Latham to cut 440 jobs as workloads plummet - 27 February 2009

Latham to cut 440 jobs as workloads plummet - 27 February 2009
This is a representative article at this point. Many law firms are now starting to make double digit reductions in staff across the board. This was in response to a 21% decline in profits per equity partner ("PEP") from about $2.3 million to $1.8 million. One wonders whether it is possible to get by these days PEP of $1.8 million. The costs of the six month severance packages is certainly not trivial. The cost of training those let go and the cost of rehiring replacements when times get better, as they most certainly will some day, hopefully sooner than later, when coupled with severance costs, would hardly seem to warrant this sort of reaction given the level of profits per equity partner.

Dow Might Be Down, but Stock of One Law Firm Is Up

Dow Might Be Down, but Stock of One Law Firm Is Up
How could a blog like this one not comment on this article? The interesting story will be when the UK firms start to utilize these new capabilities in 2011, just two years from now. The potential impact of that is shown by some of the analysis of the value of some American firms that appears towards the bottom of the article. Many UK firms have significant foreign presences, including in New York. If these firms can amass capital of the magnitude the article suggests might be possible, the New York competitors of these UK firms will be at a significant disadvantage, if they cannot do the same. Thus, these NY firms will either seek some way to do the same or seek some way to keep the UK firms from employing their public ownership capital in New York. That will not be a complete solution, however, because the capital raised through the UK can still be employed elsewhere around the world and will give the UK firms a decided advantage in those markets.

From the Emerald Isle to Down Under, Firms Tightening Belts

From the Emerald Isle to Down Under, Firms Tightening Belts
This article is interesting not so much because it shows that world economic conditions are infecting Ireland as well, we all sort of knew that already, but it shows, once again, the mobility of the legal work force. As jobs in Ireland decline, Irish lawyers are looking to Australia as an opportunity.

Madoff Victims' Lawyers Establish Global Alliance in Madrid

Madoff Victims' Lawyers Establish Global Alliance in Madrid
This is an interesting approach to global legal services. I would call this a special purpose legal network. It will be interesting to see how well it fulfills its purpose and whether it chooses to go out of bushiness when the purpose is fulfilled. It is hard to tell from the article exactly how closely knit the members will be, and what ethical and other issues might evolve from this special purpose network. This concept is something that bears further watching.

Norton Rose US merger is ‘inevitable’ - 23 February 2009

Norton Rose US merger is ‘inevitable’ - 23 February 2009
The Magic Circle firms have long thought that capital markets work was going to be dominated by either New York or London, but not both. That is why many Magic Circle firms have established very significant presences in New York, but not all have done so through a merger. Many New York firms are doing the same in reverse. It seems clear the Magic Circle firms are planning to be ready to jump one way or the other, depending on how the capital markets work shakes out. This Norton Rose article is cumulative to the conventional wisdom, but its significance is that the current economic climate does not seem to have changed the long term outlook.

DLA Piper shows its mettle in Emea, Asia - 23 February 2009

DLA Piper shows its mettle in Emea, Asia - 23 February 2009
Claiming that its solid performance for 2008 represented the benefits of diversity in both "geography and practice," DLA then moves on to make some significant staffing reductions in the UK and in the US. It will be interesting to see how well geographic and practice diversification can shield DLA from the ravages of the current economic climate. My suspicion is that it will not. Firms with better practice diversity may fare better, but geographic diversity can become very expensive when there is a broad scale downturn in business. It is very hard to defend the continued existence of marginal foreign branch offices in difficult economic times.

Profits Plunge 9.6 Percent at NY Leader

Profits Plunge 9.6 Percent at NY Leader
This article indicates that Shearman's results were more dependant on its business mix than on it global presence. This tends to demonstrate that global firms do not enjoy an advantage from their being global when the economic conditions are themselves global. Rather, it is the practice mix that is more important in determining results. The prior post concerning Cravath's results is more support for this conclusion.

