Biglaw Firms Brace For Possible Recession

Are these firms prepared for the financial doom and gloom that's lurking on the horizon?

Recession ahead – road sign warning conceptFor those working in Biglaw, there was nothing “great” about the Great Recession. Thousands of associates were laid off, incoming associates had their employment deferred, and law students had their offers pulled. It ultimately took Biglaw years to recover, and it was far from a painless endeavor. And let us not forget the recession caused by the 2020 coronavirus crisis, when Biglaw firms managed their expenses by using the cost-cutting measures of salary cuts, furloughs, staff layoffs, and stealth associate layoffs. That was no picnic either.

But what will happen when the next recession arrives? Are these firms prepared to face what may lie ahead?

Right now, Biglaw firms are riding high on a post-pandemic wave of unprecedented financial success and associates are raking in the big bucks in terms of increased salaries and bonuses. Things seem to be going really well, but darkness is looming on the horizon, with economists forecasting bad times in the future. How are law firms gearing up for the possible economic dip? The American Lawyer has the details:

In the event of a downturn, law firm leaders and industry observers said, they are expecting the rate of office openings and the competition for talent to slow, while putting more focus on counter-cyclical practice areas. Those dynamics could also put pressure on billing rates and shift some of the leverage away from employees and back to law firm management for issues such as compensation and whether personnel can work remotely, industry observers added.

Already, the battle for top talent has slowed a bit, as law firms are offering fewer big signing bonuses compared with last year, and firms are showing less appetite for hiring droves of associates at once, recruiters say.

So, which practice areas should get ready for the spotlight? Bill Josten, strategic content manager for Thomson Reuters who oversees the Law Firm Financial Index, has the scoop:

Litigation, in general, is often considered a countercyclical practice, and demand in that area is almost back up to where it was in 2019 during its “high-water mark,” he added. Insurance work is also generally considered evergreen. And in addition to bankruptcy, some other areas might be ripe for growth during a downturn.

“Real estate practices have been going strong. Tax practices have been showing back-and-forth signs, but with taxes, there is a potential upside. Regulatory and compliance has the potential for a lot of expansion, particularly globally,” Josten said. “So there are areas where firms could potentially focus.”

While some Biglaw leaders are trying to put their eggs in one basket to prepare for the worst, others are a little more optimistic when it comes to the economy. Take, for example, John Quinn of Quinn Emanuel, who recently told Am Law that he thinks “the good times are still rolling.” In fact, he said, “I think law firms are still super busy and looking to recruit.”

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No matter where the leader of your Biglaw firm stands — whether they’re wearing rose-colored glasses or preparing for economic doom and gloom — they seem better prepared to face financial woes than ever before thanks to what they learned during the recessions of the past. Hopefully that means layoffs of all kinds will be kept to a minimum if a recession actually occurs, but if things start getting bad, you know where to reach us.

Is Big Law Ready for a Recession? [American Lawyer]


Staci ZaretskyStaci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

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