Large Law Firms Prepare for a Slower Year

Law Firms

Posted Feb 25, 2008, 06:51 am CDT

By Debra Cassens Weiss

Large law firm leaders and consultants tell the Wall Street Journal (sub. req.) that legal work is slowing in several segments, leading them to expect a less than stellar year in 2008.

Last year was a boom time for many firms, which saw revenue growth of more than 10 percent on average, according to the Citi Private Bank Law Firm Group. But business began to slow in the third quarter because of a ripple effect caused by the subprime mortgage crisis.

"Firms will see their work slow down this year," Goodwin Procter chairman Regina Pisa told the newspaper. "There's no question about it."

She noted a slowdown in mergers and acquisitions work at her firm, a downturn also seen at Latham & Watkins, the newspaper says. WilmerHale reports reduced work in initial public offerings of companies going public, while Orrick, Herrington & Sutcliffe is seeing less work in securitizations, which involves the packaging of mortgages and other assets into securities that are sold to investors.

William Perlstein, co-managing partner at WilmerHale, told the newspaper, “We all suspect that there will be initial cutbacks mandated by corporate boards across the board in terms of expenditures.” That means legal services that are considered discretionary will be taking a hit, he said.

Some firms expect extra work in bankruptcy and subprime litigation, but it may not be enough to offset reduced work elsewhere. Still, few big law firms have resorted to layoffs, although many have so far held the line on associate salaries.

But hiring may be slowing. Last year WilmerHale didn’t always replace associates who left the firm. Both McCarter & English and Proskauer Rose expect to be conservative in hiring this year.

The Wall Street Journal Law Blog notes the story, and adds a chart of large law firms listing gross revenues and profits per partner in 2007. The biggest one-year increase in gross revenues was posted by Cooley Godward Kronish at 45 percent, followed by Reed Smith at 39 percent. Law firms exceeding the $2 billion mark in gross revenues are Latham & Watkins; Skadden, Arps, Slate, Meagher & Flom; and DLA Piper.

Comments

Report Abuse

Posted by payne - 7 months, 2 weeks, 4 days, 5 hours, 39 minutes ago

I think like in any industry that this will depend - Personally I disagree that this will be the case in several specialties
Employment - recessions and bad economy will bring many more employment lawsuits

Bankruptcy, Taxes, Fraud and Financial industries. There is a lot of fraud to be expected with recessions, and the rest kinda speak for themselves.

These are the ones that are on the top of my head, but, I say, that definitely there are several specialties that can and will capitalize on this downturn, if they are “smart”
Posted by Mike Hunt - 7 months, 2 weeks, 2 days, 12 hours, 32 minutes ago

Will this mean the end of “personal shoppers” and other perks for associates? I doubt it. Tightening the belt an inch or 2 doesn’t mean that much when you’re fat as a moose to begin with. I can’t get over the lunches I’ve seen being brought into my friend’s law firm, “catered” by the client who probably doesn’t even know he’s paying for pate de fois gras and avocado sandwiches! My friend is such a cheapskate, he wouldn’t pay for a Hershey’s bar out of his own pocket, but now he’s eating Ghiradelli chocolate on his client’s dime!
Posted by hklawyer - 7 months, 2 weeks, 2 days, 10 hours, 47 minutes ago

Why does the commentary on any given story devolve into jealousy over Biglaw compensation?
Posted by Mark Pitchford - 7 months, 2 weeks, 2 days, 8 hours, 40 minutes ago

All work is cyclical.

Like Payne pointed out, firms and solos just need to adjust their focus to those specialties that will be seeing increased activity.
Posted by Jonathan Edwards - 7 months, 2 weeks, 2 days, 4 hours, 37 minutes ago

Dang, Mike (2), I wouldn’t eat Hershey’s either, if I had Ghiradelli available. Although I prefer Cadbury’s. My personal shopper wonders what I would do without her. She thinks I am helpless. It is all on the client’s dime, that is how we earn our living. Still, I expect to do fine, since I don’t do those mergers and acquisitions. Bankruptcy, divorce, estates, they all pay. Maybe not a lot on each one, but there are plenty. I just hope Biglaw doesn’t cut in on me!
Posted by Steve Perkins - 7 months, 2 weeks, 2 days, 3 hours, 41 minutes ago

Regarding #3 above… the commentary only drifs toward jealousy over compensation when a rare article slips through that doesn’t deal with the topic already. Usually, jealousy over compensation is the main subject of the articles posted here. I’m not sure if “devolved” is therefore even the appropriate term.
Posted by Kobayashi - 7 months, 2 weeks, 2 days, 3 hours, 24 minutes ago

Avocado sandwiches are overpriced. I work deep in South Texas and go across the border to Reynosa, Mexico and get a 1/2 kilo of hot corn tortillas (yea they’re on the metric system), and 2 ginourmous avocados...2 bucks. What!!??? But I digress, although a slowdown is currently affecting dealwork, it may trickle even into areas I once thought were impervious to downturns, such as intellectual property. I’ve heard patent attorneys say that patent prosecution is hot during upturns and patent litigation is hot during downturns. If you know anything about the eastern district of TX then you know patent litigation seems hot regardless. News has to be pretty bleak for you to hear about slowdowns in these seemingly immune practice areas. However, I do remind myself that what is hot now may be cold a couple of years from now.

Commenting has expired on this post.

ABA Journal - Law News Now

Law Firms