When De-Equitization Costs More Than It Saves


The de-equitization phenomenon will likely continue even after the pain of recession subsides for law firms. The objective of de-equitization is to improve the financial leverage of the firm by adjusting the staffing levels that are critical cost factors for serving a client. For example; are two senior lawyers, each with high hourly rates and likely with personal assistants, necessary to handle a client's work? Can the firm involve an associate, or even a paralegal, and get by with one senior partner? If so, then the superfluous partner is a candidate for de-equitization, as the firm takes the rational business step of improving its leverage and reducing cash outflow.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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