Some law firms are merging and becoming legal giants. Other firms are making key appointments in an effort to build momentum. But the common theme across the entire sector is change. The way legal firms are being structured is moving away from the historical models, and more change is yet to come. Piper Pritchard is an executive search and consultancy firm servicing the legal sector. John Pritchard founded the firm in 1992, and has over thirty five years of experience in the legal, banking and private equity sectors. James Whitworth, Managing Director, has over a decade of experience in legal executive search. They discuss how mergers and new hires are changing the structure of law firms forever...

1

The motive to merge

Several major law firms have merged in recent years. For many reasons, this is a trend that will continue and intensify. Globalisation isn’t new, but client demand for services spanning all key jurisdictions is stronger than ever. There is also pressure to offer broader services within jurisdictions. To work on headline-making M&A deals, law firms must have both strength and size. Combined with competition over fees and several merger success stories, consolidation is inevitable. Significant differences in partnership structures mean that this will affect top firms less, but the mid-tier market is ripe for mergers. The only exception may be the market for litigation, where the rise of conflicts of interest within firms are spawning successful boutiques.

Yet mergers carry risks. Firms must weigh the potential benefits against the possibility of becoming bloated and creating culture clashes. Merged firms might not remain partnerships in a meaningful sense.

2

Lateral hiring

Some firms prefer to grow by hiring rather than merging for this reason. Even merged firms may also need to hire to fill weak spots. Growth by hiring can offer less risk and still provide significant returns. One reason is that prominent hiring can signal credibility to clients and build momentum over competitors. Certain hiring strategies, however, are more effective than others.

Hiring partners that can bring clients was popular in the past, but such ‘chequebook recruitment’ often faces two problems. The first is the rise of institutional clients managed by many partners, which makes it difficult for one person to own and transfer the relationship. The second problem is the effect on culture. It is plausible that crude financial moves fail to incentivise and foster good partner relations. James D. Stewart’s investigation for the New Yorker into the collapse of Dewey & LeBoeuf lent significant support to this theory.

Shrewd law firms are adapting their hiring strategies to reflect this. Instead of targeting partners that immediately bring clients, they target those that can contribute to a long-term plan. For such firms, partners with experience of institutional clients are desirable because they have the skills to build similar relationships at their new firm. Such partners arrive with healthier expectations from both parties, and they integrate more easily into the team.

3

Sealing the deal

Several unique features of the legal market, however, mean that even wise hiring strategies face problems. Relevant talent is often limited, meaning shortlists write themselves. Of the few partners that are relevant, several will feel loyal to their firm because they trained there and worked hard to secure and share ownership. The fact that career moves are always risky, and lawyers avoid risk by nature, compounds the scarcity.

If these obstacles are defeated, financial considerations of course play a part in then determining if a move happens. Of most importance, though, is the ability of both parties to find a compelling commercial logic for why the move is mutually beneficial.

The difficulties of this process create special duties for executive search consultants in the legal sector. Complete honesty with clients is crucial. At the beginning, this means offering transparency about the size of the target market, the strength of the proposed opportunity and the chances of success. But giving clients feedback from candidates as the process unfolds is equally important. This often demands courage, but sometimes difficult truths need hearing and acting upon to secure long-term health and success.

About Piper Pritchard

Piper Pritchard is a provider of search services within the legal community. They began with the recruitment of partners and teams and this, subsequently, led to their being asked to recruit associates. More recently, in line with the development of in-house legal functions, they have developed more versatile capabilities and are increasingly working with corporates, banks, funds, private equity houses and their portfolio companies and sovereign wealth funds. In addition to their core recruitment services, Piper Pritchard offer consultancy and due diligence services.

Piper Pritchard