Mark Jungers on Predictions for Biglaw in 2016 in Law 360

5 Predictions For BigLaw In 2016

Law360, New York (January 15, 2016, 9:27 PM EST) — The rarefied air occupied by BigLaw firms will see continued turbulence in 2016, as firms facing a competitive market seek out ways to keep their turf at the top of the heap.

Leading law firms will need to be aggressive in seeking out profit, whether by focusing on poaching talent from other firms or hunting for big bet-the-company cases, experts say. And every firm will grapple with an increasingly interconnected world that can mean fewer, but bigger, opportunities.

Here, Law360 takes a look at what 2016 has in store for BigLaw.

Growing Gaps at the Top

Law firms of all sizes will continue in 2016 to confront a relatively flat market that can often play out as a zero-sum game, experts say. In the year ahead, experts predict that the firms at the very top will start to split as some focusing on existing platforms are left behind by those pursuing aggressive growth strategies and global dominance.

“You’re going to see a group of BigLaw grow substantially and really take share, especially in litigation,” said Michael Rynowecer, founder of BTI Consulting. “Other law firms will wither.”

Rynowecer said the firms that race ahead will be “very aggressive” in bringing in partners and clients and will be investing more capital in highly focused practices as a way to set themselves apart.

Mark Jungers, founder of Lippman Jungers LLC, said some enormous firms like Skadden Arps Slate Meagher & Flom LLP or Latham & Watkins LLP may chose to focus instead on managing an already sprawling firm and international offices.

“But that does not mean that they’re withering in any way,” Jungers said. “Operating as a three- or four-thousand-lawyer law firm is a separate challenge.”

Another gap will open up, according to Marcie Borgal Shunk of LawVision, between firms that think strategically about their long-term profitability, including by hiring chief strategic officers or chief pricing officers, and those that don’t.

“That in my mind will be what starts to drive the dichotomy between those firms that are more successful and those that are less successful,” Shunk said.

Fewer Big Mergers

Acquisition activity between the largest firms will slow down in 2016, predicted Frank D’Amore, founder of Attorney Career Catalysts, saying he expects to see “fewer real large-firm-to-large-firm mergers” in the new year.

“They’re becoming harder and harder to consummate,” D’Amore said.

Large-scale mergers are more difficult to complete, he said, because of the wide range of conflicts they can open up and because they represent a major investment for both sides of the deal in terms of finances and managing risk.

Another major impediment to mergers among equals is the cost of combining offices in firms with a global presence, as the new organization finds itself saddled with duplicate leases in New York, Los Angeles, Paris and London, Jungers said.

“They all have offices in the same places,” Jungers said. “Doubling up on real estate in five or six cities is really expensive.”

But while BigLaw firms will shy away from complicated, pricey deals with rivals, D’Amore said, they will likely continue to search for merger and acquisition opportunities — just in a smaller sweet spot of midsize or smaller firms.

“The hunt for revenue for law firms is just relentless,” D’Amore said, and mergers will continue to be a quick way for firms to grow profits.

More Lateral Moves

While large firms turn away from big mergers, expect the market for lateral hires to heat up instead, experts say. BigLaw firms looking to gain new clients will have little difficulty poaching partners who are increasingly willing to make a move to greener pastures.

“BigLaw is under special pressure to grow. The bigger you get the harder it is to grow,” Rynowecer said. “If you can add productive people or people who can bring clients with them, that’s a good way to grow.”

Jill Huse, co-founder of consulting firm Society54, said that she expects lateral recruiting to continue to accelerate but that firms will need to focus on integrating those new hires.

“I think lateral recruiting is becoming the No. 1 strategy for all law firms,” Huse said. “What’s going to be important this year and next year is lateral integration. They’re still not doing a great job.”

Helping the trend, experts say, is a new willingness from partners to jump ship for better opportunities instead of spending their career at one firm.

“I think that with every year that passes partners become just a little more open to making a move,” Rynowecer said.

But as firms accommodate an influx of millennial associates who often have less firm loyalty than their older counterparts, lateral hiring will also become a strategy to ensure a firm can extract value from an associate who may stay for only five to seven years.

“For the regional and smaller firms, they recognize that law firm recruiting for first-year associates is not an ideal strategy,” Huse said. “An attorney right out of law school isn’t profitable for the first three or four years. You can bring in a lateral that has a book of business.”

Bigger Cases for Fewer Players

As companies expand across borders and take advantage of global supply chains, the risks of litigation have increased and “bet-the-company” suits will become more frequent, Rynowecer said.

“There’s plain more opportunities for things to go wrong,” he said. “You’re dealing with many more potential parties that have been wronged.”

That increase in costly litigation will prove a boon to the firms that can get it, Rynowecer said, while leaving the less lucky competitors in the dust and contributing to stratification among firms.

“The risk to the law firms is that they don’t get the bet-the-company matters,” he said.

Jungers agreed that demand for high-end commercial and trial capability is on the rise, adding that a paucity of high-caliber trial lawyers will allow firms with a trial reputation to stand out.

“There aren’t that many people who can try a massive case,” Jungers said, “There just aren’t.”

Huse said she has seen a rise in both major litigation and smaller cases, at the expense of firms looking to profit off a middle ground.

“I find it interesting that more and more litigation is being taken out of the middle,” Huse said. “More litigation is going to either boutiques or BigLaw.”

Contributing to the growing spread, Huse said, is that some companies are eager to use BigLaw firms for big cases to capitalize on name recognition, while some in-house counsel are increasingly turning to boutique firms for smaller matters.

“If it’s not bet-the-company stuff, in-house counsel are becoming more sophisticated at knowing these boutiques can do the same kind of thing,” she said.

Larger Roles for Younger Lawyers

Time marches inexorably forward, and firms are starting to feel the crunch as baby-boomer senior partners near retirement age and millennial associates move in.

“It’s a really interesting dynamic that’s happening right now,” Huse said. “You’ve got this younger generation that’s coming up and they’re getting to be equity status, and you’ve got this older guard that doesn’t want to let go.”

One of the most important challenges for firms in the next few years, Huse and Shunk both said, will be addressing succession planning to ensure clients and other firm business can be smoothly transferred from the old guard to the new.

“The younger generation is recognizing the need for succession planning,” Huse said. “They’re making their voices heard.”

Shunk said law firm leaders are realizing that their window to plan successful transitions is closing and that client relationships can be damaged by stalling.

“To the extent that clients are not addressing their succession plan, I suspect that that will drive a shake-up on the client side,” Shunk said. “I’ve had clients make comments such as ‘If you’re leaving two years to transition the relationship, that’s not enough.'”

Younger attorneys moving up the ranks have also been clamoring for more business development training, experts say, and firms will need to address the demand for better training in the coming year.

“I anticipate that we will see an uptick in more expansive programs around [business development training],” Shunk said. “The recognition that we need to be doing better with that is more pervasive.”

D’Amore said firms will have to stretch beyond training to accommodate millennials and younger lawyers, as the new generations are bringing a “sea change” by seeking more balance and flexibility with less focus on compensation.

“I think BigLaw is going to have to increasingly come to grips with the fact that the millennials are truly a different generation,” he said. “For the long-term viability of firms I think they’re going to have to come to grips with that and make some accommodations.”

By Carmen Germaine

–Editing by Jeremy Barker and Brian Baresch.