Skadden to Kirkland: another wheel falls off the big law model

Per the NYT (HT ATL)

David Fox and Daniel E. Wolf, two top partners at the New York law firm of Skadden, Arps, Slate, Meagher & Flom, have defected to Kirkland & Ellis in a move likely to send shockwaves through the Wall Street legal world.

* * * The loss of two noted partners, who together generated tens of millions of dollars in fees annually for Skadden, could signal a broader shift in the corporate legal landscape as lawyers at large full-service firms leave for more focused, profitable shops. Last year, Kirkland generated about $2.47 million in profit for each partner, a closely watched measurement, compared to $2.07 million in profits per partner at Skadden, according to The American Lawyer, an industry magazine.

* * *Kirkland bills itself as younger and more entrepreneurial than some of its long-established competitors, which also attracted Mr. Wolf and Mr. Fox. The firm is also more focused on specific profit-producing areas like M.& A. and bankruptcy, while bigger firms like Skadden, Jones Day, and Latham & Watkins offer a vast swath of legal services.

Yikes. What was this about Second City? A branch of a Chicago firm picking off senior partners of a premier NY firm?

I see this as another wheel falling off of the big firm model. Although Kirkland is hardly a “boutique,” the next step could be to M & A-specific shops. As I’ve said, the days when top lawyers can be adequately compensated out of the profits generated by legions of associates are ending.

This moving around from one law firm to another is just an intermediate step. The next step is to more radical versions of legal services delivery, including by firms financed with outside capital.

Comments

[Onlooker]

What are they going to do with the capital? And why does anyone think that the non-contingent fee law business is so scalable and profitable that it can provide the growth story and high rate of return demanded by equity?

[Vickie Pynchon]

outside capital? for law firms? YIKES!!! this would take a lot of convincing for this old lawyer.

[Doug Park]

Professor,
I find interesting your prediction regarding law firms financed by outside capital. Is that permissible under the current State Bar rules of most states? For example, California does not allow non-lawyers to have an ownership stake in law corporations. Would State Bar rules regarding ownership need to be revised? Of course, many firms take out bank loans.

Doug Park

[fusion]

>>the next step could be to M & A-specific shops>>
Wachtell? The one-stop v. boutique argument has been going on for a long time.

Just how much business David and Daniel generated, rather than getting due to Skadden connections generally, is not exactly clear.

Drawing vast conclusions from a single episode may be a mistake. Not too many years ago a Wachtell M&A partner moved to Latham, a move that signified little. Is this different?

[John]

Come on! Kirkland and Skadden are both "BigLaw." As you mention, Kirkland is not a boutique - it isn't even a midsize firm - its a massive firm in the AmLaw top ten. All this signifies is that Kirkland is doing better than Skadden (due to Kirkland's strong bankruptcy practice) and was able to poach a couple of solid partners by throwing $$ and security their way.