Is Heller the First of Many?
More big law firms are likely to dissolve this year, as San Francisco’s Heller Ehrman announced it would do late last month, predicts Paul Lippe, a founder and chief executive officer of social networking site Legal OnRamp.
In his American Lawyer article, which was reprinted on New York Lawyer (reg. req.), Lippe outlines 10 reasons why he thinks more big firms will “Heller-ize” than merge with rivals over the next 18 months.
Concern about law firm liabilities is one reason. “Any acquiring firm in a merger quickly figures out they can cherry-pick people rather than acquiring the firm as a whole and all its liabilities. In a boom, people overlook the worries, but in the current climate, fear of the unknown will loom much larger; compare the spree of bank mergers pre-Credit Crunch to the inability to get any done without government support in the current environment,” he says.
Low law firm capitalization, office leases that are suddenly under water, and the lack of economies of scale in law practice also make his list. So does the relative ability of lawyers to move their practices, compared to professionals in other disciplines.
“To far greater degree than almost any other type of firm, the intellectual capital and client relationship capital belong to the individual partner, not the firm. It’s no surprise, then, why partners leave,” tripping weak firms into dissolution, Lippe writes.
