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 his post-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