Welcome to the Party

by LeClairRyan

legal_market_crashI read with great interest Sir Nigel Knowles’ article in The Lawyer (link), a publication concentrated on the UK legal market, entitled “The end of the legal market as we know it is nigh”.  On behalf of those who have been talking about this for some time, I would like to welcome Sir Nigel to the party.  By no means am I intending to pick on Mr. Knowles, who is listed as the global co-chief executive of legal monolith DLA Piper.  However, I both agree with his broad conclusion (in concept, if not in scope) and disagree with the majority of the rest of his article.

In the brief article, the ultimate conclusion is that the legal market is lined up for massive change (agree) as the industry “accelerat[es] towards its judgment day” (well, hyperbole never, ever, ever, ever hurt anyone, ever).  However, he notes that “all is not doom and gloom”, as there will be great opportunity for the firms that survive.  Other than the factors that have been pointed out in this and countless other blog posts, seminars, and the occasional screaming from the rooftops, this is the extent of the article that seems to be in touch with most of the legal community.

The issue is a matter of perspective.  Sitting as the global co-chair of the largest law firm in the world, the perspective that everyone will have to go global or go niche is as understandable as it is out of touch.  If you are operating in one of the, say, 10 largest law firms in the world, Sir Nigel’s article is for you, but this post is probably not.  The race for the ultra-profitable work has become narrower and narrower (see here).  As a consequence, those in line for it need to be where that work is.  Within the US, that’s pretty simple.  If you have offices in New York, DC, and Los Angeles, you can get to wherever that work is in short order.  If you don’t, you probably still can.  Globally, it becomes slightly more challenging as the emerging markets in Africa and Asia join the stalwarts that are already in place, and those trying to hang on in what is an increasingly challenging and fragmented global market.

For the rest of the community (yes, I still hang on to calling it a community, because it still is at the granular level), the pyramid of work that is available will continue to be there, but the ability to meet the needs and desire of the clients that own that pyramid will similarly continue to grow more and more challenging.  Demands from clients are increasing.  The willingness of clients to pay exorbitant hourly rates (remember when $1,000/hour was a glass ceiling nobody would break?) or pay for the training of junior associates is waning, if not gone.  Clients have recognized that the administrative cost of having different lawyers all over the United States is low lying fruit when trying to cut costs.  (Sir Nigel points out that “consolidation is a certainty”…again, not news.)

wavesThe fact is that there are signs that the global recession is ending.  Economic indicators are positive, even if not strong, and the present and prospective clients are looking for ways to ride that wave.  That means increased corporate work, which inevitably leads to increased litigation about that corporate work.  Everything from commercial litigation to personal injury litigation tends to follow suit.  But it is not immediate.  Recall back to 2007-2008 when the global market crashed.  The legal industry is necessarily reactive and reactionary, and the real pain hit in 2010 and 2011.  Working out of such a crisis is no different.  Sir Nigel calls it a “stay of execution” that the major upheaval associated with the upward curve did not hit last year.  I think it is more the realities of the ever-trailing legal market.

Sir Nigel is right that major change is coming.  Consolidation and mergers will grow in the upcoming years, but that is not catastrophic.  It is the nature of the industry now.  Just like the development of new processes and systems to work a portfolio of legal work, there is a science to the ebb and flow of the industry.  History repeats…developing a plan to ride that wave is more essential now than ever, but only because those who do not plan will be ripped apart by those who do.

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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