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Wachtell is obviously in a different world on its own, but why do firms such as Morgan Lewis, Wilmer and APKS have such low leverage? Are these firms struggling to get work? I work at one of the firms with low leverage and am wondering if I should expect to move.

Anonymous User wrote: ↑

Thu Apr 22, 2021 12:29 pm

Wachtell is obviously in a different world on its own, but why do firms such as Morgan Lewis, Wilmer and APKS have such low leverage? Are these firms struggling to get work? I work at one of the firms with low leverage and am wondering if I should expect to move.

At a low leverage firm. I think it’s been good for gaining more experience, and don’t feel like my firm is struggling at all (of course, it’s certainly possible, but I don’t get that sense at all). High leverage is a boon for equity partners.

Anonymous User wrote: ↑

Thu Apr 22, 2021 12:29 pm

Wachtell is obviously in a different world on its own, but why do firms such as Morgan Lewis, Wilmer and APKS have such low leverage? Are these firms struggling to get work? I work at one of the firms with low leverage and am wondering if I should expect to move.

This is a weird extrapolation to make. Leverage really doesn't indicate financial health at all; note that the most leveraged firm in the AmLaw 100, Gordon Rees at 15:1, has some of the worst financials. Just think of it the same way as you do in finance - leverage amplifies both gains and losses.

If there's anything to take away from a firm's leverage, it's that higher leverage=more fat to trim in the event of a downturn. You are more likely to be expendable at a high leverage firm.

But really, I don't think it's something you should really pay attention to at all, unless it's some wild outlier. The idea of lateralling because of what you perceive as low leverage is goofy - either you have work or you don't; no idea why you'd need to look at leverage.

As for "why," practice areas probably has a strong influence on this. Transactional work, especially large deal work, lends itself to fat teams of associates.

If you look at what e.g. Wilmer does, a lot of it is litigation, investigations, crisis management type stuff. This generally doesn't require big teams, especially now that doc review is largely farmed out to staff attorneys or contract attorneys.

That's just one factor, but it's at least a partial explanation.

Practice groups and specific practice niches have a lot to do with leverage. The leverage of an entire firm is often a reflection of the key practice groups and types of matters the firm tends to take on.

It's rare to find much leverage in specialty areas like tax and benefits (partners often outnumber associates). M&A groups that do public company mergers lend themselves to lots of leverage as there's a TON of diligence to wade through. The leverage in your group means a lot more to you than the leverage for the firm as a whole.