For much of 2020, expect the legal industry to mirror 2019. Law firms will continue to invest in countercyclical practice areas as major events—namely, an anticipated economic downturn and the 2020 U.S. presidential election—loom in later months.
“We will likely see a continuation of what’s already started—firms stockpiling bankruptcy talent—which is related more to the assumption that a recession is coming,” says Joseph Altonji, a co-founding partner of consulting firm Law Vision Group. He says that as M&A and private equity practices cool off, there will be increased activity in the bankruptcy, restructuring, labor and employment and real estate spaces. These practice areas have already been attracting attention for some time; bankruptcy lateral moves in 2019 outpaced both 2017 and 2018, according to ALM data.
“For the short term, the uncertainty means business as usual,” Altonji says.
Law firms are still reaping the benefits of years of economic expansion. But with growing anxieties about an economic slowdown or recession, firms in 2020 are likely to invest those extra dollars into safer practice areas, rather than gambling on something new.
“Firms, especially big, global Am Law firms, try to think about how to be recession- and downturn-proof with more balanced practices,” says David Walden, managing director of legal recruiter E.P. Dine.
Walden identifies corporate restructuring, bankruptcy, finance, certain types of litigation and intellectual property as areas ripe for expansion in the coming year.
“These all tend to be, as far as practice areas, in even higher demand now than they have been in the last 10 years due to expansive economies,” he says. He also expects that the health care, data privacy and insurance spaces will see some growth, while transactional and M&A work will slow.
Avery Ellis, a California-based recruiter at Mestel & Co., says that, on the West Coast, he’s still seeing demand for practice areas tied to a strong economy, such as M&A, real estate, finance and corporate work, and not as much of an interest yet in countercyclical practices.
“When I talk to [West Coast] law firm leaders, they’re mildly optimistic about the year closing out and have, with some hesitation, optimism about the upcoming year,” he says. Similar to his East Coast counterparts, however, Ellis expects more of the same on the West Coast in 2020.
“We’re more steady and stable out in California,” he says. “I’m anticipating 2020 to be somewhat like 2019.”
The 2020 presidential election has given firms reason to take a wait-and-see approach as they sort out their priorities for the coming year.
“The country is making a set of economic choices in the next election, more significant than any other election that we’ve had recently,” Altonji says. “There are potential radical changes to the economy, especially compared to what President Trump has been doing in terms of tax cuts and deregulation.”
With more than a dozen Democratic candidates still in the running for the party’s nomination, legal experts say it is too early to be sure what practice areas could be affected and how much. But the election of a Democratic president would all but certainly mean a rewrite of the tax code and a departure from the Trump administration’s deregulation agenda, as well as changes to health care and immigration—all potential growth opportunities for firms later in the year.
“However the election plays out, to an extent it appears that, in the short term, there will be a quieting of some business activity until there’s increased clarity about who will be president,” Altonji says.