Latham’s Wachtell Recruiting Pipeline Highlights Scale Advantage

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at how quickly the profit pool at Latham & Watkins has grown compared with Wachtell. Sign up for Business & Practice, a free morning newsletter from Bloomberg Law.

Latham & Watkins turned heads this week with a splashy recruiting coup, taking two more partners from the vaunted partnership of Wachtell, Lipton, Rosen & Katz.

In bringing on banking and private credit partner Emily Johnson and M&A pro Mark Stagliano, Latham has now hired four Wachtell partners in the past 12 months. It’s a rare crack in Wachtell’s armor. The elite, single-office firm with an M&A practice that punches far above its weight has until now been largely immune from the free agent transfers roiling Big Law.

The hires highlight a recruiting advantage Latham has built by growing its profit pool at a rate that’s nearly unmatched. It echoes a similar period nearly a decade ago when Kirkland & Ellis poached a string of partners from Cravath, another once-untouchable partnership.

Start with the scale. Latham in 2024 paid its 550-plus equity partners nearly $4 billion in total, data from The American Lawyer show. That figure has grown 177% since 2016. Latham in 2024 paid its partners more in profit than the revenue generated by any other firm besides Kirkland & Ellis.

Wachtell’s partners have on average been paid better than any other law firm over the past decade. But the firm’s total profit pool hasn’t grown as quickly, due to less growth in the number of its equity partners over time, and its strategy of sticking to a handful of practices. Wachtell paid its 86 equity partners a total of $777 million in 2024—up 65% from 2016.

Latham’s profit pool is now five times the size of Wachtell’s, up from three times as large in 2016.

Latham, of course, doesn’t just have scale. It has a more flexible compensation system, which allows the firm to pay top partners more than traditional lockstep compensation systems. That flexible model, over time, has proven attractive to mid-level partners at firms such as Wachtell and Cravath who have been paid based on seniority. (Cravath modified its lockstep system, but Wachtell is still viewed as a lockstep firm.)

All four of the Wachtell defectors to Latham in the last year were partners at the firm for five to seven years before making the jump.

“We offer a different opportunity both because of our size and scale and breadth of market offerings,” Marc Jaffe, Latham’s New York office managing partner, told me. “But we also offer a different opportunity in our approach to the market, our focus on looking around corners over the next decade-plus, and offering leadership opportunities to young, dynamic partners. It’s a different proposition. And that was attractive to each of the four partners we were able to recruit in the last 12 months.”

The Wachtell-Latham pipeline is reminiscent of a period from 2016 to 2018 when Kirkland poached a series of Cravath partners, including Jonathan Davis, Sandra Goldstein, and Eric Schiele.

Those moves generated questions about the long-term stability of Cravath’s model. They also coincided with Scott Barshay’s departure for Paul Weiss. Cravath ultimately responded in 2021 by modifying its lockstep compensation model. And in 2023 the firm adopted a tier of salaried or non-equity partners.

Still, the firm, like Wachtell, is much smaller than the global peers it is now competing with for top talent.

Back when Kirkland was poaching young partners from Cravath, Kirkland’s profit pool was four times the size of Cravath’s. It’s now nearly nine times larger.

But what was interesting about the Kirkland-Cravath pipeline, in hindsight, was that it didn’t continue forever. Kirkland hired Allison Wein, a former Cravath M&A partner, in 2022. But that was the end of the migration.

So, size isn’t necessarily destiny. Just because a firm becomes significantly larger than a prominent rival doesn’t mean it will endlessly poach that firm’s partners.

_{Podcast: Even Cravath, Wachtell Must Now Fight ‘the Talent Wars’}

It’s more likely that firms like Latham and Kirkland view the ability to hire partners from prestigious places like Wachtell and Cravath as a signal of their own pedigree and ambition.

“No other firm combines our excellence and scale—nor our ambition,” Latham chair Richard Trobman said in the firm’s press release announcing its latest Wachtell hires. It’s a word Trobman has used in press releases when the firm makes a notable hire, including acknowledging the firm’s “serious ambitions” in a 2024 release noting the firm’s goal of building the best restructuring practice.

Still, even if Latham’s Wachtell pipeline ended today, challenges remain for undersized, elite firms like Cravath and Wachtell. There are plenty of other competitors that still view hiring their partners as an imprimatur of their own ambitions.

Cravath this year has lost some seven partners, including two leaving for Davis Polk & Wardwell, a firm whose profit pool has grown more than twice as fast as Cravath’s since 2016.

Worth Your Time

On Billing Rates: A boutique California law firm shouldn’t have had its fee reduced by a federal judge based on its small size, an appeals court ruled. We previewed the case in the Big Law Business column last year.

On Data Centers: Virginia has been a hotbed for data centers, but lawyers in the practice say it is becoming more difficult to build in the state, David Schultz reports. I spoke with David about Big Law’s data center business for Bloomberg Law’s On The Merits podcast.

On Latham: Mahira Dayal profiled Latham dealmaker Zach Podolsky, who joined from Wachtell a year ago and has since handled major deals in the oil and gas industry.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.