A Brief Lesson in Modern History—How Lateral Rules Were Rewritten
Everyone knew you couldn’t pull laterals out of the big NY firms—until Kirkland, Paul, Weiss, and a few others did. Quinn grabbed partners out of Skadden who have now been plucked out of Quinn by Dechert. The new rules are: every partner is fair game everywhere. The previously unheard practice of recruiting big NY firms' laterals to new firms is almost routine.
Up Next? Mergers
Most law firms merge to gain market access, new geographies, and new practices. Some of the mergers are financial rescues, but even most of these bring market access. Firms still see mergers as a vehicle to extend reach.
The global tie-ups offer the merging firms international market access. They expect to market to each other’s clients, cross-sell, and otherwise develop what they hope is a preferred or captive market.
Now it’s time to rewrite the law firm merger rules. Two new kinds of mergers are coming:
The Consolidation Mergers
Look for law firms to consolidate markets instead of extend reach. Every city (except major financial centers) has 2 large players—each of whom will claim market leadership. You will see these firms merge. These market leader mergers immediately create economies of scale and mega clients for the newly created firm—the kind of formula proven to deliver superior profits.
Yes there will be conflicts, but like all good mergers, these will be overcome.
The Rock Star Mergers
In 1998 Price Waterhouse and Coopers & Lybrand merged to become PwC. They were an instant powerhouse with a plan to dominate the largest 200 companies in the world. Rock star law firms will merge and change the entire competitive landscape. These mergers will look like:
2 top-tier NY firms merging
A magic circle and top-tier NY firm merging
Latham merging with an Am Law 30 or Magic Circle firm
Kirkland merging with an Am Law 30 or Magic Circle firm
There may be other rock star mergers with the same impact, but these mergers will make every other firm rethink their approach to business and life.
Preparing Yourself and Your Firm
We expect these mergers to happen in the current planning horizon. You can incorporate these events into your current thinking through scenario planning and answering the following questions during a leadership retreat:
What would, and could, we do when the 2 biggest competitor firms in our markets merged?
How would we protect our client base if a NY firm merged with a Magic Circle firm?
Even though we don’t take in laterals, who are the 5 laterals we would want—by name—if we suddenly change our minds?
What would be the ideal criteria for a lateral partner?
Even if we don’t want to merge, which firms would make the ideal merger partner to help grow clients and boost profits with the lowest risk?
You could ask more questions, but these will bring you to the heart of the matter. And will keep you plenty busy with strategic thinking.
To circle back to where we started—all the rules are being thrown out the window. New rules apply. A few firms will redefine the rules while others scramble. If you don’t want to redefine the rules, which most don’t, then be ready to act when others do—and you can still jump ahead for the future.