Tom Borman – Big money and big law success have seen Kirkland & Ellis rise to become the world’s most profitable law firm but in a new report from the Financial Times – who ask whether the Kirkland & Ellis party is over? – it appears the firm may now be at important crossroads. Can it maintain its leading position atop the BigLaw mountain?
A slowdown in its main market in the private capital market and poaching from other law firms has seen Kirkland & Ellis face increased pressure on revenues and its large profits, despite its aggressive approach to business.
Fueled by the private equity boom, the firm’s partners have reaped immense profits, with top earners making over $20 million annually and remained at the heady heights on the most prestigious law firms list.
Their strategy of heavy investment in private equity deals, including hundreds of millions of dollars from partners’ own pockets, has been a lucrative venture, allowing them to trade these holdings internally.
This approach has closely intertwined Kirkland’s fortunes with the $13 trillion private capital industry.
However, the firm’s aggressive business style, akin to that of a hedge fund or investment bank, and its rapid growth trajectory, have recently come under scrutiny.
Last year, the firm reported over $6.5 billion in revenue and approximately $3.5 billion in profit, but rising interest rates and a slowdown in buyout dealmaking are now posing challenges. The co-investing strategy, once a major attraction, has lost its sheen, with some partners facing losses.
We reported on the ‘tough ass’ culture of the firm and the fact that some staff found the pressure and culture too hard to handle.
Business Insider reported a year ago on the loss of junior lawyers at the firm due in large part to the grueling hours required of them. There has been ‘churn’ at the firm despite the healthy sign-on bonuses of up to $250,000.
Poaching From Rivals
Along with other successful law firms, lateral moves continue to create issues that need to be faced. Kirkland’s dominance is being challenged. Rival firms like Paul, Weiss, Rifkind, Wharton & Garrison have successfully poached over a dozen of its partners.
We reported in November the hiring of Kirkland’s legal talent in London, California and New York.
They also recently recruited the so-called ‘trillion dollar’ anti-trust attorney Scott Scher (right) to their Washington DC office this year and there was the big money lateral hire of M&A star lawyer Neel Sachdev that we reported in September.
Others are adopting Kirkland’s partner model and pay structures. This competitive pressure, coupled with increasing scrutiny from trade associations and investors, and a corporate culture that demands high performance, raises questions about the firm’s future trajectory.
As a pioneer in private equity legal advising, Kirkland & Ellis has built a reputation for its deep relationships with major firms and aggressive negotiation tactics.
Yet, as the private equity market cools and rivals rise, the question lingers: Can Kirkland & Ellis maintain its top position, or is its era of unmatched dominance coming to an end?
The Law Firm Culture
The firm’s strategy of aggressive expansion and high earnings is evident in the story of Andrew Calder, (below) a prominent figure in the firm. Calder, who rapidly ascended within the firm, exemplifies Kirkland’s approach to talent acquisition and development.
His success story, marked by significant financial rewards and a swift rise through the ranks, highlights Kirkland’s willingness to invest heavily in top legal talent.
However, this strategy comes with its challenges. As the legal market evolves, with rival firms adopting similar strategies and pay structures, Kirkland faces the task of continually innovating to retain its leading position.
The firm’s unique approach to career progression and internal culture has been a key factor in its success, using rapid promotion for talent (ie money-making) legal talent based on a meritocracy rather than the more traditional lockstep method.
The firm’s young partners are highly motivated, with the prospect of becoming equity partners and earning substantial pay. This culture, described as more business-like than clubby, has been instrumental in maintaining Kirkland’s competitive edge.
The question for the firm now is – where to? Or, more significantly, how to remain on top.
Time will tell.
