Some of Pennsylvania’s largest law firms are reorganizing their practices into industry-targeted groups to address the recession anxieties and opportunities of their largest institutional clients, local firm leaders said in recent interviews.
Ballard Spahr went public last week with a “distressed assets and opportunities” group, while Duane Morris, which has made an effort to increase its energy clientele in 2022, now seeks to cross-sell real estate and environmental legal counsel to energy clients, who Leaders at the firm say are increasingly interested in the divesting of property assets.
These kinds of go-to market strategies are another example of how Big Law firms seek to grow their market share by reflecting the boom-and-bust business cycles of their most profitable institutional clients. In other words, after 2021’s unprecedented levels of demand for corporate and transactional legal services, restructuring lawyers’ long-awaited time to shine could be nearing.
“Transactional practices were hot for the last two years and we’re adjusting now,” said Matthew Summers, who co-leads Ballard’s recently formed group with two other partners and serves as co-leader of the firm’s bankruptcy and restructuring group. “Now that the market is shifting in another direction, we have a team internally ready to go to work on these other distressed-type matters.”
A Ballard Spahr spokesperson said the recently formed group currently includes 24 attorneys from four departments: finance, business and transactions, real estate, and litigation. And the number of affiliated lawyers continues to grow.
But don’t take firms’ internal reorganization as a prognostication that the economy is careening toward a 2008-type of doomsday, said Dominic J. De Simone, Ballard Spahr’s finance co-chair and one of the other leaders of the firm’s newly formed group . Nor does it mean that all the firm’s clients are struggling.
De Simone said the group’s aim, in part, is to help clients take advantage of current economic conditions: a “tremendous” amount of capital on the sidelines, cooling of deal valuations and an anticipated uptick in troubled loan sales. This is where the “opportunities” part of the group’s moniker comes into play, lawyers in the group said.
“From our perspective, it’s hard to imagine a client that somehow isn’t having to think about the changing business environment from what it has been for the last eight or 10 years,” De Simone said. “There are a lot of changes and a lot of industries and companies are being impacted by those changes.”
Law firms have come a long way from dividing their law practices between the conventional categories of corporate and litigation practices. Nowadays, it’s more en vogue for a big firm to sort its lawyers into industry groups that reflect their most profitable clients’ businesses, instead of departments with opaque terminology more familiar to fellow members of the bar.
“We didn’t split the atom when it came to industry focus,” said Matt Taylor, CEO of Duane Morris. “There have been certain venture capital and investment firms that had industry-focused strategies long before law firms. We’re not the first professional services firm to do this but we’re on it in a very good time when it’s becoming more popular.”
Duane Morris reorganized its practices in an industry-focused direction in 2018 as leadership changed hands to the current CEO and vice chair. Firm leaders said the go-to market strategy has been organized around industry groups that bring in the most revenue, citing financial services and health and life sciences at the top of that list.
“We recognized that the better part of client business fell into one of these industry areas,” said Thomas G. Servodidio, the firm’s vice chair. “They are all developing business plans and measuring performance against business plans. By putting our expertise together, like IP lawyers and employment lawyers, we’re able to provide the full service for that client in that industry area.”
Large law firms began to reorganize into industry-targeted lawyer groups in the years leading up to the financial crisis of 2008, said Beth Cuzzone, a global practice group leader at legal software company Intapp, who pointed to the creation of Goodwin Procter’s resource hub for companies looking to go public as a historical marker.
At the time, Cuzzone said firm leaders sought to cater to booming industries of technology and finance, with packaged legal services in IP, financing and more general business consulting. The thinking among law firm leaders, Cuzzone said, was to align their practice’s business cycle with the ebbs and flows of their most rain-making clients.
“Then they started following them through to distressed assets when all of these traditional funding sources put their money on the sidelines,” she said. “Law firms helped clients find sources of distressed funding; all of those things were packaged together to follow the life cycle of the company.”
Large law firms have since managed to stay profitable in good economic times and bad ones. Why? Because clients turn to their lawyers for transactional legal support to take advantage of favorable economic conditions and for litigation and restructuring legal services in a less favorable economy, Cuzzone said.
“What I’ve seen through the last several downturns is law firms fare well because when you have a downturn, you have uncertainty, and when you have uncertainty, you turn to your law firms,” she said. “Law firms have gotten good at helping clients with their business through the ups and downs. I think that’s driving some of the services that firms are starting to go to the market with.”