Tag Archives: Gloria Sandrino

Market News, Partner Market, Tips

Partners Assessing a Secondary Market Move: Finding the Right Firm and Office

Back in December, we suggested that the expansion of Am Law firms into new secondary markets may have been the defining Am Law firm story of 2022, and we explained some of the many reasons why partners at Am Law firms in major cities are moving to secondary markets in unprecedented numbers.

As the 2023 partner lateral market comes into focus, we can report that opportunities at Am Law firms in secondary markets remain plentiful. This is especially true for practices that are less dependent on a strong economy such as litigation, antitrust, privacy, data security, intellectual property, employee benefits, and tax.

Secondary market Am Law opportunities may appeal to partners in two categories. First, they may be a fit for partners interested in moving from outside the state to a secondary market, for the reasons described in our December article. Second, they may be attractive to partners already based in a secondary market who see a chance to “trade up” to an Am Law firm that has recently arrived in their city.

If you find yourself in either of these categories, what are the most important factors to consider as you search for the right firm and office?

Practice alignment with office strategy

The most important criterion to assess is how well your practice aligns with the firm’s strategy for the particular secondary office you’re considering. Note that office-level strategy is not the same thing as firm-level strategy!

Typically, when a firm opens in a new city, it will have identified specific priority practice areas and clients (both existing and potential) for the new office. Two office openings from last month offer clear examples. Goodwin launched in Philadelphia, targeting health care, life sciences, private equity, and financial services work. Meanwhile, Davis Wright opened in Culver City with the aim of expanding its entertainment, media, and healthcare practices.

If your practice area aligns with the new office priorities, that’s an excellent sign. Especially where the firm has publicly announced the practices it intends to build, there will be a sense of urgency internally to back up the talk with demonstrable success. If your practice fits into the plan, you can expect the firm to make a real effort to support you. Conversely, if your practice is not a priority for the office in question, think twice. Even if the firm is willing to bring you in, you cannot expect the same level of support as will be extended to partners in the priority practices.

Cross-selling opportunities

A critical component of strategic fit is the extent to which you can reasonably expect to benefit from cross-selling opportunities, both at the local office level and firm-wide.

Cross-selling can sometimes be driven by proximity to key existing and potential clients: the logic is that by being nearby, partners will be positioned to build strong relationships that lead to servicing an increasing proportion of the client’s legal needs. In interviews about the Culver City opening, Davis Wright partners took care to emphasize their focus on creating cross-selling opportunities on LA’s Westside for lateral partners. Similarly, firms opening in Miami—one of the most popular secondary markets for recent Am Law office expansion—are taking care to site their offices as close to priority clients as possible, in some cases securing space in the same prime Brickell developments that are drawing recently arrived leading hedge funds.

Platform benefits

Although office strategy should be at the forefront, it’s also critical to consider the platform offered by the firm as a whole. How valuable would this firm’s platform be for your practice? K&L Gates’s communications around its office opening in Nashville in 2021 highlighted this factor. In the firm’s press release, partners connected the strong local opportunities in healthcare to the firm’s national healthcare practice and emphasized the value of “a fully integrated law firm with the breadth of practice area capabilities, industry insights and knowledge, and geographic reach that K&L Gates offers.” It’s particularly logical that K&L Gates would play up this factor in Nashville, which historically has not drawn interest from Am Law firms with global reach. But platform is an important consideration regardless of your destination.

Talent pool

Access to talent has been a key driver of recent secondary market expansions. That includes not only newly-hired associates and counsels drawn to secondary market offices but also lawyers currently employed by the firm who may stay longer if given the opportunity to transfer. The secondary markets that firms have favored are viewed by many as nice (and cost-effective!) places to live. Consider, for example, Kirkland’s new offices in Boise and Salt Lake City. Another selling point for many secondary market offices is the lack of state income tax. Think Miami, Austin or Seattle.

Talent has also been a key selling point in attracting lateral partners to these new offices. One reason that partners already working in secondary locations are often eager to join firms in the Am Law is because Am Law firms feature a materially more sophisticated legal talent pool, which newly arrived partners can leverage to accelerate their practices. For Am Law firms arriving in secondary markets, depth of talent is a key advantage—this is a dimension on which the regional firms with a longer history in these markets typically cannot compete.

