Law firms endured change in 2020 that even the industry’s most prescient decision makers could not have seen coming on Jan 1.
Big Law wasn’t girding for the biggest bankruptcy boom since 2009, which swept in as coronavirus shook the global economy. Restructuring practices saw 5% demand growth through three quarters in 2020, the largest growth area of any practice tracked by Thomson Reuters Peer Monitor Index.
Helping companies issue debt is usually a low-key practice are for large law firms. It became one of the busiest groups in 2020 after intervention from the Federal Reserve held down interest rates and companies looked to debt markets to ride out lockdowns.
And who could have predicted that blank check companies—by now you’ve heard of SPACs—would raise $75 billion in 2020? It became a crucial market for Big Law firms, many of which had largely ignored the investment vehicles that had raised less than a combined $50 billion in the previous decade, according to data compiled by Bloomberg.
Those hot practices helped the 50 largest firms, which are traditionally the biggest players in bankruptcy and Wall Street work, far outperform dire projections about how Covid-19 would affect them. These wealthy firms grew revenue 6.8% through the first three quarters of 2020, according to data from Citi Private Bank’s Law Firm Group.
Failing to learn another lesson of 2020—nothing is predictable—Bloomberg Law set out to forecast five practice areas that could drive growth for Big Law firms in the year ahead.
Perhaps the biggest surprise trend of the past year is expected to continue into 2021 as interest rates remain low, valuations are high, and companies keep raising capital to survive pandemic-related shutdowns.
Most firms with active practices handling initial public offerings, investment grade debt, and high-yield debt topped their level of activity from all of 2019 at some point during the third quarter of 2020.
Latham & Watkins global capital markets chair Ian Schuman said the firm’s capital markets group in 2020 soared past what was previously a record 2019. He expects even more activity next year.
Most of the factors that led to such a busy 2020 remain in place, Schuman said. A recent pickup in mergers and acquisitions may provide an additional boost, as capital raises are often used to help pay for corporate acquisitions.
“All of this activity that is driving the capital markets work is if anything gaining momentum in some ways,” Schuman said. “I fully expect it to continue into 2021.”
The pandemic leveled a wave of uncertainty on businesses in 2020, leading to a down period for corporate matchmaking. North American M&A values fell 34% through three quarters this year, according to data compiled by Bloomberg.
But as vaccines gained approval and corporate boards looked ahead to life in a post-pandemic world, deal activity has made a comeback. In the fourth quarter through Dec. 17, M&A value in the U.S. was up roughly 30% from the same period last year.
The late-year surge was driven by deals in the technology and pharmaceutical industries, both of which have become even more important to the economy during the pandemic. Sebastian Fain, an M&A partner at Freshfields, expects those industries to power deal-making in 2021.
On the flip side, private equity firms will have plenty of fresh powder to deploy on companies whose valuations have been suppressed during the pandemic, Fain said.
“There have been a lot of winners in this post-Covid recovery period,” Fain said. “They have currency either in the form of cash on their balance sheets or their stock is valued really nicely.”
Trial lawyers got used to Zoom in 2020, but not all proceedings were moved online. Courts are facing a backlog of civil jury trials, held up since the onset of the pandemic. Those cases will eventually move forward once courtrooms are deemed viable venues for in-person activity.
Litigators are hopeful courts will be able to resume trials at some point next year after Covid-19 vaccines are widely distributed. For law firms that have trials delayed from last year, there will be “incredible demand,” said Craig Martin, Midwest Chair of Willkie, Farr & Gallagher.
“Trials are huge events in the story of every litigation, and as they get pushed to the right, you really do get this glut of cases that need to be tried,” said Martin, who had three trials—in Chicago, Houston, and New York—delayed from 2020. “The judiciary is feeling that at some level.”
Data and Privacy
Big Law firms have been bulking up their data protection and privacy practices for years now, and there are signs those investments will pay off in 2021.
A combination of recent data breaches like SolarWinds hack as well the need to protect data handled by a remote workforce during the pandemic could boost demand for these practices.
And in a newer twist, U.S. antitrust regulators are increasingly interested in technology firms’ data collection and privacy practices. Significant antitrust enforcement actions were brought at the end of the year against Facebook Inc., and Alphabet Inc.’s Google, and regulators are warming up to the idea that consumers may be harmed by how tech firms collect and share personal data.
Sean Royall, a Kirkland & Ellis partner who previously served as deputy Director of the Federal Trade Commission’s Bureau of Competition, said the FTC and the Department of Justice are “very actively”considering how to use privacy standards as part of an antitrust case.
“That’s something to continue to watch out for: whether they will be successful in finding cases that allow them to persuasively feature those kinds of arguments,” he said. “But in the interim one thing is clear: it’s coming up more and more in investigations.”
Labor and Employment
Labor and employment partners were on speed dial during 2020 as workforces around the country were upended by the pandemic. Only bankruptcy and corporate work outdid labor and employment in demand growth during through three quarters of 2020, according to Thomson Reuters Peer Monitor Index.
Companies will continue to need help as they grapple with the pandemic’s fallout. Back-to-work questions abound regarding whether or how to require vaccines or on-site virus testing, said Michael Eckard, co-chair of the coronavirus taskforce at Ogletree Deakins.
Employers face a range of options, Eckard said. Some are entering into agreements with state and local health departments to administer state-provided vaccines to their employees. Others are considering requiring employees to show a “proof of vaccination” to return to the office. Still others have no direct vaccine policy. All the approaches are legal, but they carry differing levels of risk, Eckard said.
“Many employers may find that employee education and voluntary vaccination programs can yield comparable numbers of employees receiving vaccines compared to a mandatory program while allowing the employer to avoid many of the legal compliance challenges and pitfalls associated with mandatory programs,” he said.