Not long ago, California was among the hottest destinations for some of the country’s most profitable law firms.
Lateral partner hiring has cooled across Big Law since a mad scramble for talent in the pandemic era, when rock-bottom interest rates spurred record-setting dealmaking.
A specific pocket of lateral hiring has taken one of the biggest hits: The number of partners hired in California by the 25 most profitable firms. Those firms are on pace to add 27% fewer partners over the past two years, compared to the two-year period that preceded it, according to data from Leopard Solutions.
The remainder of the Am Law 100 hasn’t cooled on California: Hiring in the Golden State among the 75 other firms is on track to tick up over the past two years, Leopard data show.There’s a handful of explanations for the California hiring decline among top-profit firms. They range from a busted market for tech deals to what recruiters say is a relatively small pool of high-impact partners.
“For the average Am Law 25 firm that’s opened up in Los Angeles and Northern California, there’s only so much hiring to do for the top talent,” said Divya Bala, founder of boutique legal recruiting firm Avance Partner Search.
California’s tech startup market has been rocked by high interest rates. Deal activity here is down significantly, which could cause firms to pause investments in the sector.
A total of 18 law firms each advised on at least 100 deals involving a California company in 2021 through 2022. In the time since, only five firms have worked on 100 deals or more, according to data compiled by Bloomberg. Such California M&A deals in the past two years fell by about 45% on average at the 10 busiest law firms compared to the 2021-2022 period. Most of those firms are among the 25 most profitable.Much of the strategic, growth-focused hiring in Northern California has stopped, said Jon Truster, a partner at legal search firm Macrae. Many moves were the result of partners departing firms where there wasn’t enough work, he said.
“While this hasn’t been a devastating slowdown, it’s gone on for a long time,” Truster said. “So, a lot of the hires that were made, certainly not all, have been based on … people feeling unsettled in their current roles.”
The most profitable firms have also slowed partner recruiting in New York, but not as drastically. They’re on pace to hire 9% fewer partners in the past two years compared to 2021 through 2022. The other 75 firms have experienced the same decline over that time.
Some of the largest firms spent heavily to dislodge high-end partners in San Francisco and Silicon Valley during the pandemic era. Paul Weiss, Cleary Gottlieb, and Debevoise & Plimpton were among the firms entering those markets between 2020 and 2021.
Willkie also launched its LA office in 2021. The outpost was the fastest-growing office in California among the high-profit firms from 2021 to 2022, according to Leopard data. The firm added 23 partners to the office during that period.
Those four firms have continued to expand their California offerings. Paul Weiss opened in LA, while Cleary hired an ex-Cooley trial partner, and Debevoise added at least three lateral partners. Willkie’s LA office now has about 35 partners, according to its website.
Weil Gotshal this summer opened offices in LA and San Francisco, luring two Latham & Watkins private equity partners in the process. Sidley Austin over the summer opened a San Diego office, staffed by lawyers already at the firm, and earlier this week hired a former Latham litigator in Los Angeles.
Only five of the top 25 firms by profits per partner hired more partners from 2023 through mid-October than they did from 2021 through 2022, according to Leopard data. Those firms are Paul Hastings, Debevoise, Simpson Thacher, Weil, and Skadden.
Big Law’s most profitable players are expected to keep their focus on New York, the country’s largest and most competitive legal market.
“You can count on two or three hands the partners with a $30 million-plus practice in one of those cities in California,” Bala said. “But in New York, there’s just so many more of those people. And that’s what the Am Law 25 will be looking for.”
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