Lateral partner integration

It’s also essential to inquire about and understand your potential new firm’s lateral partner integration plan. Successfully integrating new partners into the firm’s existing practices is in everyone’s best interests, but even so, we’ve witnessed many cases of poorly managed integration.

For an example of a firm vocalizing its commitment to integrating lateral partners, consider Latham’s opening in Austin in 2021. Latham brought in three lateral partners with deep Austin ties to anchor the new office, two from DLA Piper and one from Wilson Sonsini. In the press release, Latham Chair and Managing Partner Rich Trobman spoke of the firm’s intention “to offer clients in Austin the very best of the Latham platform, by combining our new partners’ experience and skill sets with our already deep and successful bench spanning capital markets, venture capital, and private equity.” If you’re considering a lateral move of any kind—but especially to a relatively smaller office—you will want to make sure your new firm is similarly committed to integrating you effectively.

***

If you are a partner interested in exploring secondary market opportunities, we invite you to get in touch. Although there are ample partner-level opportunities out there, partner needs are hardly ever posted. Drawing on our longstanding relationships with leading Am Law firms, we make it our business to know who is looking. We assist with interview and business plan preparation, and when you reach the offer stage, we can negotiate on your behalf, minimizing awkward interactions with your soon-to-be partners. Remember, we do this for a living. It’s a wise choice to avail yourself of the benefit of our experience.

Associate Market, Featured, Lateral Moves, Market News, Partner Market

Lateral Partner Moves to Secondary Markets: An Unprecedented Opportunity

Growth in Biglaw partnerships follows a cyclical pattern. Firms expand their partner ranks rapidly in some years and not at all in others. 2022 was a year for lateral expansion — hardly a surprise considering that client demand remained strong in most practices. The unique feature of this recent expansion wave is where firms grew: 2022 will be remembered for unprecedented hiring of lateral partners outside of the largest cities.

COVID and remote working have upended traditional assumptions about where a partner must be based in order to maintain a Biglaw book of business. The pandemic shuffled the location preferences of many professionals, including both lawyers and their clients. Partners who would rather live outside of the traditional business centers now feel emboldened to voice that preference, and many firms are prepared to accommodate.

Firms see new opportunities for business development in cities that traditionally wouldn’t have supported top Biglaw billing rates: the recent growth of the finance sector in Miami (at the expense of New York and Chicago) offers a case in point. Additionally, clients today are more tolerant of their lawyers being based in a different state: a partner who moves from the Bay Area to Austin will likely have no problem continuing to serve California clients. Another factor firms are considering is the many associates and counsels who are eager to move to secondary markets: where partners are prepared to anchor a new office (or expand an existing one), it typically helps a firm’s non-partner recruiting efforts.

Perhaps no secondary market has drawn as much attention in this period as Miami. The city has not been shy about branding itself as the hot new tech and finance hub. Distinguishing between hype and reality hasn’t always been easy, but with important Biglaw clients like Citadel moving their headquarters to South Florida, firms are rightfully taking notice. Among the firms that have opened Miami offices since COVID are Kirkland & Ellis, Winston & Strawn, King & Spalding, Sidley Austin, and Quinn Emanuel.

Salt Lake City is another market worth highlighting. Though it maintains a lower profile than Miami, Salt Lake has enjoyed a fast-growing, tech-driven economy, attracting both larger companies (Adobe, Ebay, Overstock, Qualtrics) and many startups. Kirkland & Ellis, Wilson Sonsini, and Foley & Lardner have all opened Utah offices since the pandemic.

Although secondary market expansion may have been the defining story of 2022, we expect this trend to continue in 2023. The window remains open to partners making a lateral move to a secondary city.

If you’re a partner considering such a move, should you take the plunge? Obviously, circumstances vary depending on your practice and your proposed destination. A recruiter who specializes in partner moves and knows the specific markets in question will be best placed to advise you. But speaking generally, here are a few reasons you may wish to jump to a secondary market:

Better lifestyle! Many secondary cities are attractive places to live. Interested in a warmer climate? Easy access to skiing? A lower cost of living? Chances are there’s a secondary market that would suit your lifestyle preferences.

