Archive for the ‘Laterals’ Category

2012 lateral trends

January 31st, 2013 by Altman Weil

The American Lawyer has published a new report on the lateral trends for 2012.  According to their survey, 2,691 lawyers moved in or out of AmLaw 200 law firms last year, up about 10% from 2011.

One of the key drivers of lateral movement can be a big firm failure that suddenly releases hundreds of lawyers into the market, like that of Dewey & LeBoeuf in 2012.  This is a phenomenon that Altman Weil’s Ward Bower has dubbed “the Dewey effect.”  It can also depress the law firm merger market in the short term, as we observed in the second quarter of 2012.

Setting aside extraordinary events, the 2012 lateral market was strong.

“The market’s robustness demonstrates how firms continue to rely on lateral hiring to fuel revenue growth, build practice areas, and broaden their geographic reach. “Everyone is doing it, and reasons number one, two, and three are to buy business,” says Altman Weil Inc. consultant Thomas Clay. “Laterals with books of business are in demand, and it’s not going to go away.”

Read it at The American Lawyer

Laterals: Do your homework!

May 25th, 2012 by Altman Weil

“While it is quite uncertain whether any amount of permissible inquiry by lateral partners would have predicted the business failures of [Dewey & LeBoeuf or other recently dissolved firms], the occurrence of the dissolutions should, nonetheless, cause a partner who is currently or in the future considering joining a law firm to pause and objectively assess the stability of the firm he is considering with the hope of avoiding a dissolution and its impact on their career, clients, and personal finances.”

Attorney Arthur Ciampi has written a timely piece in the New York Law Journal on the need to perform appropriate due diligence on a law firm before making a lateral move.  He outlines three basic steps:

1. Tap into your network to gather anecdotal evidence on the firm from current and former partners - and ask some pointed questions (which he supplies) about how the firm handles compensation and debt. 

2. Request and review the firm’s partnership agreement or operating agreement for three basic contractual provisions that should be included.

3. Analyze 3-5 years of financial performance including balance sheet data and ‘off balance sheet’ liabilities.

In the past such inquiries have been rare, and even considered “insulting to the prospective firm” according to Ciampi.   But times have changed, and what was once unheard of is now simply prudent.

Read it at New York Law Journal 

2011 lateral market was up 22%

February 1st, 2012 by Altman Weil

The American Lawyer has released the 2012 Lateral Report covering partner moves in and out of AmLaw200 firms between October 1, 2010 and September 30, 2011.

“If 2010 was a year for staying put, 2011 was the year that partners jumped back into the lateral market with full force. In the 12 months ending September 30, 2011, 2,454 partners left or joined Am Law 200 firms. That was a 22 percent increase from 2010…

“So what accounts for the increase in lateral hiring? In many cases, it’s cherry picking, as firms try to counter a stagnant economy by poaching top performers from rivals.”

Altman Weil principal Tom Clay explains it in a related story in today’s Wall Street Journal (subscription required) “The fastest way to increase [business] volume is to buy it.”

Read it at The American Lawyer

Laterals and growth

September 14th, 2011 by Altman Weil

Law firms are growing selectively in 2011, according to the Law Firms in Transition 2011 survey.  As in 2010, the top two growth options firms will pursue are the acquisition of laterals and the acquisition of groups.  Ninety-two percent of all law firms, and large majorities in every firm size category, plan to acquire laterals in 2011.  Sixty-seven percent will also work to acquire groups of lawyers. 

Altman Weil has published a Special Report on Laterals & Growth based on the findings from the survey.  The report’s authors, AW principals Tom Clay and Eric Seeger, commented on effective lateral hiring:

“Clearly many law firms can improve their return on lateral hires.  Considering the time and money firms invest in the process, a baseline benchmark for lateral success should be at least 80%.  In the future, we expect firms to devote more attention to the specifics of lateral portfolios, including detailed profitability analyses, and to manage their recruitment, integration and cross-selling efforts more rigorously. “

Download the report at Altman Weil.

“Lateral Binge”

July 19th, 2011 by Altman Weil

…that’s how Victor Li at American Lawyer Media describes the recent hiring activity in the AmLaw’s ‘second hundred.’    Li reports that the AmLaw 100’s positive revenue gains in 2010 were driven largely by headcount reductions.  And that released a pool of high quality lawyers that have been snapped up by second hundred firms. 

Ogletree Deakins managing partner Kim Ebert is quoted as saying “The pool for laterals is as deep as I’ve ever seen it.”  And Nelson Mullins MP David Dukes adds “Last year was probably our best lateral recruiting year in a decade.”

Read it at Daily Business Review

Law firm creates new incentive for laterals

June 2nd, 2011 by Altman Weil

Foley & Lardner has set up a venture capital fund allowing partners, of counsel and retired partners to invest in client companies and client funds, according to the National Law Journal.

“Foley & Lardner views the fund as a moneymaking venture, not a marketing one, [partner Gabor] Garai said. It also views the fund as a selling point in the lateral hiring market, he said.”

“There are financial and psychological motivations when firms are looking to compete for talent and lateral partners,” Garai said. Entrepreneurial clients will also appreciate that the firm has skin in the game, he said.

“It’s also a way of showing…clients that you’re sort of on the leading edge that goes beyond simply representing them in the technical legal issues that they encounter,” Garai said.”

Read it at law.com

Law firm leaders are confident in face of changing marketplace

May 25th, 2011 by Altman Weil

The newly released Altman Weil Law Firms in Transition Survey 2011 finds confidence high among US law firm leaders in firms of all sizes.

