By Shannon Henson
Law360, New York (January 01, 2010) — The lateral market will stay hot in 2010 as law firms seek out new talent and partners become increasingly disillusioned with the financial state of their firms, legal industry consultants said.
Legal observers agreed that 2010′s movement will be a product of the economic downturn and will be spurred by law firms interested in bulking up on available talent to prepare for the future, or looking to unload partners who aren’t producing.
“If 2009 was categorized as the year law firms got rid of associates, 2010 will be the year that law firms got rid of partners,” said Blane Prescott, a senior vice president with Hildebrandt International. “Firms tend to be loyal to their partners, but loyalty has its limits a year into the recession.”
On the other side of that equation, the recession has also eaten away at the loyalty partners feel toward their firms, consultants said.
“I continue to talk to partners who have concerns about their firms,” said Frank Michael D’Amore, founder of Attorney Career Catalysts LLC. “The first quarter of 2010 may be telling, especially for firms on calendar years, because that’s when partners will see the types of profits and, as a result, distributions they will receive.”
Lateral movement historically heats up at the tail-end of a recession, Prescott said.
At first, in the midst of the downturn, partners will sit back to see how their firm performs and reacts, but after bonuses are distributed, some lawyers might conclude that the market position of their law firms has changed detrimentally, Prescott said.
“Some partners might say, ‘It’s time to find a different place,’” he said.
Michael B. Rynowecer, president of BTI Consulting, said that some high-powered laterals were starting to feel constrained by their law firms. Cost-cutting, he said, could make a partner feel like a “caged tiger.”
“And,” he added, “another firm can come along and offer a greener pasture.”
Partners who are mulling a jump in 2010 might face challenges, however, as law firms dig in their heels to retain key clients.
Jerry Kowalski, founder of legal industry consulting firm Kowalski & Associates, said spurned law firms would pull out all the stops to show clients that the firm — and not the departing partner — could best serve their legal needs.
That dynamic, he said, will put departing partners in a position of having to prove to prospective firms that their clients are prepared to move, too.
Partners are also conservative in down times because they don’t like moving firms when their book of business is weak, he said.
“They want to leave like Jerry Seinfeld, when they are at the top of their game,” Kowalski said, adding that lateral movement may, in fact, stay flat or decrease.
D’Amore said belt-tightening at law firms has — at least so far — had less of an impact on the lateral market than industry observers expected.
Fewer lawyers than predicted have made the transition from large firms to midsize and small firms in an effort to reduce rates for clients, he said.
“Large law firms that have traditionally held their ground on discounts have started to yield,” D’Amore said.
“Some of the real big firms are not publicizing this, but they have become more flexible than ever on discounts and flexible fee arrangements. Because of that, there has not been as much of an exodus from large to smaller firms as expected,” D’Amore added.
Still, Prescott said, some big name partners did leave their firms in 2009, and more are expected to follow this year.
“We know there are law firms actively out there lining up lateral moves” to take place in 2010, Prescott said.
Firms are typically in the market for new talent when they need someone with a particular expertise or want a person with a transportable book of business, consultants said.
The lateral market movement in 2010 will impact all practice and geographical areas, Rynowecer said.
There are a number of firms that will be attacking while their rivals retreat, meaning they will be aggressive in the lateral market when other law firms can’t afford to be, he added.
“They think that now is the time to strike and get great laterals when three years ago they didn’t have the appetite for it or the market was such they couldn’t afford to attract these laterals or get their attention,” Rynowecer said.