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A silver lining for law firms?

January 8, 2009

Last year wasn’t so bad for lawyers, for, as Julie MacIntosh writes in the FT, “Law firms were forced to get creative as banks scrambled to find novel ways to raise capital, dozens of parties sued each other over broken deals, and others wielded air-tight contracts as blunt instruments in order to get things done.”

This was good news for corporate lawyers, a breed which tends to toil quietly rather than with the brashness of, say, the typical litigator. MacIntosh again: “As dealmakers have focused recently on the intricate language of merger and credit agreements, corporate lawyers have stolen some of the spotlight usually reserved for investment bankers, buy-out investors and hedge fund managers.”

So far, so good – for corporate lawyers, at least. But 2009 isn’t looking so positive, “as the market distress that spurred last year’s frenzied bank deals cools from a boil to a simmer.” Or, as one global law firm head, speaking of bankers’ ability to pull in fees, puts it: “We definitely feed at the same trough.”

Wall Street firms recognise that they currently have more people at work than are actually working, but appear to be adopting a ‘grin and bear it’ approach, looking out for the eventual upturn and redeploying staff where possible in the meantime. The redeployment is to areas that are expected to be busy – restructuring, asset divestiture and bankruptcy. “That clearly will be the most vibrant piece of business, along with litigation in general that arises out of any sharp downturn in the financial markets,” says Robert Sheehan, executive partner of Skadden, Arps.

Does every cloud have a silver lining? Perhaps. Indeed, MacIntosh uses the phrase herself: “A silver lining will be bankruptcy and restructuring, where legal fees look poised to balloon this year.”