Big fish, smaller office! Partners entering from larger cities often enjoy the best of both worlds. They can establish themselves immediately as a top expert in their new, smaller market by virtue of the high-profile matters they handled in the prior market. At the same time, they can bring their current clients with them. For more junior partners, a move to a less crowded market can also be a fast-track to internal leadership opportunities.

Billing rate flexibility! In some cases, it is increasingly possible to charge national billing rates in smaller cities as companies used to paying those rates move in. But as a general matter, smaller markets usually require firms to adopt a more flexible approach. The ability to offer more flexibility on rates can be of great help to partners looking to expand their client base outside the big cities.

Talent retention! Many associates and counsels want to be based in lower-cost cities with more affordable real estate. For partners, the ability to accommodate that desire means they can retain their talent group for longer. Instead of leaving to join a smaller firm in a secondary market, associates and counsels can achieve the same cost-of-living benefit while staying in Biglaw.
Strategy, strategy, and more strategy! In the current market, lateral partners moving to secondary locations are a key part of many firms’ strategic growth model. If you join a new firm under these circumstances, firm leadership will be especially invested in your success. As a lateral partner, you want to ensure your new firm is committed to integrating you into the firm’s platform, and it is always advantageous to lateral into a situation where the firm feels some extra pressure to make the move work. Coming in as an anchor partner for an office that is a focus of firm growth should set you up nicely.

Featured, Market News, Partner Market

More Bang for the Buck: Hiring Lateral Partners In Groups Is Gaining Popularity

Paul Hastings has been doing a lot of hiring lately. Same as many other firms, right? Actually, not quite. Paul Hastings has been in the headlines not for bringing on many new partners, but for hiring partners in groups. In March, the firm poached a group of 43 restructuring attorneys from Stroock & Stroock & Lavan, including 18 partners. In May, Paul Hastings brought over a three-partner energy team from Shearman & Sterling. And in June, the firm hired a group of four financial services partners from Buckley.

Paul Hastings is executing this recruiting strategy on a particularly notable scale, but the firm’s appetite for lateral partner group hiring is hardly unique. In February, Reed Smith brought on an 11-attorney real estate finance group, including five partners, who had previously been at Akerman. In April, Norton Rose Fulbright announced the hiring of an 11-lawyer group, including four partners, from Minneapolis litigation boutique Blackwell Burke.

The benefits of a group move are increasingly compelling to both firms and individual partners. At the most basic level, hiring a group of partners gives a firm more bang for the buck. Why settle for one book of business when you can get several? Of course, not all partners are equally valuable, and before hiring a group, a firm will need to become comfortable that each potential partner meets its bar. But broadly speaking, the more partners the firm can hire, the more incremental business it stands to gain.

From a partner perspective, making a lateral move as a group eases the challenge of integration, facilitates client transitions, and strengthens confidence that the new firm will stand by the partner even in more challenging times.

Easier Lateral Partner Integration

Although cultural fit is typically a factor that both firms and lateral candidates take care to assess when discussing a potential lateral move, no two firms are perfectly alike, and integrating into the culture of a new firm can be a challenge. Having some familiar faces around tends to help — after all, it’s a good bet that a group that chooses to move together has an existing successful working relationship. It is easier to integrate a “working group” into the firm’s culture than to integrate lawyers individually: instead of starting afresh with entirely new colleagues, attorneys who arrive in a group may be able to keep many of their existing teams intact.

The lateral partner questionnaires of the partners in the group can be an especially useful tool in curating the lateral partner integration plan. The questionnaires collectively set out a roadmap allowing for each partner (and the partner-to-be) in the group to benefit from the group’s bench strength.

The benefits of more rapid integration tend to be reflected in immediate business development success. The hiring firm is making a bet that a lateral partner will not only bring over existing business but will also use the new platform to attract new clients quickly. When a group of partners moves together, they benefit from immediate cohesion in the new firm setting. As with any move, there will be a learning curve as the newly-arrived partners figure out how to refine their marketing pitches to showcase the new firm’s distinctive capabilities. But with a solid base of longtime colleagues already in place, the refinement is more icing on the cake than a fundamental reworking of the partner’s story. Partners in this situation are poised to compete immediately and successfully for new clients.

