Kenyon & Kenyon: The Incredible Shrinking Law Firm
Has the situation stabilized since our last look at the firm? Not exactly....
Back in July, we wondered: What’s Going On At Kenyon & Kenyon? The news was not good: partners being told not to take their draws, partners getting de-equitized, lawyers heading for the exits, and staff getting laid off.
In October, we reported on Kenyon appearing near the top of the list of major law firms with the biggest drops in attorney headcount in 2015. At that point, Kenyon’s headcount was down a whopping 16.4 percent.
Has the situation stabilized since these prior reports? Not exactly, according to a recent report in Law360:
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Rocked by an ongoing stream of attorney departures, intellectual property boutique Kenyon & Kenyon LLP is showing signs of financial strain and may be on the lookout for a merger partner, sources told Law360….
[Since March], the firm continues to bleed talent, with lawyers decamping for Haynes and Boone LLP, Patterson Belknap Webb & Tyler LLP, Arent Fox LLP, Duane Morris LLP, Shearman & Sterling LLP, Hughes Hubbard & Reed LLP and Singularity LLP.
The firm also saw attorney and staff departures over the last week. IP firm Kacvinsky Daisak Bluni PLLC on Dec. 7 added Douglas Ringel, a patent litigator from Kenyon who had been with the firm for 15 years. And Kenyon‘s director of library services is moving on to serve as the New York Law Institute’s executive director, according to a Wednesday release by the institute.
The firm lists a total of 96 partners, counsel and associates in offices in New York, Washington, D.C. and Palo Alto, California, according to its website Friday. In comparison, the firm had 220 lawyers in 2006.
Citing a legal recruiter who has worked with a half-dozen Kenyon partners, Law360 confirmed what we previously reported: “Several Kenyon partners have entered into agreements of de-equitization, and some partners also have agreed not to take their partnership draws so that the firm could make payroll.” Yikes.
How might Kenyon save itself? Using the same strategy employed by struggling firms in the past, such as Patton Boggs (now part of Squire Patton Boggs), Edwards Wildman (now part of Locke Lord), and Bingham (not technically a merger, but many of its lawyers got “mass hired” by Morgan Lewis):
Legal industry sources predicted that a merger is a likely scenario that Kenyon is considering.
“I believe rumors that the firm is secretly testing the waters for a merger with a larger firm,” the legal recruiter said. “I suspect Kenyon is putting the word out that it’s considering a suitor. … A lot of Am Law 200 firms respect the firm’s partners and skill sets.”
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A merger would be preferable to continued piecemeal defections, given the way the ball of yarn is unraveling:
Many partners at the firm would like to leave, but feel stuck, according to sources. An attorney search expert said a Kenyon partner with a major book of business was concerned about leaving for fear it would trigger more departures and hurt the firm financially.
“If top partners leave the firm, it could cause a run on the bank and they could lose all of their capital,” the expert said. “This is the tension you have when firms are going through problems like this. Partners with the larger books of business are obviously the most appealing to other firms, but they also tend to have the most capital invested in the firm. They don’t want to be the ones who lead to the eventual bankruptcy of the firm.”
Partners on average have about 35 percent of their yearly compensation invested in their firms, but that number can be as much as 60 percent, according to the expert.
So that’s one virtue of capital contributions (and why some firms have been raising them lately): they’re a glue that helps keep partnerships stuck together. Bingham probably broke up so quickly in part because of its “naked” capital system (i.e., no capital paid in by any partners, so no need to worry about getting capital out).
Kenyon still has many talented and prominent lawyers among its ranks — including managing partner Edward Colbert, brother of television host Stephen Colbert — so one can see how it might be an attractive merger candidate. But with industry observers wondering if patent litigation is dead, and patent prosecution turning into commodity work, this might not be the best time to be shopping around an IP-focused firm.
Our sources at Kenyon continue to be anxious about the firm’s fate.
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“There are a ton of rumors regarding layoffs [this quarter] or in the beginning of next year,” one of them told us. “Everything here is really just speculation, until something actually happens.”
Very true — but we are happy to speculate here at Above the Law. If you have information to share, please email us or text us (646-820-8477). Thanks.
Kenyon & Kenyon Faces Financial Woes As Attys Leave [Law360]
Earlier: What’s Going On At Kenyon & Kenyon?
The Biglaw Firms With The Biggest Drops In Attorney Headcount (2015)
Is Patent Litigation Dead? What Gives?
