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Big Law Layoffs Mean Buyer’s Market for Firms Raided During Boom

Nov. 28, 2022, 10:30 AM

Law firms whose rosters were thinned by larger rivals in last year’s recruiting war are seeing a chance to strike back.

“There is opportunity for smaller firms, non-AmLaw 50 firms, [and] firms that don’t pay market to grab some really, really talented lawyers right now, both from law firm layoffs but also from tech company layoffs,” said Kate Reder Sheikh, a Northern California-based legal recruiter Major, Lindsey & Africa.

Big Law firms scrambling for talent as demand surged over the last two years often poached from smaller and regional competitors. They lured associates away with higher pay and the option to work from anywhere during the pandemic.

Now, the tables are turning as demand wanes for lucrative business transactions. Some firms are finding there’s not enough work to go around for all of the associates they brought on.

Kirkland & Ellis and Cooley LLP, two of the most aggressive associate hirers in 2021, have laid off junior lawyers across offices. Silicon Valley’s Gunderson Dettmer, known for working with venture capital firms and emerging companies, has also cut headcount.

The reductions and similar moves expected at other large firms opens the door for smaller competitors who saw talent gobbled up in last year’s boom. That includes firms father down the Am Law 200, which ranks law firms by gross revenue.

“This is the moment for us to be opportunistic and go grab some talent that either got poached from us or we couldn’t afford in the last few years,” said Husch Blackwell chair Catherine Hanaway.

The 726-lawyer firm reported $476 million in gross revenue in 2021, bringing it just inside the largest 100 in the country.

‘Talent Pool’ Open

Big Law firms’ demand for corporate associates reached unprecedented heights last year, amid a surge in capital markets, mergers and acquisitions, and other work. Many of the largest firms broadened their typical recruiting pools in the rush to add lawyers.

Some major firms with large operations in places like New York and Washington used remote work arrangements to bring aboard associates in secondary markets like Atlanta and Seattle. They also offered market-leading pay rates that many associates found difficult to turn down.

“We lost folks,” Husch Blackwell’s Hanaway said. “It was gut wrenching with a few of them.”

The firm has no plans to make layoffs, Hanaway said.

“I’m hoping that a few of those people who got poached we see come back,” she said.

Irwin Kishner, executive chairman of the New York-based Herrick Feinstein, said the firm fought last year to preserve its talent base. The changing conditions present a chance to compete not only for top associate talent, but also partners, he said.

“It’s just going to be a greater talent pool now to be able to decide who you’re gonna bring in and who you’re not,” Kishner said.

The 150-lawyer firm brought in $125 million in gross revenue in 2021, with profits per equity partner reaching $1.2 million, according to Am Law figures.

Regional Hiring Rewards

Smaller, regional firms tends to be more judicious in hiring than their Big Law brethren, said Jack Hopper, a Texas-based recruiter for Kinney Recruiting. Many stayed on the sidelines as the largest firms raced to boost salaries and dole out rounds of bonuses to attract and retain associates.

Husch Blackwell made a strategic decision to grow its incoming crop of new lawyers in 2017, Hanaway said. That gave the firm cushion when some associates exited.

“The greatest thing about my partners is that they haven’t been so oriented towards ‘what can I make this year’ that they’re afraid to take a little risk and make a little investment in the future,” Hanaway said.

The firm nearly doubled the size of its first-year associate class over the last five years, with 48 newly minted lawyers joining Husch Blackwell in September.

Herrick Feinstein’s Kishner said the firm’s smaller size and opportunities for hands-on training give recruits the chance to be more than “a cog in a vast legal machine.”

“You have to fight or compete on every single level and it’s not all just the almighty dollar,” Kishner said.

The pitch for some smaller firms also includes better work-life balance and the chance to work in places with a lower cost of living, as many push lawyers back to the office. It’s likely to resonate with Big Law associates who might otherwise not have smaller firms on their radars—whether they are now out of a job or just looking for something different.

“In some cases, they wouldn’t have even talked to those firms two years ago, but once they do, they realize that there could be a really strong fit in other regards, besides pay,” Reder Sheikh said.

To contact the reporter on this story: Meghan Tribe in New York at mtribe@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com