BigLaw Financial Outlook Forum

[TLSModBot]

Yeah that was in slightly bad taste.

But seriously I hope Dickstein gets their merger cuz otherwise it's not looking great.

http://www.philly.com/philly/business/2 ... apiro.html

Oh, nice. Hooray for 100 plus lawyers not suddenly being thrust into the market unemployed.

[Betharl]

So, it's projected that industry revenue and profitability will increase very modestly in future years, just like the past few years, and in the face of new technology and LPOs, increased pressure from clients/bigger in-house legal departments, and U.S. GDP growth of what, 3% a year? This doesn't seem that bad to me. Particularly as it looks like firms have right-sized themselves (the culling during the recession and subsequent smaller class sizes) and are getting more efficient.

Firms aren't hiring as many people, but now might be a great time to get on the biglaw track. I would think the increasing size of in-house departments and smaller firm class sizes would combine to create a great environment for seeking exit opportunities in the future. Maybe it will be harder to make partner, but on the other hand, the average age of an attorney in this country is, like, 50. Attorneys in these senior position have to retire eventually.

[TLSModBot]

1. Please link to a single credible source that says both profitability and industry revenue will increase.

2. "Legal industry" =/= "Law firms". There are a ton of non-lawyer legal service providers (where a JD is a useless degree byw). And law firms, by and large, are where new lawyers cut their teeth. So if they ain't hiring, there's a problem. Unless we see an increase in in house dept's etc. take on new lawyers and grow them themselves.

3. There's so much more that's wrong with the above post but lazy so see literally the rest of this thread and NY to 190 thread as rebuttal.

[DELG]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

As much as the idea of a law firm dead pool entertains me, it's probably in awful taste. Also, hard to talk about some things publicly.

Poor taste? A bunch of rich ass white UMC and rich folks might have to find another job ohes noes. Lets do this.

You still UMC after your firm collapses?

[Betharl]

1. Please link to a single credible source that says both profitability and industry revenue will increase.

2. "Legal industry" =/= "Law firms". There are a ton of non-lawyer legal service providers (where a JD is a useless degree byw). And law firms, by and large, are where new lawyers cut their teeth. So if they ain't hiring, there's a problem.

I'm using industry to refer to law firms, like the Citi report does. Biglaw not hiring is mainly a problem for people who can't get biglaw out of school. My main points are 1) very slow growth isn't awesome, but it doesn't warrant panicking or taking bets on which firms are going to fail next, and 2) I think if you can get Biglaw, now is actually a pretty decent time to get into it, because I think there will continue to be solid demand for mid-senior level biglaw people, either in firms or in-house.

[Actus Reus]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

I feel like ppl making $2.00mm a year isn't a sign things are crumbling. I would go with Kasowitz or some firm with 10+ offices because that's a lot of overhead.

[lost129]

Do these M&A outlooks mean nothing?

http://info.kpmg.us/content/dam/info/ma ... utlook.pdf

[Monochromatic Oeuvre]

I still don't see why you foresee catastrophe from an associate perspective when entry-level hiring maintained steady, if unspectacular, growth for the past six years, and firms expect that to continue throughout 2018. Demand for law firm services is averaging positive growth (although clearly not like it once did). So while everyone agrees the headwinds will continue to exert pressure, there's nothing to suggest that Biglaw will die off. It seems more likely that more resources will continue to concentrate in the hands of fewer and fewer (both within firms and with the market as a whole) and that everyone else is basically going to stagnate (and maybe watch their purchasing power be eroded). Until labor-saving technology is adopted on a significant scale, they're still gonna need plenty of bodies.

[smaug]

I still don't see why you foresee catastrophe from an associate perspective when entry-level hiring maintained steady, if unspectacular, growth for the past six years, and firms expect that to continue throughout 2018. Demand for law firm services is averaging positive growth (although clearly not like it once did). So while everyone agrees the headwinds will continue to exert pressure, there's nothing to suggest that Biglaw will die off. It seems more likely that more resources will continue to concentrate in the hands of fewer and fewer (both within firms and with the market as a whole) and that everyone else is basically going to stagnate (and maybe watch their purchasing power be eroded). Until labor-saving technology is adopted on a significant scale, they're still gonna need plenty of bodies.

nah, they can just use more contract attorneys, like they have been for a while

everyone is getting more and more cost conscious

i think you also underestimate how some firms will eat other firm's lunch, mainly by lowering costs. It's a race to the bottom.

