welcome back to the Big Law Business Column about the changing legal market written by me, Roy Strom. Today, we take a look at what it takes to crack the high-end, lucrative practice of bankruptcy. Register to receive this column in your inbox on Thursday mornings.
Big law firms are tightening their bankruptcy practices as the odds of a recession increase.
The top 100 firms hired nearly 120 restructuring lawyers in the second quarter, more than in any other period in the past two years, when large bankruptcies hit record lows, data from the law firm and credit analysis company show. Attorneys Firm Prospects.
Paul Hastings accounted for a large part of the hiring, as he attracted more than 40 attorneys from Stroock & Stroock & Lavan.
Some of these firms are bringing in restructuring attorneys who handle creditor work as a hedge against a down economy.
But at least one, Sidley Austin, is taking on the toughest task in the Big Law bankruptcy business. He is hiring to represent big companies in bankruptcy, a business that now goes to only a select few rivals.
Just three firms, Kirkland & Ellis, Weil Gotshal & Manges, and Skadden, Arps, Slate, Meagher & Flom, have controlled that top end of restructuring practice for more than three decades.
At least one of those firms represented the largest Chapter 11 filers in 26 of the past 31 years, according to a database compiled by UCLA and law professor Lynn LoPucki.
Kirkland’s practice has been the fastest growing in the past decade, culminating in 2020 when the firm advised on 23 of the 56 largest bankruptcies, the database shows.
With so few firms controlling the top end of the practice, is there hope for new rivals to rise to the top of the Big Law bankruptcy practice?
“It takes a long time, but it can be done,” said Sharon Garb, managing director of recruitment firm Major Lindsey & Africa. “The first step is to get a credible group leader. It’s a risk, but the rest can follow after you have that.”
Sidley Austin is giving that push.
Last week, the firm hired Kirkland & Ellis partner Stephen Hessler, who has worked on several high-profile cases and led Kirkland’s work for bankrupt telecommunications company Frontier Communications in 2020. The case generated more than $30 million in fees. . He will serve as Sidley’s global restructuring chairman.
Hessler and Sidley president Yvette Ostolaza said the firm has other hires waiting to be announced as it plans a strategy to become a go-to firm for struggling large companies. Sidley already has a restructuring practice consisting of about 50 lawyers.
“It’s a huge goal for all of us at Sidley to be among the first choices for representation from the company side,” Hessler said in an interview. “And given our client base, not only on the private equity side but also in the public company environment, we think we’re incredibly well positioned to capture our share of that work.”
A great private equity practice is indeed crucial to cracking debtor-side practice, Garb said.
So are great teams of litigators, tax attorneys, and strong relationships with board members, often forged through executive compensation practices or shareholder activism advocacy, a practice Sidley led during the first half of the year. .
“They have clearly indicated that they want to grow this, and if they can get some of that work, it could be shared,” Garb said. “It depends on how loyal these patron clients are to Sidley. That will be the question.”
Other firms have employed Sidley’s strategy of attracting a partner from a major restructuring practice in hopes of replicating that firm’s success.
Cravath Swaine & Moore in 2007 made a rare side hire by bringing in former Skadden partner Richard Levin, who had helped write the 1978 Federal Bankruptcy Code.
Latham & Watkins in 2009 hired Skadden’s Jan Baker, who said at the time that turning Latham into a perennial leader in the mold of Weil or Kirkland could take 10 years.
Baker retired in 2017, and a year later, the firm hired former O’Melveny & Myers partner George Davis (who started at Weil) to co-head its bankruptcy practice. In 2019, Latham led the LoPucki database with four debtor-side representations along with Weil.
Paul Weiss in 2018 hired former Kirkland partner Paul Basta, who represents Revlon Inc. in its Chapter 11 bankruptcy filing last month.
A court filing of that case provides clues as to why the hard-to-crack practice remains so appealing to managing partners. Basta lists his hourly billing rate at $2,025, among the highest in Big Law. The firm had earned nearly $8.5 million in fees in just over a month of working on the case.
Jon Truster, a New York-based law firm recruiter at Macrae Legal, said more firms are calling about the availability of bankruptcy partners.
How successful can they hope to be, given that it takes years to rise to the top of the bankruptcy market?
“It’s hard to know if cases will be more spread out than they have been in the last 10 years,” Truster said. It’s also unclear whether “the trend of Kirkland and Weil being the debtor’s lead attorney is changing.”
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About Sidley: Sidley was also in the news this week after a group of Texas Republican lawmakers threatened to penalize the firm for agreeing to pay for out-of-state abortions. The White House criticized the effort as the kind of “extreme proposals” President Joe Biden warned about in the wake of the Supreme Court overturning Roe v. Wade, reported Meghan Tribe and Courtney Rozen.
On Twitter and Elon Musk: Twitter sued Musk over his efforts to cancel a deal to buy the company, and attorneys at Wachtell Lipton Rosen & Katz said the Delaware Chancery Court case may be resolved in just four days, with hopes of starting on the 19th. September, reported Jef Feeley for Bloomberg. I previously reported that the case could result in legal fees in the tens of millions for the multiple large law firms involved.
About Big Law and Colorado: Big law firms are flocking to Denver as technology and life sciences companies receive record amounts of venture capital funding, reports Sam Skolnik. Firms such as Crowell & Moring and Wilson Sonsini have recently entered the area.
That’s all for this week! Thanks for reading and please send me your thoughts, criticism and advice.