech startups have long competed for East Coast venture money with the Dulles Corridor near D.C. and the Boston area’s university-adjacent tech sector.
But as Robert Johnson, executive director of the New York Venture Capital Association, a trade group, told the Wall Street Journal last year, “in the past three years or so, it’s so clear that … there’s a foundational start-up community in New York. And that has never been the case before.” In the same article David Silverman, a partner at PricewaterhouseCoopers, said: “New York is now the leading place on the East Coast for tech-venture investments. Several years ago, companies that wanted to do something big all had to go to Silicon Valley.”
Suffice it to say, this new vein of corporate activity provides great opportunity for many lawyers and firms —provided they have the right mindset and practice skills. The emerging company practice requires sophisticated business acumen, as well as practice knowledge that cuts across several disciplines. Start-ups need trusted counselors who can help them navigate through a host of corporate issues, from venture financing, to commercial contracts, to strategic mergers and acquisitions and initial public offerings. Building a close corporate relationship with a start-up client also can yield work for other key practices. Emerging companies often have complicated employment and executive compensation arrangements around stock options; intellectual property disputes are common; and corporate governance and regulatory issues will arise – particularly if the company plans a public offering.
Here’s the caveat. Lawyers and their firms will need to be flexible about their rates if they want to attract start-up clients. Few emerging companies will be willing (or able) to spend $1,000 an hour on legal help. This may be a particularly sensitive issue for lawyers at firms that have a stable of institutional clients paying premium rates. Their firms may not want to dilute their rate cards by taking on emerging companies. Whatever the firm’s size, its management and lawyers must recognize that representing an emerging company is an investment in the future. Firms that cut a company a break in the early years often come out ahead later when their client is well-established, public, and paying top rates. As those companies grow, they also can help firms attract talent at both the partner and associate levels.
For partners, rate issues may mean making a tough – though, we believe, ultimately rewarding – choice: Should they leave their firm for one that can provide greater rate flexibility and support? We recently helped a partner move from an Am Law 100 firm to an Am Law 200 firm for just this reason. The partner wanted to be more entrenched in the emerging company practice, but he wanted to charge lower rates to be competitive and to improve profitability by joining a firm that is accustomed to this model. By making a move, he is now building a stronger book of business, and his new firm is grabbing new clients and carving a deeper niche practice.
Our client isn’t alone. The market for laterals with emerging company practices is heating up. We are seeing New York-area partners moving to Am Law 100 firms because their emerging company clients are getting bigger and are requiring larger law firms to handle their work. Others are making strategic moves to more flexible smaller firms, and some are relocating from more traditional New York corporate firms to players with well-established technology backgrounds.
Among the most recent moves have been Randolph Adler Jr. and Michael Chung, who took their six-person emerging practices and start-up group from Dentons to Fox Rothschild. (Fox Rothschild “is national and aggressively focused on the middle-market. They’re not trying to do these multibillion-dollar, cross-border transactions,” Adler told The American Lawyer after the move.) Fenwick & West, a Silicon Valley stalwart, opened an office in New York in 2016, and recently attracted Ethan Skerry, a prominent technology and life sciences deal lawyer, from Lowenstein Sandler. Two other Lowenstein lawyers with emerging company practices have also moved to firms with strong tech and corporate backgrounds: Charles Torres joined Perkins Coie, and Peter Fusco moved to Orrick Herrington & Sutcliffe. Orrick’s David Concannon, who advises emerging companies and venture capitalists, jumped to Latham & Watkins. And Joe Daniels, best known for his work with early-stage technology, life sciences and consumer companies, has moved from Sheppard, Mullin, Richter & Hampton to McCarter & English.
The benefits of moving to an emerging company practice aren’t limited to partners. Associates are uniquely well positioned to capitalize in an emerging growth or start-up environment. Often, they are of the same generation as the entrepreneurs who are launching new tech businesses, and they may have opportunities to connect with potential clients simply by mining their social contacts. Even before making partner, they can break out and grow a book of business.
