The changing dynamics of the law market also create major changes in the areas that firms place their resources into. Smaller firms are generally hidebound by their practice areas, which mean they are more susceptible to cyclical trends and practice downturn.
Accordingly firms are increasingly focused upon areas of activity that will be counter-cyclical or at least help counter the downturns.
LateralLink principal Michael Allen wrote in AbovetheLaw about four key areas of growth or regression. They will, he says, either burden or catalyse a firm’s future.
Here are the four:
1) Bank/Securities Litigation.
Firms that basked in the work created by the financial turndown are precariously positioned as the windfalls from their bankruptcy and financial litigation cases wind down. Specifically, the firms that represented Wall Street banks and insurance companies in the post-recession free-for-all will see a slowdown that is somewhat mitigated by the confusion arising from the Dodd-Frank act. However, firms with strong regulatory practices are ripe to reap the rewards as financial services adjust to the new rules.
The mega-firms who represented the large banks during the economic turndown are generally well positioned to absorb the shock from the loss of that revenue stream. Paul Weiss, Sullivan Cromwell, Cravath, and Cahill Gordon have strong and well-diversified practices that will blunt any blow to a particular sector. Whereas, smaller firms that rely on litigation from their bank clients as a major source of revenue have likely hit their peak.
Bankruptcy filings are down 33% from the height of the recession. Should this trend continue downward, firms with large bankruptcy departments may find them more difficult to sustain. For example, a firm like Brown Rudnick, with a top bankruptcy practice may need to diversify, as bankruptcy accounts for 16.5% of their headcount.
Similarly, Kramer Levin is also firm with a large bankruptcy department relative to its size. The largest bankruptcy practice, overall belongs to Kirkland & Ellis, but this practice accounts for a small 5% of their total size, which should mean the slow-down will have less of an impact on the firm as a whole. The creditor and fund side of bankruptcy practice over the next 7 years should be a thriving market, and firms should consider re-upping their ranks to prepare for a possible distressed opportunities that are likely to follow.
FCPA (Foreign Corrupt Practices Act) is growing hotter and firms with an international presence are well equipped to take on the work. Many recent occurrences of FCPA cases have concerned bribery across Africa, the Middle East and Southeast Asia. The two top FCPA firms, Gibson Dunn and WilmerHale, have strong international platforms that allow them to better defend their clients. As the demand for investigation practices grows, we will see movement in the top partner ranks.
Now that Sony’s emails have been disseminated to every corner of the earth, clients are growing increasingly aware of how important privacy is for a company. Not long ago, privacy was concentrated in DC with firms like Covington, Hogan Lovells, and Venable leading the charge.
Most Am Law 100 firms now are turning their attention to the growing practice. Among high-rate platforms, we’ve seen many fold these groups into their tech transactions practices, while other more flexible rate firms like DLA Piper and Mintz Levin have established independent practices.
For the latter, many of these opportunities tend to be less geographic-focused, as we’ve seen privacy openings in the past year from West Coast and Mid-West firms. The state of the privacy practice is akin to frontier America where the rules are mostly being made up as the practice ages from its infancy. The benchmark for a privacy partner is still ambiguous, but in this ambiguity, junior partners and senior associates have an opportunity to brand themselves separate from an existing paradigm.
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