Mark Jungers Discusses 2016 BigLaw Lateral Moves

BigLaw Lateral Partner Moves Fell By 7% In 2016

Law360, New York (March 14, 2017, 11:12 AM EDT) — Lateral partner movement between large U.S. law firms fell by 7 percent in 2016 compared to the year before, data collected by Law360 shows, a drop-off experts say was likely the result of uncertainty surrounding the U.S. presidential election.

New York was one of the most active regions of lateral law firm partner hiring among large U.S. law firms in 2016. (AP)

There were at least 2,082 lateral partner moves nationwide last year, down by nearly 200 from 2,245 the year before, according to data Law360 collected from the hiring announcements of the 200 largest U.S.-based law firms. But experts say 2016 was likely a blip in an otherwise hot lateral market that has remained strong over the past several years.

That blip was likely the result of uncertainty among law firm leaders over how the November U.S. presidential election would unfold and what direction the government and country would take as a result, as is often the case in election years, according to Charles Volkert, executive managing director of Robert Half Legal.

“There are certain law firms that looked to hire in areas they felt wouldn’t be impacted by a different administration one direction or the other and others that put hiring on hold to see which administration would be elected,” Volkert said, pointing to a quick rebound in the first quarter of 2017. “We have seen a significant increase in demand for highly experienced candidates as we moved through the first quarter of the year.”

As of the beginning of February, Law360’s most recent review of lateral data, there had already been 350 lateral partner moves, more than half of the 677 the industry saw in the first three months of 2016 and of its 2015 figure of 685 — harbinger of a busy first quarter for 2017.

One recruiter, Larry Watanabe of Watanabe Nason & Schwartz, said his year so far has been “frantic,” with lateral partner placement so busy he can barely keep up with it, working 14-hour days.

According to Watanabe, the election, coupled with financial uncertainty brought on by Britain’s exit from the European Union and industrywide associate salary increases all may have led to the hesitance to hire last year.

The associate salary increases, which were spearheaded by Cravath Swaine & Moore LLP in June, likely impacted law firms’ bottom lines and may have made them more reluctant to spend the capital necessary to bring on new laterals in 2016, Watanabe said.

“We’re going to see a number of firms missing their budget numbers,” he explained. “Lateral partner hiring is very risky and it is very costly. Any year that you hire a new lateral, most firms are really hoping to break even” due to overhead, delayed collections on billing, and headhunter fees.

Ken Young, co-founder of Young Mayden legal search and recruiting firm, said he observed law firms take a heavier hand last year in performing due diligence on potential laterals, weeding out those that weren’t a perfect fit.

“I do think law firms are being more careful about laterals. The due diligence and the scrutiny have without a doubt increased,” Young said. “Everybody wants team players who will make good partners and who have very strong books of business that can keep other lawyers busy. But those people don’t grow on trees.

Mark Jungers, co-founder of global legal recruiting firm Lippman Jungers LLC, said he too has seen that presidential elections can drag down lateral movement for a short period of time as law firms wait to see how the political climate will unfold, while noting that his agency was busy throughout 2016.

“I do think the election created some uncertainty in the market and that probably harmed the volume of lateral moves,” he said.

One area that varied this past year from previous elections, according to Jungers, was the movement of government lawyers back into private practice following the election.

“Many of the law firms were, I believe, scared of hiring folks that would have no connections to the new administration, and we haven’t seen that before,” he said.

Additionally, Obama administration attorneys involved in the government’s crackdown on financial institutions have had a hard time finding a home in private practice, according to Jungers.

“Those people had a very, very difficult time going to law firms. We heard several stories of clients making it clear to their law firm service providers that all names needed to get cleared by them for hires out of the government. They did not appreciate how the government had been treating the big banks, and some are sensing that it was payback time,” he said.

Jungers forecasted a rebound in 2017, as did a number of other recruiters.

“I think it will [pick back up] once the dust settles a little,” he said. “It’s probably a little dustier now than typically. If you look at the stock market and read the business tea leaves, people are feeling okay about this. There is certainly still a level of uncertainty that is making people uncomfortable, but I think companies are feeling okay about how things will go for them.”

Certain practice areas and regions were more active in terms of lateral movement last year than others. The top three most active regions were New York, Washington, D.C., and California, with lateral movement in New York actually ticking up between 2015 and 2016 with small downturns in the latter two regions year-on-year.

In terms of practice areas, private equity partners and those who focus their practice on both private equity and M&A were on fire last year, taking the No. 1 and No. 2 top spots in terms of the highest number of lateral moves, and both areas saw substantial increases from 2015.

Other practices that saw increases in lateral movement last year include international arbitration, banking, government contracts, privacy, bankruptcy, project finance and securities.

Watanabe remarked that private equity lateral movement has been very hot recently in his experience, particularly in the technology space.

Jungers called the private equity sector “the gift that keeps on giving.”

“There’s just unlimited work right now and it’s also predictable,” he said. “Attorney who represent a major fund, they could tell you what the pipeline looks like from start to close of that fund. There’s nothing else like that in law.”

“Everybody wants as much of it as they can get and so when people become available, or there are enough recruiters chirping in the ears of private equity partners, sometimes they get lured away because there is unlimited demand for them,” Jungers added.

By Aebra Coe

–Editing by Rebecca Flanagan and Emily Kokoll.

Methodology: Lateral data is based on partner hires announced by the 200 largest U.S.-based firms by domestic attorney headcount, including vereins with a U.S. member.