(For law firm management: If you want a sense of how embedded young entrepreneurs are in New York’s start-up sector and to get a picture of how they work, we’d encourage you to take a tour of a WeWork location or any other of the emerging company incubators around the city. They are crammed with small companies and millennial energy. As you take the tour, imagine if associates at your firm could network with the dozens of potential clients you see.)
For some associates, joining a startup is an effective and exciting way to make an early move to an in-house role. As The American Lawyer recently wrote, “tech is again a tough rival to law firms’ associate recruitment and retention efforts. Leaders at firm after firm point to technology companies as the biggest draw for young associates who are looking to make a change.” Those associates, the magazine said, are looking to get in on the ground floor of companies creating disruptive technology and grappling with sophisticated legal issues. The phenomenon isn’t limited to the Bay Area. The magazine wrote that it has “spread across the country, as the tech scene has made homes in cities like New York, Pittsburgh, Seattle and places in between.”
In Silicon Valley, of course, this kind of move is nothing new. VCs invested roughly $25 billion there last year, and associates and partners have a long tradition of picking up early-stage clients and reaping immense rewards when the company matures. Take, for instance, David Drummond. In 1998, he was a young Wilson Sonsini Goodrich & Rosati partner. That year he started working with a pair of students from his alma mater, Stanford University, handling legal matters for their start-up. It just happened to be a new search engine called Google.
Twenty years later, Drummond, the company’s first outside lawyer, is the chief legal officer for Google’s parent company, Alphabet, and, by some accounts, he’s the most powerful lawyer in Silicon Valley. His estimated total annual compensation? More than $40 million.
Not every company will become a Google, of course. Yet for corporate lawyers who yearn to have more control over their own destinies and for law firms that want to develop deep and lasting client relationships, pivoting to an emerging company practice can yield rich rewards. And New York has become an excellent place to make just that kind of move.
This article appeared on www.law.com on September 15, 2017 and was written by Ross Weil and Taylor Miller.
Let’s consider the following scenario: A young associate in her third year at an Am Law 200 firm receives an offer to take a job as an in-house lawyer. The associate isn’t in love with Big Law, has no deep desire to become an equity partner, and harbors vague hopes of someday becoming the general counsel of a Fortune 500 company.
Should she take the job? After all, wouldn’t it be wise to get on the in-house career track as soon as possible, especially if that’s what she may want to do in the future?
We’re loading the question here, of course. We think the associate in question should turn down the offer and keep plugging away at a law firm. As legal search professionals, it’s not uncommon for us to hear from junior associates – some as early as second-years – who are contemplating an exit from private practice. While a move in-house at this stage might be tempting, we think it could close as many career doors as it opens. Not only would such associates be depriving themselves of important skills and contacts gained as a senior associate, it may harm their ability build a thriving in-house career as well.
We should be very clear: Taking an in-house position can often be a great move for a seasoned attorney. More than ever, legal departments are relying on technology and alternative service providers to perform routine work, and many in-house counsel are grappling with cutting-edge issues involving regulation, business strategy, and globalization. As a result, in-house roles require more experience and business savvy than ever before. These aren’t (and never have been) fallback positions for junior associates experiencing ennui about their law firm careers.
In fact, we generally advise against an in-house position unless you’ve put in a minimum of five years or more as an associate. That’s not to say that you should suffer in silence if you hate your present circumstances, but we think there are other options available to help ease the pain.
First, though, let’s talk about the reasons it makes sense for a junior associate to stay on a Big Law path — at least for a few more years.
No Turning Back
Every so often, you’ll read about the retiring general counsel of a major company joining the ranks of an Am Law 200 firm. It makes sense: The GC can provide insight about the in-house world and presumably has made the kinds of contacts that will help drive business to the firm.
