In-House: The Lateral Report
A record number of Am Law 100 and 200 partners changed firms last year, according to our annual report.
The American Lawyer
By Aric Press
February 01, 2009
A record number of Am Law 100 and 200 partners changed firms last year. In our annual survey of lateral activity, we found that 2,509 partners had moved in or out of the big firms in the year ending September 30. This was a 4 percent increase over our 2007 results and, because of our timing, did not include about 400 partners forced to find new jobs after Heller Ehrman, Thelen, and Thacher Profitt closed late in 2008.
This result contradicts last year's conventional wisdom. Economic downturns are supposed to be times when partners hunker down and firms become more conservative and less willing to take on newcomers. Instead 2008 was the second consecutive year of lateral growth, spurred in part by partners looking for better or more secure homes--and in part by partners who were pushed out of their former firms. We call the latter group "accidental laterals," an unfortunate set comprised of those sent packing and those whose firms died before they did. This phenomenon isn't likely to be a one-year wonder. (You can access our report on accidental laterals, and the full Lateral Report--stories and charts--via the links below.)
There are limits to our data, but it is the best available in the marketplace. We compile the moves from announcements and news reports and then in the autumn confirm the list with the Am Law 200 firms. We divide the laterals into 31 practice areas, from banking to tax. And we track the timing of the moves. It's no surprise that activity picks up after profits are divided.
For the third consecutive year, the largest group of lateral partners came from the corporate practice. In 2008 they represented 17 percent of the laterals, a fairly flat number since 2006. Intellectual property was the second most popular at 12 percent, followed by litigation at 11 percent and banking/finance at 10 percent. For the last five years, either corporate or litigation has led the lists.
We treat large acquisitions as lateral moves. Sometimes these arrangements are billed as mergers-and when sensitivities are particularly raw, even as mergers of equals. But in our experience, merger parties generally fall into two camps: the eaters and the eaten. The biggest gainer, K&L Gates, led the charts as a result of swallowing Kennedy Covington in North Carolina and Hughes & Luce in Texas. We've learned over the years that acquirers also tend to be shedders. That was true last year as well. Sometimes those departures are voluntary, sometimes not so much. Last year, for instance, among our top five acquirers, K&L picked up 185 partners and dropped 40; Reed Smith added 74 laterals and lost 38 partners; and DLA Piper added 58 partners while losing 37.
Clearly there's stress and opportunity in the marketplace. There is also the capacity for mistakes. In the urge to seize "stars" and/or bulk up in key regions, some firms have doled out generous guarantees to their new hires. This is a controversial practice in good times; as the economic meltdown gets shoulder-high, guarantees may look especially unwise. Not only do they create yet another privileged caste in the firm, but should these new arrivals fall short of their advanced billing, they automatically become another burden for the rest of the partnership.
A year ago I was confident that the received wisdom--that lateral hiring drops in recessionary times--was wrong. I'm not as sure about 2009 because it's so hard to judge the length of the downturn. I expect that there will be a few more mass acquisitions and many more accidental laterals. If the pain is severe, I think many firms will put away their shopping lists and reach for their hatchets. And I am confident that those whose guarantees are running out will put themselves on the market again. It never hurts to ask.
THE LATERAL REPORT
THE CHARTS
The Revolving Door: Top Gains
Jumping Ship: Biggest Losses
Practice Areas
THE STORIES
The Accidental Laterals
Star Laterals
Jumping Ship
Personal Touch: Hunton & Williams's Lateral Growth Spurt
