Ready for Dramatic Change in Legal Industry

Thousands and thousands of lawyers and staff have been laid off at law firms throughout the world. Just today, the fourth largest British firm Allen & Overy let go over 500 lawyers and staff. To make clear that partners are also suffering, the firm has asked for $50,000 contributions back to the firm by most partners. They also let go 47 partners. Oh yeah and a firm-wide pay freeze. Last Thursday alone over 800 lawyers and staff were laid off at eight big firms (including DLA Piper and Holland & Knight) throughout the US, saving over $100 million in costs for those firms, according to the American Bar Association Journal. Some are starting to call it “Black Thursday.”

And this is what has been announced. I asked a friend who is a partner at a big firm whether they have had layoffs. “Stealth,” he said. Yesterday I met with a law student friend of the family, who may have to take a job working in a store for the summer to make money. Some students are willing to take unpaid summer positions, some simply cannot. Lawyers are putting in their resumes for available paralegal jobs, to the point where firms are saying “no lawyers” in their ads, since they are concerned the lawyers will leave the paralegal job as soon as they find a lawyer position. I now get unsolicited resumes on a daily basis, when it used to be once every 1-2 months.

Those of us still gainfully employed obviously are competing for a smaller pie of business around. At lunch with a friend this week, he said simply, “It’s a [expletive] train wreck.” Hourly rates and flat fee prices, frankly, have come down. This is good for clients though of course not ideal for us service providers. What are corporate transactional lawyers like me doing with fewer deals around? Taking on things that I might not normally have time for, like serving as an expert witness in a case connected to a reverse merger. Other areas remain somewhat active, like private placements for private companies. Our PIPEs business remains active, deals are indeed closing, but of course fewer than before. I’ve been talking with my friends at very large companies who are suddenly feeling tremendous pressure to rein in legal expenses, creating an opportunity for my smaller, lower priced firm, to replace the large lumbering firm they had been using. I am spending more time than I normally have to keep up with my thousands of valued business contacts and friends. Relying more on litigation work that remains steady. And yeah, it’s nice to see my family a little more than usual.

The Reverse Merger Report just ran an article on layoffs and troubles for law firms focusing on this area. No question it has hit us all. A group of leading PIPE and reverse merger lawyers that gets together for dinner regularly feels more like a support group than a networking event. Yes firms that do bankruptcy and litigation are busy. But no one is happy. Most are saying it will be probably another year at least before the economy turns around. For those of us dealing with Wall Street, we are hopeful that the market will begin to recover in advance of the economy, waking up the deal world a bit more and a bit sooner. Frankly I am already getting calls about deals getting started, when a month ago that simply wasn’t happening.

The era of competing for talent is basically over for now. There is fabulous talent spilled all over the streets of our major cities. Those who have the ability should be looking to grab some of that talent even if there isn’t much for them to do for now. But it is not anywhere near over. I believe we are going to see at least one or two more major US firms going under. Indeed, I think as many as 5-10% of law firms in NYC may not exist two years from now.

To all: hang in there. Or don’t. And don’t be afraid to let this moment help you decide to consider dramatic change that could bring more long term benefit. Or don’t.

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