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The American Lawyer reports that more than 3,100 lateral partners moved between Am Law 200 firms in 2019, with corporate partners accounting for 25% of those moves, according to recent data released by ALM Intelligence. The total is 14.5% higher than last year’s lateral total of 2,754, largely as a result of an improved methodology used to collect this year’s data, which affects the year-over-year comparison. Over the past two decades, the number of lateral partner moves, tracked by The American Lawyer since 2000, has ranged from just above 2,000 to more than 3,000 a year, the article adds.

The article reported that at least 580 corporate partners joined the ranks of the Am Law 200, while 469 departed, which adds up to a net gain of 111 partners. Litigation partners accounted for another quarter of the past year’s laterals. Banking and Finance partners were the third-most-transient practice, comprising nearly 14% of all laterals. Interestingly enough, given the warnings of a recession, bankruptcy attorneys were the least transient, accounting for just a small fraction of the year’s lateral moves, at 2.4%, ALM Intelligence reports.

According to the report, Philadelphia-based Fox Rothschild saw the greatest percentage growth via lateral moves, as its partnership ranks grew by 60, or roughly 18%, on the back of 102 lateral hires, offsetting 42 departures. The firm has been growing steadily since it first cracked the Am Law 200 in 2015, the article notes. Additionally, the article noted that Winston & Strawn saw the greatest net defections among the Am Law 200, losing 52 partners and adding 17, for a net loss of 35, (as quoted in The American Lawyer).

Nearly three-quarters of Am Law 200 firms have had a lateral partner leave within the past five years due to an issue with personality or law firm culture, according to data released by ALM Intelligence. A lawyer’s business is easier fixed than their character, notes Polsinelli’s CEO Chase Simmons. And while there’s no one lateral partner who can affect a law firm’s revenue numbers on their own, a toxic partner could ruin a firm’s culture, he adds. “Culture is more permanent. Everything derives from the culture,” Simmons says. “If you mess with that, the dollars aren’t going to follow.”

“Law firms are constantly on the hunt for top talent, and they have recently began building programs focused on lateral integration. The reasons for doing so are interconnected. For one thing, firms use their programs as a selling point in their recruitment efforts. They also lead to better retention rates. Nearly every law firm The American Lawyer spoke with for this story touted a higher five-year retention rate than the 60% average that ALM Intellection reported last year among Am Law 200 firms,” (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports that 2019 was a record-breaking year for law firm merger announcements and represented a “solid year of growth” for completed mergers, according to recent data collected by two legal industry consultancy firms tracking law firm tie-ups. Altman Weil, which tracks law firm merger announcements, announced that last year’s 115 combinations broke the record set by the U.S. legal industry in 2018, which saw 106 announcements. Additionally, another report by legal consultancy firm Fairfax Associates, which counts combinations once they are completed, announced that firms completed 59 mergers in 2019. While this is lower than the 71 mergers counted in 2018, it is still higher than the historical average of 54 mergers per year recorded between 2009 and 2018, Fairfax notes.

Two of the largest merger announcements from 2019 took effect the first day of the new year: Taft—the result of Cincinnati-based Taft Stettinius & Hollister merging with Minneapolis-based Briggs & Morgan—and Lathrop GPM, the offspring of Kansas City, Missouri-based Lathrop Gage and Minneapolis-based Gray Plant Mooty. Aside from Taft and Lathrop GPM, ten more law firm mergers are scheduled to close in the first quarter of 2020, Fairfax reports. This includes Dentons combinations with Indianapolis-based Bingham Greenebaum Doll and Pittsburgh-based Cohen & Grigsby as well as the pending marriage of Minneapolis-based Faegre Baker Daniels and Philadelphia-based Drinker Biddle & Reath, (as quoted in The American Lawyer).

