Ignoring
the ballyhoo about “The New Normal” and the debate about whether this is BigLaw’s
end of days, most seem to agree that the US legal market is overcrowded. It
suffers from too many lawyers and law firms.
Like many
aspects of our industry, market overcrowding is not new. For years, we have
watched some BigLaw firms stagger around zombie-like and refuse to die. They decline
in vigor and resort to bottom feeding and submitting low bids on every job in
town. Some of these ZombieLaws are highly leveraged affairs with shrunken
equity partner castes and even smaller star chambers that oversee closed
compensation systems. Other ZombieLaws are over-leveraged and offer a warm bunk
to lawyers with small books of business whom no one else will hire.
The disappearance
of five such firms would blow fresh wind under the wings of fifty nearby firms
and lift them higher. I blogged about this in 2008 when I predicted Bay Area firms
would benefit from Thelen’s and Heller’s demises. (See "It's Hard to Accept Intelligence That Breaks Your Heart.") Since then, the Boston and Atlanta legal markets have also benefitted
from regional right-sizing. The New York City market is right-sizing now,
albeit slowly. In several other overcrowded markets, a handful of firms are feeling
and causing each other’s pain.
If I had
more resources right now, I would create two online prediction markets. (See Intrade
for examples of such markets.) The first market would solicit bets on which US
law firms will dissolve by December 31,
2013. The second one would solicit bets on which firms will merge with one or more firms by the end
of the year. On January 1, 2014, I would close those markets, open two new ones,
and start all over again.
If these
markets worked well—and I believe they would, by crowd-sourcing intelligence anonymously
from knowledgeable persons who will never go on the record—they would quickly and
accurately identify the weakest firms. And, yes, these prediction markets might
hasten their deaths.
What a
mean thing to do, right? Wrong. It would be a kind thing to do. Depending on
your viewpoint, of course.
So how
about it—would you place anonymous bets on these two markets? Which geographic, practice and industry legal
markets do you see as the most crowded? Which firms would you bet will dissolve
or merge by December 31, 2013?
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1 comment:
Very good post, as usual. Curious to see if we took the AmLaw 200 composite revenue, and factored in the firms that merged or dissolved, to see the level of revenue increase in the sector. I suspect that the increase is quite small, confirming your thesis that to a large degree, there's a zero sum game going on.
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