Lawyers' M&A bounty is widely spread

Lawyers' fees from M&A deals are booming, but M&A lawyers may not reap the benefits.

Leading law firms are doing rather well from the current boom in M&A. According to The Telegraph, Linklaters and Freshfields Bruckhaus Deringer recently revealed profits per partner up 19% and 26%, with rising M&A activity largely to blame.

But like fixed income bankers who had to share the fruits of their success with equities colleagues during the lean years, M&A lawyers will have to share their spoils with people elsewhere in their firms. And while fixed income salespeople and traders could at least count on receiving more than average if they themselves performed well, rewards for individual performance in the legal industry are minimal.

Most of the so-called magic circle of leading law firms still operate a lockstep pay system, says Siobhan Lewington, director of search firm Fox Rodney. "Rather than individual performance, pay is related to tenure and the overall profitability of the firm," she says.

Lewington says some of the more forward thinking legal outfits have begun linking individual partners' pay to the amount of business they bring in, in a strategy known as 'modified lockstep.'

Unsurprisingly, most of those operating this system are US firms such as Sullivan & Cromwell and Cleary Gottlieb Steen & Hamilton, which coincidentally happen to be the ones building M&A law teams right now.

If fees in their area remain high, guess where top M&A lawyers will be heading.