Overall economic performance is rebounding, with two thirds of all firms surveyed reporting increases in gross revenue in 2010 and nearly three quarters reporting increases in revenue per lawyer and profits per equity partner.  Standard hourly billing rates are up significantly this year, with firms reporting or planning a median 4.0% increase in billing rates for 2011.  Continued reductions in overhead costs and the strategic shrinking of firms’ ownership ranks are contributing to profitability.

“If firms are finding their feet again post-recession, it is on new ground with a number of new factors in play,” said Altman Weil principal Tom Clay.  “And although most firm leaders seem to recognize the changes, it’s not yet clear whether they will be able to manage them effectively.”

Following are some selected highlights:

  • 67% of law firms reported an increase in gross revenue in 2010; revenue per lawyer was up in 73% of all firms; and profits per equity partner rose in 73% of firms.
  • Overhead costs were down in 53% of firms in 2010.
  • The amount of non-hourly billing in 2010, measured as a percentage of revenue, increased in 58% of all firms and in 81% of firms with 250 or more lawyers. 
  • Only 12% of firms report that alternative fee arrangements are more profitable than hourly billing. 
  • 27% of law firms de-equitized partners in 2010 and 16% will do so in 2011.  32% of firms made fewer partnership offers in 2010 and 18% will do so in 2011.  Larger firms are more likely to take these actions than smaller firms.  
  • 92% of all law firms plan to acquire laterals partners in 2011. 
  • 87% of law firms are planning to add associates to their ranks in 2011.   Only 18% of firms plan to remove associates this year, down from 42% in 2010.  
  • Only 18% of those surveyed think that reduced associate salaries will be a permanent trend, down from 32% who thought that last year.
  • 60% of firm leaders expect that the increased use of contract lawyers will be a permanent trend, up from 52% last year.
  • 41% of all firms believe that outsourcing legal work will be a permanent part of the new legal market. 
  • 47% of all firms are concerned that they are not prepared to deal with the retirement and succession of Baby Boom lawyers – the top concern identified.
  • 94% of law firms believe that the focus on practice efficiency is a permanent change in the profession - the number one trend identified.
  • Other top trends include more price competition (90%), fewer support staff (88%), more commoditized legal work (81%), more non-hourly billing (75%), and fewer equity partners (68%).
  • Only 16% of firm leaders expect permanently lower profits per partner.   
  • Leaders score their confidence as an “8” on a zero to ten scale when asked about their firms’ ability to keep pace with change.

Conducted in April and May 2011, the survey polled Managing Partners and Chairs at 805 US law firms with 50 or more lawyers.  Completed surveys were received from 240 firms (30%), including 38% of the 250 largest US law firms.

The full survey is available online to download at: www.altmanweil.com/LFiT2011.

Post-recession lateral market

February 16th, 2011 by Altman Weil

Howard Scher, a shareholder at Buchanan Ingersoll, writes about the post-recession lateral market in The Legal Intelligencer:

“The pent-up supply of lateral talent represents a potentially game-changing growth opportunity for smart firms. Many firms and laterals are looking at laterals as the post-recession silver bullet — a way to buy new clients, open new markets and immediately increase firm revenue.”

But he suggests that the rules have changed in what he calls a “new lateral hiring code” in which sought-after candidates can call the shots.

“So what does it take to land and successfully integrate the newly powerful lateral? Hint: it’s not just the money. Although no lateral has absolute control over his book of business, it helps to think about laterals more like seasoned business owners, rather than restless employees. The recruiting process is more like a mini M&A operation than a hiring and a handshake. And as with selling any book of business, the lateral’s decisions are predicated on issues far more complex than compensation and a corner office.

Laterals care about lifestyle, firm politics, culture, personal development, technology infrastructures and many more elements that previously were offered in a more take-it-or-leave-it approach. Today, every issue is negotiable according to a new code of requirements and priorities.”

Read it at The Legal Intelligencer

Partner compensation and lateral hiring

February 11th, 2011 by Altman Weil

 The AmLaw Daily interviewed Altman Weil principal and legal industry expert Ward Bower to discuss the hot lateral market and other industry trends.

“Nearly six weeks into 2011, partner compensation and group lateral moves are the early buzzwords on the lips of legal industry observers.  Both issues were front and center in The Wall Street Journal on Tuesday in a report about the huge sums of money being paid by law firms in the major markets–New York, Chicago, Los Angeles, and Washington, D.C.–to lure top rainmakers who earn as much as $10 million. In some cases, partner compensation is being reduced in order to free up capital for these larger payouts, and the gap in pay among a firm’s equity partners is growing. These “star attorneys,” The WSJ reports, can make eight to nine times more per year than their fellow partners.”

“With the lateral market heating up, and Am Law 100/Second Hundred reporting season well underway, we reached out to Ward Bower, a principal at legal consulting firm Altman Weil, to discuss partner pay and the hiring frenzy.”

Read it at the AmLaw Daily

Lateral partner moves hit ten year low in 2010

February 2nd, 2011 by Altman Weil

Fewer partners jumped firms in 2010 compared to 2009. The decrease is attributed in part to less fallout from fewer law firm mergers and failures. Other important factors include firms’ unwillingness to take risks on less-than-proven partners and groups and more rigorous recruitment policies and procedures. The lateral market remains fluid and nearly all law firms of any size report that lateral recruiting remains one of their main growth strategies. — Eric Seeger, Principal, Altman Weil, Inc.

“After a record year for lateral moves in 2009, law firm partners looked around in 2010 and decided that there was no place like home. In the 12-month period ending September 30, 2010, only 2,014 partners left or joined Am Law 200 firms. That number was a hefty decrease—27 percent—from the same period a year earlier, when a whopping 2,775 partners moved. In fact, 2010 marked the lowest number of partner moves since 2000, when only 1,859 partners switched firms, and was well off the average of 2,458 partner moves each year from 2005 to 2009.”

Read it at American Lawyer