The majority of mergers in 2019 continued to be small combinations, with eighty-five percent of the mergers involved firms between five and 20 lawyers, Fairfax reports. “We are continuing to see firms anywhere from 100 lawyers to 600 to 700 lawyers feel like they need more scale in order to compete effectively,” notes Lisa Smith, a principal at Fairfax Associates. “I think we’ll continue to see consolidation in the form of laterals and groups or small acquisitions or mergers of equal size. Consolidation is going to continue to be big in 2020,” she adds. Additionally, Zeughauser Group consultant Kent Zimmermann notes law firms are competing hard for talent. Deciding to scale up and merge can give a law firm a deeper bench and greater revenue, which can mitigate and ward off the poaching of top talent by other firms, (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports on law firm financial performance for the first nine months of the year, concluding that for the first time this year, law firm revenue growth outpaced expense growth, according to a recent report by Citi Private Bank’s Law Group. The Citi results, based on a sample of 190 firms including members of the Am Law 200 and boutiques, showed that revenues grew at 5.1% for the first nine months of the year, compared to 4.1% from just the first half. The bulk of that increase stems from higher rates, which grew 4.7%, compared to demand, which grew 0.9%.

“While the first nine months of 2019 saw slower revenue growth than we saw through the same period in 2018, there are several positive trends in the results. Demand growth continued to gain momentum. Rate growth has been strong. Expense pressure has moderated, easing margin pressure. Dispersion and volatility remain but are less acute than we saw earlier in the year,” notes Gretta Rusanow, research co-author and head of Citi Bank’s advisory services. “Looking ahead, inventory levels are high. The biggest challenge to a strong year-end is the continued lengthening of the collection cycle. If firms are able to collect on strong inventory levels, 2019 should end well,” she adds.

The report also revealed that law firms headquartered in Chicago and the Midwest matched or exceeded the revenue growth across the legal industry for the first nine months of 2019. Law firms headquartered throughout the Midwest reported their revenue is 7.8% higher this year when compared to last year, the report found. “Demand is up 1.6%, which is higher than the industrywide average of 0.9%, and rates have gone up 5.8%—more than anywhere across the United States,” Rusanow notes.

“Chicago is one of the most popular legal markets in the country. From a revenue point of view, they’re matching where we’re at for the industry. On top of that, they’re sitting on pretty healthy inventory levels going into year-end,” Rusanow adds. “I’m pretty optimistic about what the top-line stories will be for Chicago through the end of the year,” (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer published results from its annual Am Law 200 report, which includes data and rankings for the nation’s Second Hundred highest grossing law firms. Overall, gross revenue increased on average by 3.1 percent, net income grew by 2.9 percent, profit per equity partner grew by 2.8 percent, revenue per lawyer increased 1.6 percent, and overall headcount rose 1.5 percent. According to the report, eleven Second Hundred firms saw double-digit revenue growth and thirty-eight firms saw revenue increase more than five percent.

The 2019 Am Law 200 report shows a tempered version of the financial strength demonstrated by the Am Law 100 notes Gina Passarella, Editor-in-Chief of The American Lawyer and ALM’s Global Legal Brands. “Firms, on average, performed well, but the growth was significantly less than what the first 100 firms experienced, highlighting the added pressures faced by smaller firms with less differentiation. In that sense, the Am Law 100’s better performance in 2018 is emblematic of another feature of that larger group: greater historical volatility. Second Hundred managing partners need not look upon that with envy,” (as quoted in The American Lawyer).

See more highlights from The Am Law 200 on The American Lawyer.

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The American Lawyer reports that law firm demand in 2018 was the highest on record since 2011, according to a recent report by Thomson Reuters. Further amplifying evidence that law firms, especially the largest, reached new financials highs in 2018. Another report, conducted by Citi Private Bank’s Law Firm Group, found that revenue growth was up 6.4 percent at the 191 firms surveyed by the bank. And in the last two weeks, Wells Fargo reported average law firm revenue growth at 5.9 percent and average net income growth at 7.6 percent, the strongest numbers since before the Great Recession.

