Large Law Firms Prepare for a Slower Year
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.