Smoother Client Transitions

For both the hiring firm and the moving partner, a critical component of a successful lateral move is transitioning as much of the partner’s existing book of business as possible. That process can be a real test of the partner’s relationship with his or her clients. From a client’s point of view, the decision to move is considerably simpler if it is clear that the client’s matters will be handled at the new firm not just by the same lead partner but also by the same larger team of attorneys. That continuity of the “bench” is highly reassuring.

Long Term Strategic Support and Execution

When a law firm hires a group of partners, associates, and counsels, there is an implicit long-term commitment from the firm to support the integration of the group and the expansion of the group’s practice. A firm that brings in a group is presumably thinking beyond any individual member and is more likely to be intentional about creating a succession plan for the longevity of the practice. This degree of strategic support from the new firm can be especially critical when the group experiences a challenging period. Cutting loose an entire group is more of a black mark than releasing an individual partner in challenging times. So from an individual partner’s perspective, there is valuable security in joining as part of a larger group.

Featured, Market News, Newsletters, Partner Market, Team

Evolving Partnership Economics: The Equity and Non-Equity Models Are Starting to Blur

The “partner” title holds undeniable cachet in law firms. Elevation to the partnership is treated as a key professional milestone. But in the current law firm landscape, the fact that a lawyer has been designated a partner often conveys very little about the economic arrangement between that lawyer and the firm. A few firms have a single tier of partnership, but the majority have at least two. In some firms there are as many as four tiers, each with a different set of benefits and obligations.

The traditional equity model

In simpler times, partnership meant equity partnership. If you made partner, you received an ownership interest in your firm and the right to vote on firm governance matters. In exchange for that equity interest, you were required upon joining the partnership to contribute a lump sum of capital. The firm held onto your contribution for the duration of your partnership tenure, and upon your retirement from the partnership, you sold your interest back to the firm and reclaimed your capital. As for annual compensation, longer tenured partners typically took home a larger slice of the pie than the newly elevated, but no partner was paid a fixed salary. As the general fortunes of the firm rose or fell, all members of the partnership rode the wave together.

At a few major law firms the traditional model remains largely intact. Firms like Cravath and Debevoise are the purest examples: they continue to have only equity partners and to pay lockstep, seniority-based partner compensation. Firms such as Davis Polk have done away with lockstep compensation but still feature an all-equity partnership. However, firms committed to awarding equity to every partner comprise a shrinking minority of the legal industry.

The non-equity alternative

As early as the 1970s, some law firms began to introduce a bifurcated partnership model: there were equity partners and non-equity partners (sometimes described as income partners or non-share partners). Non-equity partners did not become owners of the firm, did not have full voting rights, and were not expected to contribute capital. Instead, they effectively were paid a salary. Becoming a non-equity partner meant you received the “partner” title but not the partner economics.

In some firms, the non-equity partnership tier was pitched as a stepping stone to equity partnership. The intermediate non-equity tier was a conceit designed to lengthen the track to true partnership while providing some social capital in the interim. It enabled lawyers who were effectively still senior associates, as traditionally defined, to market themselves externally as “partners.” Delaying the elevation of some senior associates to equity partnership by a couple of years may have been helpful for firm economics in the short term, but there is always the next generation of associates rising through the ranks. So the notion of non-equity partnership as simply a way station on the track to the equity tier was never especially credible, and before long, non-equity partnership became a common terminal status for many lawyers.

Blending equity and non-equity

The distinction between equity and non-equity partnership has become increasingly blurred at many firms. For example, several firms in the Am Law 100 now require non-equity partners to contribute capital. This is sometimes sold as a means of giving non-equity partners “skin in the firm game.” But in a world where only a small proportion of non-equity partners are likely to ascend to the equity ranks, one can understand why non-equity partners would be unenthusiastic about the capital contribution trend. They are being required to bear a burden of equity partnership with no guarantee of receiving the corresponding benefit.

Some firms are creating multiple partnership tiers (sometimes called compensation bands), with each tier featuring its own combination of rights and obligations that may not neatly correspond to either the equity or non-equity models. Perkins Coie has four tiers. The lowest tier is similar to the standard non-equity model, in that partners in that tier are paid a straight salary. The higher tiers are differentiated both in the level of compensation offered and in the voting rights afforded to the partners in the tier.

As the economic models of partnership have grown increasingly complex and differentiated, so have the implications for current and potential partners. In our next installment, we will explain how non-equity partnership can be a superior option for lawyers in certain scenarios.