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The megafirms are growing by leaps and bounds, but more than one-fifth of the firms on the NLJ250 lost lawyers last year — 21.2 percent. In 1998 and 1999, only 14 percent of the 250 shrank. Many of the firms that bled talent last year are among the oldest and most recognizable names in their markets: � Cadwalader, Wickersham & Taft in New York sustained a net loss of 74 lawyers and shrank nearly 17 percent. � Morrison, Mahoney & Miller of Boston lost 37 lawyers and shrank more than 21 percent. � Lord, Bissell & Brook of Chicago lost 33 lawyers and shrank nearly 10 percent. Firms that shrank often fall in the range of what’s now considered midsize, employing roughly 150 to 400 lawyers. “Midsize firms are not going to disappear, but they are extremely vulnerable in this market,” says Joel Henning, senior vice president and general counsel at Hildebrandt International, a consulting firm. “The cost of doing business has gone up significantly for lawyers — in particular, the cost of hiring and keeping lawyers,” he says. “Generally speaking, the big firms can compete for laterals from the midsize firms and promise them more money.” Indeed, attrition tops the list of midsize headaches. Cadwalader reported losing more than 100 associates last year, an attrition rate of 36 percent. The firm has done a lot of hiring, too, and is on track to bringing its numbers back to the 400-some lawyers the firm started with this year, says managing partner Robert O. Link Jr. “We’d love to be larger,” he says. “To the extent that we find … candidates, we’ll continue to grow.” Washington, D.C.’s Crowell & Moring shrank nearly 12 percent, losing 30 lawyers last year. The firm suffered a number of high-profile defections, including a patent group that joined Shaw Pittman; an antitrust group that joined Boies, Schiller & Flexner; and a securities group that left for Kirkpatrick & Lockhart. One explanation for the losses: Although the firm’s profits per partner were a respectable $500,000, they were flat from the year before, and revenues grew less than 2 percent, according to an annual survey performed by the Legal Times,a Washington, D.C., affiliate of The National Law Journal. “Mobility is a fact of life,” says Crowell’s chairman, John Macleod. “This was sort of a blip in the chart of continual growth.” The firm, which historically has done most of its hiring from law school, is looking for more laterals, he says. Lord, Bissell & Brook lost nearly 20 lawyers when 10 medical litigation partners left in the spring. Managing partner John Gurley says that rate-sensitive practices in general have become harder for many firms to justify. “The medical litigation departure is the natural evolution of our business,” he says. “It was an amicable departure.” MERGERS ON THE RISE Attrition isn’t the only reason midsize firms are struggling. Economies of scale enable large firms to afford more sophisticated information technology and marketing services, says Henning. In addition, “the pitch to clients [is] increasingly appealing — that they can provide a breadth and depth that midsize firms can’t,” he says. Hence, “our merger business has never been more active.” New York’s Whitman Breed Abbott & Morgan dropped off the 250 when the firm’s New York office merged with Chicago’s Winston & Strawn. Other Whitman Breed groups joined Holland & Knight and New York’s Kramer Levin Naftalis & Frankel. The dissolution of Whitman Breed, which was formed by a 1994 merger of two New York firms, followed years of struggle. Nearly everyone in charge of a midsize firm acknowledges that mergers are increasingly viable options. “Our strategy is not focused on growth for the sake of growth,” Link says of Cadwalader. But, he adds, “I think we all recognize there’s consolidation among our clients and that there will be consolidation in the legal profession. “For the right opportunity … we would strongly consider [a merger],” he says. Joseph S. Welty, managing principal at Baltimore’s Miles & Stockbridge, which lost 21 lawyers and shrank more than 11 percent, says that the firm has formed a merger committee and is seeking ways to enhance market share, increase its profitable client base and make itself more recognizable. Charles A. Maddock, a consultant at Altman Weil Inc. of Newtown, Pa., says that two types of firms are particularly vulnerable: those with more than 100 lawyers that maintain a single office, and full-service firms that don’t have a single identity. “What we’re finding in the studies we do is that brand identity becomes just as important in the selection of a firm as the individual lawyers,” he says. Despite all the attention given to size, losing lawyers isn’t necessarily a bad thing. “I wouldn’t assume that losing lawyers is hurting profitability,” Maddock says. Some firms put themselves in a better financial position by shedding unprofitable practices and lawyers. Says Maddock, “Some firms not on the NLJ250 are probably more profitable than some of the firms on the 250.” That’s the case with Morrison Mahoney, which fell off this year’s list, managing partner Mark P. Harty says. “We did downsize the firm,” he acknowledges. In the past two years, the firm has closed offices in San Francisco; Grand Rapids and Southfield, Mich.; and Cape Cod, Mass. “In closing those offices, we obviously had a lower head count,” Harty notes. “My watchword is profitability, not head count. The result … was that 1999 was the best year for the firm. We’ve been very happy with our downsizing.” Similarly, Nicholas T. George, president of Akron, Ohio’s Buckingham, Doolittle & Burroughs — another firm to drop off the NLJ250 — says that the loss of 30 lawyers, which shrank the firm nearly 20 percent, is primarily the result of healthier market positioning. The firm has shed unprofitable practices and through retirement has brought the average age of its partners to below 40, George says. At the same time, the firm has marked for growth its intellectual property, tax, business and trusts-and-estates practices. And although IP boutique Pennie & Edmonds — which reported losing 38 lawyers, a decline of more than 15 percent — suffered some attrition due to aggressive headhunting, much of its associate attrition was by design, says senior partner Brian M. Poissant. “Quite frankly, when the associate raises occurred, we took the opportunity to weed out the associates that weren’t worth the salary increase,” he said. Related Chart: 2000′s loss leaders

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