[Monochromatic Oeuvre]

I'm sure the use of contract attorneys will continue and perhaps grow to some extent. I very much doubt there's gonna be some large-scale shift, because if there were gonna be one, it would have happened a long time ago.

I'm sure many firms will eat one another alive, and I wouldn't be surprised to see an increase in mergers or dissolutions. But as long as all the work transfers, the total demand will remain basically the same. Seems to me that most people have predicted that the future of the business is a few dozen megafirms (along with a few rich specialists who deliberately remain small) and everyone else sort of somewhere in the ocean. DLA Piper might honestly have 25,000 lawyers one day. But if all the work transfers from all the Dicksteins and the Pillsburys of the world, it may be, in a macro sense, irrelevant what label the work is being done under.

[smaug]

I'm sure the use of contract attorneys will continue and perhaps grow to some extent. I very much doubt there's gonna be some large-scale shift, because if there were gonna be one, it would have happened a long time ago.

I'm sure many firms will eat one another alive, and I wouldn't be surprised to see an increase in mergers or dissolutions. But as long as all the work transfers, the total demand will remain basically the same. Seems to me that most people have predicted that the future of the business is a few dozen megafirms (along with a few rich specialists who deliberately remain small) and everyone else sort of somewhere in the ocean. DLA Piper might honestly have 25,000 lawyers one day. But if all the work transfers from all the Dicksteins and the Pillsburys of the world, it may be, in a macro sense, irrelevant what label the work is being done under.

bolded is happening right now, and has been happening for a while

but the rest is well taken and a good point

[TLSModBot]

Mergers don't change underlying client demand. Nor are they a bad thing necessarily - a well-executed merger results a more profitable and cost-efficient firm.

But law firm mergers are hard to pull off successfully, meaning they are either borne of very strong firms looking to intelligently grow or from very desperate firms trying to avoid dissolution. The latter category is increasing in frequency and firms here are more likely to see the deal fail. That is why, at least on my end, I direct some negativity towards law firm mergers right now.

Even if net demand stays the same or increases (and I dispute that is the case for a variety of reasons), the volatility and uncertainty it creates in hiring really sucks for new and future associates. I saw careers end before they really even got to start in the wake of Dewey collapsing.

[Monochromatic Oeuvre]

Dewey is, of course, sort of a unique case of a firm without demand who (a) deliberately obfuscated that fact, and (b) had put themselves in a position long ago not to be able to do anything about it. The market, as a whole, absorbed it pretty well, as Dewey's people and business splintered off into ten different directions. Of course certain people got fucked. The greater volatility the market is likely to experience is probably gonna increase the number of "winners and losers" unless there is a sea change in law firm hiring models (i.e. unless not getting an offer after an SA becomes anything other than a kiss of death). But other firms who stagnate, the Pillsburys and Schiff Hardins of the next ten or twenty years, might have more "orderly" deaths where they just sort of decay away, hiring fewer people each year. At the very least, the writing will be on the wall for a while, even if not everyone will be able to avoid what happened to, say, a lot of Bingham juniors.

Side note: Did anyone ever follow up to figure out what happened to the Bingham SAs (as in, did they wind up getting full-time offers at a reasonable rate?) and the group of juniors that were brought on "temporarily?" I know Morgan Lewis was already not offering 100+ Bingham associates, but how bad did the final damage wind up being?

[Johann]

if anyone wants to bet me even odds that K&L gates exists on January 1 2018 ill take whatever youre willing to put up.

[Johann]

Dewey is, of course, sort of a unique case of a firm without demand who (a) deliberately obfuscated that fact, and (b) had put themselves in a position long ago not to be able to do anything about it. The market, as a whole, absorbed it pretty well, as Dewey's people and business splintered off into ten different directions. Of course certain people got fucked. The greater volatility the market is likely to experience is probably gonna increase the number of "winners and losers" unless there is a sea change in law firm hiring models (i.e. unless not getting an offer after an SA becomes anything other than a kiss of death). But other firms who stagnate, the Pillsburys and Schiff Hardins of the next ten or twenty years, might have more "orderly" deaths where they just sort of decay away, hiring fewer people each year. At the very least, the writing will be on the wall for a while, even if not everyone will be able to avoid what happened to, say, a lot of Bingham juniors.

