Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we look at how Kirkland has recruited partners by promising to make major investments in their business. Sign up to receive this column in your inbox on Thursday mornings.
Last week, I wrote a story about Kirkland & Ellis leaders pushing back against the firm’s decades old reputation as “wolves in wolves clothing.” The story was written in the context of the current Big Law market, characterized by booming workloads that have caused a surge in attrition across the industry.
In the interviews I did with 10 Kirkland partners over the last three months, another theme came through. The firm’s leaders talk often about taking “big swings” to invest in their business. Many of Kirkland’s lateral hires I spoke with cited the firm’s willingness to invest in new opportunities—and in them, personally—as a reason they joined the firm.
The swing-big concept was one of the countless sports analogies Chairman Jon Ballis used in our series of interviews. He heard it from his son’s baseball coach: “If you are putting the bat on the ball every time you swing, you’re not swinging hard enough.” The idea is to hit home runs, and that means you can’t be afraid to miss.
“Lawyers at our level, at the high end of the legal world, we are paid never to be wrong,” Ballis said. “When you run a business, you can’t have that mentality.”
It’s the first time Kirkland’s top partners have opened up about its business since an unmatched decade of financial success, which saw the firm become the largest by revenue and the third most profitable by average partner profits, which came in at $6.2 million in 2020, according to AmLaw.
One example of Kirkland’s strategy was a restructuring of its investment funds practice starting around 2015, which I wrote about briefly in last week’s story.
The concept was to reorganize and invest in its practice to take advantage of the new business lines like private credit funds that private equity firms were getting into.
It’s a trend that’s only continued. Today, Kirkland has a major practice advising on so-called general partner stakes sales, a busy market where private equity funds sells minority shares of their own business.
“You could just watch it happen: Private equity firms were growing into full-blown asset managers,” John O’Neil, who heads the firm’s investment funds practice, told me. “The message to the marketplace [was] we are global, connected, collaborative, and we’ll be able to serve you better. It’s just copying the structure the private equity firms have put in place themselves.”
Marketing that new structure in 2016, O’Neil said it would have been a success to pick up 10 new clients. They got more than 100 the first year—and more than 140 the next, he said.
Jon Gray, president and chief operating officer at Blackstone and a high school classmate of Ballis’, told me it’s a strategy he’s admired. Blackstone has historically been represented by Simpson Thacher & Bartlett, but Gray said Kirkland’s ability to build out a broad set of services targeted at alternative asset managers has “strengthened the relationship between us and Kirkland.”
“It’s all these other functions they’ve brought together under one roof that has been a powerful combination and has really accelerated their growth,” Gray said.
Alan Yang, a longtime Kirkland client, told me something similar.
Kirkland advised GLP Partners, where Yang was chief investment officer, on a $18.7 billion sale of a private real estate portfolio to Blackstone in 2019, the largest private real estate transaction to date. Yang is now CEO of another real estate investment fund, GCP, which Kirkland advised on a $2.3 billion fundraising last year.
Yang said Kirkland’s lawyers came to him and asked: How would he want their team structured? Today, he works directly with a small group of lawyers at Kirkland who quarterback his deals and pull lawyers in on tax or other issues as needed. Other professional services firms, like investment banks or brokerages, have asked him similar questions, he said, but none have executed deploying that type of service.
“To know they saw something in us and wanted to invest in us in that way was in and of itself a huge validation for what we were trying to do. And it gave me the confidence to trust them,” Yang said. “Our secret weapon is Kirkland. It’s not me. I say it’s Kirkland.”
To date, Ballis said the firm’s biggest investment has been in the Texas legal market. It’s paid off. Since opening an office in Houston in 2014 by bringing over Simpson Thacher partner Andy Calder, Kirkland has opened two more Texas offices.
“I bought into their vision and what they wanted to do,” Calder told me. “What they said was, ‘We are a very large organization, and we want to put more chips on the table and see if we can create something meaningful for the business.’”
Kirkland has more than 300 lawyers in Texas focused on energy and infrastructure.
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The firm branched out from Texas by investing in a debt finance practice focused on energy and infrastructure projects. Kirkland hired Rohit Chaudhry in 2018 from Chadbourne & Parke and has since hired lawyers for that practice from Latham, Skadden, Baker Botts and others. Chaudhry told me in 2019 the investment made sense for the firm since the lenders in the industry were already familiar with Kirkland’s ties to the private equity industry.
“When Kirkland decides to chase a particular practice or area of work, it doesn’t do it by half measures,” Chaudhry said.
The investments don’t always come from the top. Ballis said the firm empowers new hires to make individual decisions to grow their businesses.
Matthew Cohn joined Kirkland’s Boston office as it was getting off the ground in May, 2017. On a recruiting call with Ballis before making the move from Weil Gotshal & Manges, where he was an associate, he said one thing in particular stood out.
Ballis told him the firm’s strategy in Boston would be developed by the people in Boston and tailored to what an office needed to grow there—rather than being held to standards developed by firm leadership in other offices.
“Jon said everyone else in the firm is here to run ideas by, but I don’t have to ask permission for anything,” Cohn said.
He took advantage of this newfound leeway by offering “small” signing bonuses to summer associates during the firm’s first recruiting year in Boston. The Boston group didn’t ask for input; they just did it, he said. And it helped nudge recruits uneasy about taking a chance on a small office in a big city.
“It goes back to what Jon told me: You do what makes sense in Boston,” Cohn said.
The firm’s investments have accelerated during a booming time for Big Law firms.
Sophia Hudson, a New York capital markets partner who joined from Davis Polk in 2018, said the firm’s New York capital markets group stepped up hiring in June last year. It’s since doubled the size of its New York capital markets practice and grown by a third in other markets such as Chicago, Texas, and California.
Hudson and Ballis had talked about that type of growth before she made her move. Ballis told her there was an opportunity to build the capital markets practice in the same way the firm had developed its public M&A practice in New York.
“That was exciting because of the vision,” Hudson said. “If you’re entrepreneurial and can get people behind you, then you can do it. That’s a core value here, which I think is probably a little different than a lot of law firms.”
Ballis told me he wants the firm spending at least 1% of its annual revenue on new initiatives—“taking swings,” he called it. That’s likely to translate to more than $50 million a year in new investments.
“I’m not doing my job if we’re not spending that every year trying to make our place better,” he said.
Worth Your Time
On Women in Big Law: Ayanna Alexander reported on a LinkedIn group that’s providing a community without stigma for women who opted out of the Big Law brass ring chase.
On Big Law Salaries: Davis Polk added another round in the ongoing associate pay scale escalation, tacking on about 3% higher salaries for mid-level and senior associates. Other firms quickly matched.
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.