“Equity partners are not busy enough at 51 percent of all law firms,” declares Altman Weil’s 2018 survey on the state of the legal market post-recession. It’s a stinging report, one that depicts a market glutted with “chronically underperforming lawyers” who siphon off profits, impede change, and threaten their firms’ very survival. At 58 percent of 801 firms polled, including just over half of the AmLaw 200, the survey says, “Overcapacity is diluting profitability.”
We don’t contest Altman Weil’s conclusions, but the survey doesn’t reflect reality in New York, where many firms are hustling to grow. Granted, even in the city that never sleeps, some firms are harboring idle partners, but they’re a trivial factor given the current demand for high-performing lateral partners. In our experience, practically every out-of-state national firm is in hot pursuit of lateral partners who strategically fit in their New York offices. Earlier this year, for example, we found for the New York office of a Boston-based firm a partner whose expertise in the Israeli start-up sector fits the firm’s expanding early-stage company practice. We also identified for the New York office of a Philadelphia–based firm a young commercial litigation partner who’s afforded access to anew breed of clients and contactsand also enhanced the firm’s local profile.
By growing in New York, national firms are polishing their reputations and gaining greater access to the city’s dominant deal flow. As of midyear, the New York Times reported 2018 has yielded a record $3.5 trillion in mergers, the overwhelming majority of which have been lawyered out of New York. While elites such as Cravath, Skadden Arps, and Sullivan & Cromwell won the legal work on the biggest of these deals—including The Walt Disney Co.’s hard-fought acquisition of 21st Century Fox, and AT&T’s merger with Time Warner Inc.—partners at national firms we talk to say they’re expanding in New York to compete for similarly lucrative deal work and related litigation. As a result, these same firms are paying top-dollar, and that’s great news for high-performance lateral candidates.
National firms’ enthusiastic expansion into New York illustrates the strength of this market, as well as big law firms’ resiliency. For further proof, consider Citi Private Bank Law Firm Group’s June report that “revenue growth of 5.5 percent in the first half of 2018 was the highest since 2007.”
In fairness to Altman Weil, we concede that several partners we’ve worked with sought to leave their old firms because they were fed up with having their earnings dragged down by underperformers. Old guard resistance to relinquishing profits and power to up-and-comers is a sensitive, important issue, and one we’ve written about.That said, in ultra-competitive New York, we’re confident that natural market forces will ultimately drive out any well-heeled lawyers who aren’t pulling their own weight.