The billable-hour bonanza has left firms with more money to lure new recruits. That is just as well. With the supply of legal professionals limited by elite law schools’ refusal to admit many more students, firms are engaged in a fierce battle for talent. Last month Milbank, another big firm, raised its starting salaries for new associates from the industry standard of $190,000 to $200,000. A day later Davis Polk offered freshman lawyers $202,500. Partners at other firms say they matched Davis Polk within 24 hours, not wanting to be thought second-tier. Most big firms are awarding special spring bonuses to associates who have billed enough hours (typically 60 a week or more)—which plenty have done in these febrile times. The money, says the head of one big firm, is a reward for hard work. It is also, he acknowledges, an effort to stop desertions.
Poaching is rampant at all levels of these organisations. McDermott Will & Emery, a fast-growing firm from Chicago, hired six new outside partners in May alone. Even firms famous for staff loyalty, such as Cravath, Swaine & Moore or Wachtell, have lost lawyers to rivals. A senior partner at a large firm says he begins his day by opening emails from recruiters inquiring about his availability. He then peruses career announcements in legal periodicals. For the first time in 20 years Major, Lindsey & Africa, a large legal recruitment firm, is looking in Australia and Canada for associates with dealmaking experience to place at New York firms.
Not all elite American firms have prospered in the pandemic. The current conditions have favoured partnerships with expertise in complex transactions, such as Wachtell or Davis Polk. Some generalists have done less well. Profits per partner at Baker McKenzie, a Chicago-based giant, declined by nearly 10% in 2020. The dealmaking specialists could suffer if the merger-and-acquisition boom peters out. That is already happening to the SPAC craze, which provided lawyers with oodles of work in late 2020 and early 2021. And as America reopens, those covid-crimped expense accounts could begin to swell again, squeezing margins.
Managing partners are therefore thinking about what comes next. Mayer Brown is expanding its restructuring and bankruptcy practice, perhaps in anticipation of an end to government stimulus programmes that have kept many businesses afloat. Many others are beefing up their antitrust and regulatory practices as President Joe Biden and his Democratic Party in Congress threaten to regulate big business and go after dominant companies, from Silicon Valley to Wall Street. The white shoes will not soon suffer a shortage of well-heeled clients. ■
