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Not so long ago, a young lawyer would join a law firm as an associate, advance to partner and stay with that law firm until retirement. Times have changed.
Today’s lawyers are much more mobile. If their law firms are not providing the support they need to grow their practices and flourish as professionals, they will look for greener pastures – and keep looking until they find the right place.
Even before the most recent round of layoffs, which further weakened loyalty, lateral moves by partners were trending up – from 2,153 in 2006 to 2,775 in 2009 (American Lawyer magazine). A second wave of defections is taking place in 2010.
“Savvy law firms with well-thought-out plans are conducting strategic ‘land grabs’ – scooping up entire offices and practice groups from their competitors,” said Craig Brown. “Mid-tier regional firms, in particular, are gobbling up disgruntled and displaced big-firm talent.”
Brown discussed “what laterals want” at the monthly education program of the Rocky Mountain Chapter of the Legal Marketing Association (www.legalmarketing.org/rockymountain), held Sept. 14 at the Ritz-Carlton Hotel in downtown Denver.
Brown is a lawyer and founder of Motivera (www.motiveragroups.com), a Southern California-based business development consulting firm. A large part of his practice is helping lawyers use their strengths to build relationships that lead to strong books of business.
What law firms want
“It costs approximately $1,920,000 to bring on board a lateral partner with a $2 million book of portable business,” said Brown, citing an article by Richard Gary in Law Firm Inc. An acquiring firm does not break even until the third year.”
“In the 2007 land grab, law firms were gobbling up available lateral partners and practices — often without proper due diligence,” said Brown.
“In 2010, we see a second wave of lateral acquisitions,” said Brown. “This time, the acquiring firms have changed from gobblers to picky eaters. Due diligence has tightened up and the packages being offered are less generous. Generous financial incentives are being replaced by loans that will be forgiven if a lateral partner lives up to his or her marketplace potential.”
According to a recent NALP Foundation report, law firms consider four factors when deciding whether or not to hire a lateral partner or practice group:
- Can the lateral develop new business?
- Can the lateral strengthen a particular practice area?
- Does the lateral present a possible conflict of interest?
- Is the lateral a good cultural fit with the firm?
“Considering that 16 percent of laterals hired during the first wave moved again within two years,” said Brown, “finding the right laterals can be a costly proposition.
“Considering the time, effort and cost that go along with hiring a lateral lawyer or group, you would think that acquiring firms would do everything in their power to help the new lawyer succeed — but often, they do not,” said Brown.
What lateral partners want
Law firms are not the only ones exerting more care with lateral acquisitions. Lawyers, too, are becoming pickier about their choices when they make a lateral move.
“In 2007,” said Brown, “laid-off attorneys were panicked. They were primarily concerned about finding a new position and paying their bills. They didn’t take the time to do their research. As a result, many ended up in firms that were a bad fit. In the current wave of lateral movement, lawyers are being much more careful.” (more…)
