Corporate M&A work takes a nosedive on local, national levels
by Dan Heilman Associate Editor
When word got out at the end of last month that the Chicago-based firm of Sonnenschein Nath & Rosenthal had laid off 37 lawyers and 87 other employees in response to the receding economy, the natural inclination for the leaders of Twin Cities law firms was to ask: Could it happen here?
In fact, that was the primary topic of a recent informal roundtable of local managing partners, according to Bassford Remele managing partner Mark Whitmore.
“Reaction was varied, but it’s on everyone’s mind,” Whitmore said. “Firms with a strong transactional practice are having to find other, stronger areas.”
“M&A is one of the most important parts of our firm, and deal work, from all accounts I’ve heard, is dead in this city,” said David Potter, chair at Oppenheimer Wolff & Donnelly. “This is certainly not the only time we’ve seen a slowdown of deal work in the M&A area, but it’s certainly one of the few times where I’ve seen it this slow.”
Cooper Ashley, chair at Maslon Edelman Borman and Brand, has also witnessed a noticeable decline in the amount of corporate work available. “Some of the venture capital and other financing has dried up, and people are looking more closely at deals before they do them,” he explained.
Nevertheless, several local firms say they are reacting to the slack economy like a rubber raft: Push down on one part, and another part pops up. For Oppenheimer and some other firms, the saving grace until things turn around has been the business litigation work.
(Some of the region’s biggest firms — including Dorsey & Whitney and Faegre & Benson — declined to participate in this article.)
Twin Cities less affected
The Twin Cities legal community has long prided itself on its economic stability, and it’s getting a stern test during the current downturn. But observers both inside and outside the walls of local firms say this market, while not necessarily recession-proof, was built to withstand tough times.
“Minneapolis is probably less affected than the capital markets, because we don’t do as many big, big deals in Minnesota as they do in New York or London, or even in Chicago or L.A.,” said Potter. “Bigger firms just have a much more boom-bust nature to them.”
“The strength of this market is in part due to having a broad and diverse corporate base in the Twin Cities,” said Tim Mahoney, COO of legal consulting firm The Esquire Group, a Special Counsel Company. “But more important, it’s based on good planning by law firms. Most firms have been pretty conservative in their hiring and growth plans. They haven’t been caught with a lot of extra people.”
No firms gave any indications that they’re planning cutbacks; in fact, few are even considering curtailing their regular hiring routine.
“We’ve recently added some laterals, and we’re welcoming our summer associates,” said Ashley. “We don’t anticipate any lawyer layoffs.”
Ashley said one reason Maslon’s hiring patterns have remained steady is that the firm doesn’t set targets for the number of attorneys it should employ. “We grow as we need to,” he said.
Litigation up
Firms such as Bassford Remele, whose bread and butter is litigation, have little reason to fear tough economic times by the very nature of their practice focus, according to Whitmore.
“Historically, during down economic times, litigation tends to go up,” he said. “You might see the marginal employment case more frequently. Somebody loses their job, and they might more readily decide that they were discriminated against. Also, somebody may be more inclined to make a personal injury claim.”
Potter said that overall, Oppenheimer is beating its revenue goals for the year, because even though its transactional numbers are down, other areas are “really on fire.”
“We’re probably as busy as we’ve been in the last 10 years when it comes to litigation,” he said. “Also strong is our work in medical technology, and in financial services, in areas such as hedge funds. There’s enough activity in general in that area, and it’s a rapidly expanding area in our firm.”
Even though things are generally going well, managing partners of Twin Cities firms said it still pays to be cautious when it comes to keeping vendor contracts, rent and other non-personnel expenses under control.
“You have to be more careful managing, because there’s so much uncertainty out there,” said Whitmore. “You might also see a slowdown in turnaround of invoices. Clients that used to pay in 45 days might now wait 65 days. That always has the potential to put a crunch on law firms, just in terms of managing receivables, because the work still has to be done.”