Thompson Reuters report specifically revealed that law firm demand, billing rates and lawyer productivity all rose during the year. According to the analysis, demand, measured as the number of hours billed, rose 1 percent for the year among all firms. Among the Am Law 100 firms, that number was 2.8 percent. Am Law Second Hundred firms and midsize firms saw demand growth in 2018 of 0.4 percent and 0.2 percent, respectively. The Am Law 100 was the only segment of firms that saw demand growth in all four quarters of the year, the report found, (as quoted in The American Lawyer).

Fortunately for smaller firms, rate growth was more evenly distributed, the report notes. The Am Law 100 saw rates grow 3.8 percent in 2018, compared to 2.9 percent for firms in the Second Hundred and midsize categories. The report also notes that Am Law 100 firms were the only segment of firms to show positive full-year growth in productivity, which measures hours worked per lawyer. The 100 largest firms by revenue grew productivity in 2018 by 0.8 percent, while that figure was flat at Second Hundred and midsize firms, (as quoted in The American Lawyer).

Mike Abbott, a Thomson Reuters vice president for enterprise thought leadership and content strategy, said that while 2018 was a banner year for law firms— especially the nation’s largest—there remains uncertainty around 2019, especially after the fourth quarter was somewhat softer than earlier quarters. “Whether the tailwinds will continue in 2019 remains to be seen, as client rate pressure and a shifting competitive landscape for legal services continue to pose challenges,” Abbott said in a statement. “And while the entire market was improved in 2018, we saw an increasingly segmented market where the very largest firms gathered the lion’s share of the gains last year.”

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports on several key trends for midsize law firms heading into 2019, according to a recent article featured in Am Law’s latest Mid-Market Report. In the article written by Alan Tarter, he provides his thoughts on industry trends affecting mid-size law firms in the coming year based on his many years of experience as a managing partner and practicing lawyer. These trends include a heightened focus on cybersecurity, continued lateral acquisitions, cost-effective specialization, providing innovative programming to all team members, and greater collaboration between large and small firms.

According to the article, Tarter notes that midsize law firms, like their brethren at large firms, will continue to put an increased focus on mitigation of cyber risk through enhanced security, protocols and more sophisticated risk management. We will see greater use of outside risk management consultants working directly with mid- size firms to address new risks and gaps on coverages. In addition, competition for the best candidates has increased, so midsize firms will need to be even more creative in their offerings. Midsize firms will need to better exploit their value propositions to clients in order to attract laterals from larger firms, Tarter adds. 

Tarter notes that an added value proposition of full-service, midsize firms is that they are able to fill in the gaps in the specialized legal needs of both larger firms and smaller firms. According to Tarter, larger clients will continue to gravitate to midsize firms for certain types of work. “Midsize firms are in a unique position to provide more cost-effective, efficient services in matters not requiring large firm infrastructures. For example, midsize firms may be in a better position to provide more cost- effective services in specialized areas such as construction law, office space leasing or IP prosecution where larger teams and multiple offices are typically not necessary. In-house clients are becoming aware of the advantages of using midsize law firms for legal work like this,” explains Tarter.

Tarter adds that midsize firms have a unique opportunity to lead the industry in developing innovative programming to enhance the professional development of employees. These types of programs will help midsize firms stand out from their competitors, and will aid in attracting and retaining employees. These programs should place a greater emphasis on the longer-term professional development of attorneys and other team members. With the goal of providing the most value-driven services to clients, firms of all sizes are also realizing the benefits of partnering with each other, Tarter notes. You will see greater collaboration between large firms and midsize firms in working on projects together where they can each do what they do best and provide better service to clients, (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

Certain Midwest and second-tier markets, in terms of population, have garnered particular interest from large law firms, especially those that serve middle-market clients, reports Lizzy McLellan of The American Lawyer. According to statistics from AmLaw’s latest NLJ 500 survey, the number of lawyers at NLJ 500 firms grew by 100 or more in each of the Washington State, Illinois, Minnesota and Michigan markets.