Side note: Did anyone ever follow up to figure out what happened to the Bingham SAs (as in, did they wind up getting full-time offers at a reasonable rate?) and the group of juniors that were brought on "temporarily?" I know Morgan Lewis was already not offering 100+ Bingham associates, but how bad did the final damage wind up being?

are you actually trying to argue for me and capitol? like how do you start these things with dewey wont happen again but 150 people in a firm might have lost their job as normal course of business and be fucked today? you realize what you are saying right?

[Monochromatic Oeuvre]

I'm not really disagreeing with Capitol on the notion that an environment of more merger and dissolutions is gonna increase volatility, or that that's gonna mean there are more "winners and losers" unless there's some major change in the Biglaw hiring model. I did say that most future implosions probably won't be on the scale of Dewey, because liferaft firms will probably take most (even if no, not all) of the associates on board if the business environment doesn't suck, and because the writing will be on the wall for longer than it was at Dewey. The level of outright fraud and obfuscation will, in most cases, be lower. It's not so sudden when Dickstein or, in the near future, K&L Gates collapses.

I'm only really disagreeing with the idea that law firm demand or entry-level hiring, taken as a whole, will be down in any significant way. I think it's much more likely that everyone but the high-level rainmakers is gonna just tread water (and watch inflation erode their purchasing power, while the new hires will come in with rapidly increasing debt loads).

[TLSModBot]

Open question for the forum: anybody have ideas on how to get data on BigLaw's debt metrics (i.e. the amount of debt large firms take on - either as revolving credit or just net outstanding debt if any)? I don't think they have to report this anywhere nor do they choose to with AmLaw. Might try checking Thomson Reuter Peer Monitor, but am open to any suggestions.

[Anonymous User]

Dewey is, of course, sort of a unique case of a firm without demand who (a) deliberately obfuscated that fact, and (b) had put themselves in a position long ago not to be able to do anything about it. The market, as a whole, absorbed it pretty well, as Dewey's people and business splintered off into ten different directions. Of course certain people got fucked. The greater volatility the market is likely to experience is probably gonna increase the number of "winners and losers" unless there is a sea change in law firm hiring models (i.e. unless not getting an offer after an SA becomes anything other than a kiss of death). But other firms who stagnate, the Pillsburys and Schiff Hardins of the next ten or twenty years, might have more "orderly" deaths where they just sort of decay away, hiring fewer people each year. At the very least, the writing will be on the wall for a while, even if not everyone will be able to avoid what happened to, say, a lot of Bingham juniors.

Side note: Did anyone ever follow up to figure out what happened to the Bingham SAs (as in, did they wind up getting full-time offers at a reasonable rate?) and the group of juniors that were brought on "temporarily?" I know Morgan Lewis was already not offering 100+ Bingham associates, but how bad did the final damage wind up being?

I know of at least one. Edit: SAs who got full-time offers, I mean.

[barkschool]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

I feel like ppl making $2.00mm a year isn't a sign things are crumbling. I would go with Kasowitz or some firm with 10+ offices because that's a lot of overhead.

Reed Smith, I bet they're crumbling under their weight.

[TLSModBot]

Who wants to go in with me on a law firm dead pool? I claim either Dickstein Shapiro or Cadwalader.

I feel like ppl making $2.00mm a year isn't a sign things are crumbling. I would go with Kasowitz or some firm with 10+ offices because that's a lot of overhead.

Reed Smith, I bet they're crumbling under their weight.

I don't understand the Reed Smith/Pepper merger. From Reed Smith's perspective it makes sense, though it smacks of desperation (they've had some rough financial issues and this is clearly a merger about shoring up existing practices rather than expanding in geography or practices). But I don't understand why Pepper would want this.

Reed Smith is the acquirer here. To make acquisitions work, there has to be a profit incentive for the acquirer (otherwise the partners vote it down). There are two one-off means of making money from a merger: firing attorneys and other efficiencies post-integration, and the accounts receivable of departing partners (they take business with them but leave past bills due behind). The only long-term profitability for the acquirer is to take some of the partner draw away from the target firm's partnership.

Is Pepper suffering financially? Is there some kind of reverse acquisition going on here where Reed is sucking it up and taking a hit to its profitability to woo the stronger Pepper away?

[smaug]

I don't understand the Reed Smith/Pepper law firm mergers.

ftfm