What you don’t read about are law firms hiring a host of junior associates from in-house positions. In most circumstances, it’s a one-way route from law firm to in-house. If you make the move to an in-house role, you had better be prepared for an entirely new career path, as it will be extraordinarily difficult for you to move back if you feel you’ve made a mistake.
Some of this is simply a matter of supply and demand. The market is full of well-qualified associates, most of whom will have a risk profile that’s appealing to hiring partners. Those partners may see little incentive in hiring an associate who has quit a big firm and now wants to exit their in-house job. While we have seen associates go back to firms after whatwere essentiallyone- or two-year secondments, those situations are rare. As recruiters, we aren’t confident we would be able to place a lawyer who simply moved from junior associate to in-house and wanted to jump back.
Training Trouble
Experience matters, and it’s one of the key reasons associates should think carefully about moving in house so early in their careers. Most law firms are committed to training their associates and employ serious resources to do so. Law, after all, is their primary business, and an associate’s services are part of what they sell. As an associate, you may dislike a firm, partner, or a type of matter, but more likely than not, you’re learning a great deal about the basics of handling a variety of legal issues.
As you advance to a senior associate role at most firms, you’ll probably have opportunities to work directly with clients and to take more of a leading role with them. In the meantime, you’ll also be making important contacts with clients, attorneys at your firm, and with counsel on the other side of a deal or piece of litigation. All the while, you’ll be operating in an environment where lawyers and their work are highly valued.
For an in-house lawyer, such opportunities may be more limited. The law is almost certainly not the primary business of the enterprise, and, fairly or not, the legal department is often viewed as a cost center by company leaders. It’s less likely that a company is going to spend money training you, and for very junior lawyers, the work may prove even less exciting than some of the tasks you’ve had as an associate. Contract review, anyone?
That’s especially true at smaller companies and start-ups, where only one or two lawyers may serve the whole company. While you may have instant entrée into the C-suite in such a situation, and you’ll likely get to work closely with the CEO, resources for the department may be extremely limited— even for basic needs like research and outside counsel. At a larger company, you may have the ability to farm out questions to outside counsel, but costs will still be a challenge, and routinely reaching out may highlight your status as an inexperienced lawyer.
Furthermore, you’ll need to be prepared for a radical change in your status. As we’ve noted, the law (and lawyers) are at the center of the firm universe. In companies, the business needs of the enterprise take precedence. You will need to be prepared to take those needs into account as you advise your business colleagues. Consistently delivering conservative advice as you would at a law firm will likely frustrate the business team – another factor that could end up stymieing your career path. In-house lawyers who are seen as blockades to business needs rarely rise to the top of corporate law departments.
Another Option
Associates who’ve stayed at a law firm for five, or better yet, six or seven years, have received more training, and should be adequately equipped to cope with a business environment. They are less likely to need to call upon other attorneys for advice or help – something easy to do in a law firm but which can be more difficult in a small law department. And if they are interested in moving in-house, senior associates are far more likely to land superior roles that give them a better shot at one day leading a department.
For junior associates, however, the problem remains: What to do if you’re miserable at your current firm. Before making a career-shifting jump in-house, a move that you probably won’t be able to undo, we’d counsel you to take a position at another law firm.
We’ve found that associates, for a variety of reasons, are often reticent about making lateral moves. But we see lateraling as an opportunity for associates to continue to gain critical experience. It can also help them determine if their “buyer’s remorse” is about Big Law in general or about one law firm and its culture. A good recruiter will listen to what associates like or don’t like about their present firms and will offer counsel about firms that may provide a better fit.
From a career perspective, a lateral move keeps the associate’s options open. Hiring partners are more amenable to bringing aboard an associate from another law firm, and a new firm’s culture and/or business strategy could help solve the associate’s immediate problems. Later, when the time is right, the associate may make the jump to a legal department — now armed with a broader set of legal and client skills that should help them thrive in as an in-house lawyer.
