Large law firms are hunkering down, following in their Wall Street clients' footsteps. Common tactics include reshuffling staff among practice areas, lowering pay and, in the worst cases, layoffs.
Many firms are moving resources into bankruptcy and restructuring, an area that's suddenly booming. At New York-based Dewey & LeBoeuf, the busy restructuring team "is pulling in lawyers from the firm's other practice areas, such as tax, M&A, real estate and litigation," the Financial Times reports. Besides helping a firm avoid layoffs, putting merger lawyers to work advising on asset divestitures or restructuring helps maintain and deepen relationships with high-level clients.
Bankruptcy is the hottest practice for 2009 among top-tier law firms. Other bright spots include litigation and arbitration, working with the SEC and other governmental and regulatory agencies, and white-collar crime, securities and tax law.
Those growth areas, however, are expected to fill only part of the gap law firms face from the falloff in M&A and capital markets deals. Dewey is preparing for "flat" revenues this year, its chairman told the FT. Skadden, Arps, Slate, Meagher & Flom, one of the world's largest firms, expects business to be slower than 2008. Still, Skadden Arps aims to ride out the downturn, and expects to hire roughly as many summer recruits as it did last year.
Several leading U.S. firms have been gearing up for a bankruptcy boom for some time - in some cases, by reclaiming top talent from Wall Street. One high-profile bankruptcy hire is James Sprayregen, who rejoined Kirkland & Ellis in December after two years with Goldman Sachs.
Paying existing staff less, Wall Street's main cost-cutting tool, seems to be making headway in the legal field. The FT quotes an unnamed source at Simpson Thacher& Bartlett - the top advisor of global and U.S. deals last year in Dealogic's M&A league table - as saying the firm aims to shrink through attrition "and performance reviews," rather than job cuts.