“There are a lot of firms that started out in the secondary, tertiary markets that now have offices in lots of other secondary, tertiary markets,” notes Mary K. Young of the Zeughauser Group. When those firms make entry to a new market, she adds, they often acquire or take from smaller local firms that would not have made it onto the NLJ 500 on their own, (as quoted in The American Lawyer).

David Barnard of Blaqwell Inc. also notes that small firms based in smaller markets are increasingly looking for merger opportunities. “Specialization is continuing. It’s no longer possible to do everything. It’s just too tough,” he said. So small practices have to choose their strengths and double down there. After doing that, he says, “the lawyers in those towns are combining so they can offer full service to local clients and maintain their livelihood,” (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports on a mistaken and dangerous belief pervading the current U.S. legal market: that it is consolidating as larger firms grow more quickly than the market by taking share from their smaller rivals. However, an in-depth analysis of Am Law data over the last 20 years reveals that in fact consolidation is not happening. Rather, worldwide revenue growth from larger firms expanding overseas has been mistaken for consolidation of market share.

In Am Law’s latest article, Debunking the Consolidation Myth, the authors argue that the mistaken perception of consolidation has driven firms to bulk up—by merging, acquiring and hiring laterally—to avoid being at a competitive disadvantage. Such moves are high-risk, disruptive distractions for leaders whose attention is better focused elsewhere. Despite the intense effort involved, they create no strategic advantage. Wise partner groups and firm leaders will see past the prevailing dogma and focus instead on optimizing the performance of organically growing businesses, (as quoted in The American Lawyer).

In a tightly argued analysis, the authors conclude that “Consolidation is not happening. The imperative for law firms to grow is groundless. Smaller firms that don’t expand internationally are not losing share; in fact, they’ve gained share through the Great Recession. The data could not be clearer. And yet we know that this simple truth will be ignored. Facts are an ineffective counterweight to long-held belief. It’s too bad. Running a U.S.-centered, organically growing law firm well is a strategy with enormous validity and tremendous potential for strong profit growth.”

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer published results from its annual Am Law 200 report, which includes data and rankings for the nation’s Second Hundred highest grossing law firms. Overall, gross revenue decreased on average by 0.2 percent, net income decreased by 1.4 percent, profit per equity partner decreased by 1.4 percent, revenue per lawyer decreased by 0.3 percent, and headcount rose 0.1 percent.

Although the group as a whole declined in all major metrics, the report revealed that eight Second Hundred firms saw double-digit revenue growth and 22 firms had growth of 5 percent or more. Among the Second Hundred firms, Kobre & Kim had the largest increase in revenue, up by 49 percent. According to the report, one firm dropped from the Am Law 100 to the Second Hundred this year: Pepper Hamilton. Meanwhile, six firms moved onto the Am Law 200. They were Buchalter; Cole Schotz; Eckert Seamans; Goldberg Segalla; Herrick Feinstein; and Marshall Dennehey Warner Coleman & Goggin, (as quoted in The American Lawyer).

“The 2018 Am Law 200 data reflects a stark contrast to this year’s Am Law 100,” notes Gina Passarella, Editor-in-Chief of The American Lawyer. “The declines in key financial metrics among the Am Law Second Hundred were more to do with the firms who fell off the list via merger or closure than an overall decline in financial health of the group as a whole. These stats show there is much more volatility in the Second Hundred when it comes to who is on or off the list than we saw with the Am Law 100.”

Senior Analyst at ALM Intelligence, Nicholas Bruch adds, “Two important findings emerge from the Am Law 200 data. First, many firms within the Second Hundred are struggling with the transition the legal market is undergoing right now. Am Law Second Hundred firms fared less well, on average than their larger peers. The second finding is more hopeful. Many firms within the Second Hundred produced strong years. This points to a fact we see very clearly in the Am Law data: that some firms are finding ways to manage difficult market conditions and outperform the market.”

See more highlights from The Am Law 200 on The American Lawyer.

Contact Bill Sugarman for more information.