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This article appeared on www.law.com on May 9, 2017 and was written by Keith Fall and Taylor Miller.
Change in Washington can be good – very good — for business at law firms, particularly if they bet on the right practices and talent to help their clients navigate new political realities.
The move from a Democratic to a Republican administration has traditionally meant a surge in work for law firms. Rarely, however, has the shift been as seismic as the one between Barack Obama and Donald Trump. Though the new administration is still filling positions, and it will take time for the full impact of its regulatory stances to be felt, the contours of Trump’s policy priorities are becoming clearer. And for law firms, it’s a time to assess opportunities.
As strategic advisers to firms, we have been closely watching developments to determine which areas are most likely to provide growth potential for legal business in the near future. Based on our market intelligence, we’ve identified six practices that we think will show significant activity because of major changes in policy by government officials or because of reactions by industries or markets to activity in Washington.
By the way, we’re not alone in our expectations for the legal market. In December, The American Lawyer reported that more than 80 percent of law firm leaders surveyed were moderately or very optimistic about the business of law in 2017. Naturally, a turn of events (or tweets) could alter the landscape. But given the administration’s initial moves, we see promising developments for well-positioned firms in the following practice areas:
Energy. During the campaign, Trump made it clear that he would support coal, oil and natural gas providers over environmental interests. And so far, he’s made good on his promises. In January, he resurrected the controversial Keystone Pipeline and sped up work on another pipeline through the Dakotas. He’s also said he would target Obama-era emissions rules that would have closed hundreds of coal-fired power plants in favor of renewable energy sources.
No surprise: Deregulation will provide a strong boost to energy and environmental practices as clients attempt to understand the changes. The impact also is likely to be felt across several other practice areas. For example, if coal regulations loosen, mine acquisitions may heat up – creating work for M&A and finance lawyers. And trade lawyers will be needed to grapple with expected changes in import/export policy affecting energy suppliers.
Though it has pledged to cut regulations, the administration is likely to propose new rules of its own – particularly if they align with Trump’s populist campaign message. Recently, for instance, the president signed an order directing the secretary of commerce to draft a rule that would force companies to use American materials in oil pipeline construction. Expect a labor-intensive process for lawyers as the rule is designed and implemented.
Mergers & Acquisitions. Some companies may be taking a brief breather from the markets as the administration finds its footing, but we expect that in the long run, Trump-led deregulation is likely to spur more deal activity across several industries. (The energy sector, as we said, is ripe for deregulation-driven deals.) Market volatility, too, may push the Federal Reserve to hold the line on interest rates, which, in turn, will be good news for deal makers. And Trump’s corporate tax cut proposals could free up cash for transactions.
During the short term, look to mid- and small-cap companies for the most M&A activity. In a recent KPMG survey of deal makers, 78 percent said they expect their transactions in 2017 would be valued at less than $500 million.
On the deregulation front, Trump has targeted the Dodd-Frank Act for major revisions and set a May deadline for new Treasury Secretary Steve Mnuchin to examine the law and recommend changes. How far those changes may go is, as yet, unclear. But an easing of restrictions on banks could put more capital in play for a broader array of deals.
And despite the partisan change in D.C., firms may want to avoid reducing their investments in competition work. During his campaign and the transition, Trump attacked the proposed Time-Warner, AT&T merger, saying it would concentrate “too much power” in the hands of a single company. His choice for attorney general, Jeff Sessions, though occasionally critical of the government’s antitrust stances, has in recent years also expressed concern about consolidation in various industries, including health care, energy and pharmaceuticals.
Tax. President Trump has said that a major announcement on tax reform would be coming in a matter of weeks, and administration officials have said the plan will be the most significant since the Reagan era.
If his campaign platform is any indication, Trump may call for a cut from the current 35 percent rate to 15 percent. House Speaker Paul Ryan also has been working on a proposal, which according to news reports, would slash the rate to 20 percent and adjust taxes on imports and exports. Individual tax rates are also on the table, Trump administration officials have said. And Trump has proposed a “repatriation tax holiday” aimed at spurring U.S. companies to bring home $2.5 trillion in cash from overseas accounts.