Law.com - Cravath Profits Fall 24 Percent

Law.com - Cravath Profits Fall 24 Percent
One of the gold standards of the legal profession has felt the impact of the current economic climate. The article attributes Cravath's problems, at least in part, to lack of geographic diversification. I think this shows a lack of understanding of the Cravath practice. Its clients are geographically diversified, and, for the most part, always have been even if the firm is basically located in New York. The real problem is the lack of Cravath's traditional business. As the article notes, Cravath does not have a bankruptcy practice.

Allen & Overy to Cut Partners, Associates and Freeze Pay

Allen & Overy to Cut Partners, Associates and Freeze Pay
This article is interesting for several reasons. Not only is the size of the staff reduction significant both in number and percent, but there is also a salary freeze. However, in addition, there is also a billing rate freeze, so the clients might get something out of this too.

How Are U.S. Firms Faring in London?

How Are U.S. Firms Faring in London?
Here is another report from London. In the previous post I indicated the situation in New York might be a bit worse than in London. Reading this article, may make you change your mind about that. The trend is down at the moment, and it proves that the "business of law" is not immune from the economic pressures that affect all businesses. There was an interesting article in the New York Times today about the situation in Dubai. Just a few months ago, many firms were opening or expanding offices there, and there was a certain sense that Dubai might be immune from the economic problems that seemed to plague most of the rest of the world. Well, unfortunately, that appears not to be the case, which brings us back to the conclusion that law firms are not immune, even when they are global law firms.

Law.com - Revenue Flat, Profits Down at Skadden, S&C, Davis Polk and Dewey

Law.com - Revenue Flat, Profits Down at Skadden, S&C, Davis Polk and Dewey
Just to give some balance to some of the recent posts about the situation in London, this article gives some rather stark information about the situation in New York. It is about the same or, maybe, even a little bit worse. There is definitely a downward trend in both cities.

Japanese Crack Down on Unregistered Foreign Associates

Japanese Crack Down on Unregistered Foreign Associates
At first, this sounds as if we have some non-economic news for a change, but, reading between the lines, the new interpretation of the Attorney Act is probably a measure to eliminate competition from the foreign firms and compel them to rely more heavily on the domestic firms thereby tending to offset a downturn for those domestic firms. This may not work as not many domestic firms are as well versed in international transactional work as would be needed. Thus, work may move away from Japan whenever possible, which would be self-defeating.

White & Case Freezes London Pay as Profits Fall

White & Case Freezes London Pay as Profits Fall
More dismal economic news from the London market. This just goes to prove that the New York and London markets are much more aligned than many had thought. The news from both markets is largely the same: staff reductions, salary freezes, and other cost cutting measures.

DLA Piper Set to Cut up to 140 in New Round of Layoffs

DLA Piper Set to Cut up to 140 in New Round of Layoffs
The grim news gets more grim with second round staff reductions and other problems. There was also news today that a major NYC law firm, rumored to be Proskauer Rose, pulled out of a deal to lease a major portion of an office building under construction prompting the promoters to put the project on hold.

Crunching Numbers: Impact of Upcoming Layoffs at MegaFirm Becomes Clearer

Crunching Numbers: Impact of Upcoming Layoffs at MegaFirm Becomes Clearer
It looks as if the current economic difficulties are really starting to take hold in London. It will be interesting to see if the large, global, integrated law firm model survives in its current form. It will certainly be necessary to be much more selective in the future.

India Is First Choice for Referrals, Say U.K. Firms

India Is First Choice for Referrals, Say U.K. Firms
An article of this type would not have been possible several years ago. This shows the progress India has made and also the willingness of law firms and clients to outsource legal work to achieve cost savings. It seems as if the ethics issues of outsourcing are now being resolved in a way that is favorable to outsourcing, provided there is competent oversight and control over the process by a qualified attorney. It remains to be seen whether the US firms will follow suit as whole-heartedly as their UK counterparts.