The American Lawyer‘s cover story this month is about
how the corporate/transactional deal market "is
back," five years
after it went away. Equity offerings nearly tripled in value
in 2004 (to $43-billion, famously including Google) and an estimated
$100-billion of uninvested capital is also sloshing around, mostly
in private equity funds.
But for my money the story behind the story is more interesting—after
all, law firms, even members of the AmLaw 10, can hardly take credit
for the health of the transactional marketplace—and on this
score Aric Press, editor-in-chief of "TAL," hits it out
of the park. Aric notes that we’re in the midst of conference
and roundtable season, where license is distributed far and wide
to opine that enormous changes are afoot in the profession and
that things are essentially unchanged, and it is safe to say that
"both sentiments are exactly correct."
Huh? Yes indeed, because two different worlds are being
discussed just as clients divide their legal work in binary fashion:
- First there are the deals, cases, and issues where price is
no object; - And then there’s everything else.
While it is devoutly to be wished to live in the exclusive precincts
of Column A, as Aric slyly observes, unless you’re located on the
corner of Sixth Avenue and 52nd Street, you’d be lucky to get
40-60% of your revenue from there.* Law firm management
essentially doesn’t have much of a challenge living in the land
of Column A, since revenue and gross margins are whatever
the market will bear. But things get interesting—at
least if you believe firm managers should earn their salaries—when
we come to Column B.
What, indeed, is to be done? If partners believe that their
exquisitely honed skills of issue-parsing and Jesuitical dissection
can’t go slumming in the land of "just producing the work," you
may need to rethink things. As Aric puts it:
"You could just offer discounts. But really, that’s so
2003. What the clients seem to be saying is that instead of knocking
20 percent off the rate card, they want you to make a business
calculation and set a price. And then they want you to manage the
cases to it."
I can’t speak for you, but my reaction to this was, "Bring it
on!" What
could be a stronger test of one’s genuine business acumen as a lawyer
(or practice group manager, or Executive Director, etc.) than to
engage in an economically-driven discussion with an important client
about what it really might cost to deal with subset X of their legal
portfolio? Isn’t that more intellectually engaging (not to
mention more fun) than multiplying [rate] x [hours]?
*For the non-cognoscenti (or just the forgetful), that hallowed
corner is HQ of Wachtel.