A tax bill is sure to be a political priority for Trump and the GOP this year, and if it is passed, corporate tax practices should see an uptick in client interest. If personal income tax rates are also adjusted, practices serving high-wealth individuals and estates will be active, too. Again, expect Trump’s efforts to reverberate across practice boundaries. Trade practitioners will need to grapple with the adjustments in import and export rules, and additional cash from tax savings and repatriation may trigger new investments that will keep finance and M&A experts busy.
Cybersecurity. As a candidate, Donald Trump pledged to make cybersecurity a top priority of his administration. Trump was set to release new executive order on cybersecurity regulations in January, but he scuttled the announcement at the last minute. A draft of the rules, however, was leaked to The Washington Post, and it shows that private business is likely to be a major player in Trump administration plans. The draft order called for economic and other incentives to “induce private sector owners and operators of the Nation’s critical infrastructure to maximize protective measures; invest in cyber enterprise risk management tools and services; and adopt best practices.”
A Trump focus on cyber security will only accelerate business in an area that we believe is ripe for innovative legal work. According to a recent survey by Risk Based Security, a Richmond, Va.-based data security consultant, 2016 set a record for the number of files exposed by hackers — more than 4 billion were reported stolen over the course of the year. Most of that activity occurred in the United States, and most of it was aimed at business interests. This year is unlikely to be much better, most data breach forecasters have said.
For firms, data security looks like a multi-practice winner. It may provide a litigation growth opportunity, in a relatively flat overall market for disputes. And as corporations look to limit their risk, law firm transactional, intellectual property, privacy and insurance acumen will be needed.
Project finance. During hispost-election acceptance speech, President Trump recited a litany of public works projects that his administration would tackle. “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” Trump said. “We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”
Trump’s plan relies heavily upon private financing. During the campaign, Trump said he would offer $137 billion in federal tax credits to private firms that back transportation projects. That, in turn, would unlock $1 trillion in investment over 10 years. House Speaker Paul Ryan has also touted a public-private partnership approach, saying that for every dollar of federal funds spent, $40 of private money could be made available for infrastructure development.
While critics have said a private-financing formula will never pay for all the projects on Trump’s list, any multi-billion-dollar uptick in infrastructure spending is likely to drive revenue for project and public finance practices at firms.The efforts, too, could mean significant work for government contracts-focused practices. And again, transactional and other disciplines could be affected by industry activity spurred on by an infrastructure development plan.
Health Care. Health care-related practices have been in hyper drive since the Affordable Care Act’s passage six years ago. We expect more of the same — especially with the Trump administration’s pledge to eliminate and replace the ACA.
Health care was already a heavily regulated industry before the ACA, and a change in partisan control will mean several regulatory adjustments. Merger activity and related antitrust litigation also have been exceptionally strong, as the largest players have attempted consolidation — albeit unsuccessfully. On Feb. 9, a judge blocked the $48 billion merger of health insurers Cigna and Anthem. That decision came a month after a court halted a $33 billion merger of Aetna and Humana.
Thus far, ACA repeal efforts have stalled in Congress, as legislators struggle with how (or whether) to construct a replacement. Yet even before Trump’s election, bipartisan support had developed for changes in the law. Should the ACA survive, health care regulatory specialists will likely have a full roster of changes to help clients understand and implement.
For law firms,taking advantage of the post-Trump surge in legal work will mean moving quickly. Placing bets now on talent can allow firms to capitalize on the upswing in work expected as the Trump administration matures.
— This article originally appeared in the National Law Journal on and was written by Ross Weil and Keith Fall
Change in Washington can be good – very good — for business at law firms, particularly if they bet on the right practices and talent to help their clients navigate new political realities.