Risky business

Risky business

The new year brings an upsurge in risky business.

To hire a partner from another law firm is one of the riskiest decisions that lawyers and law firms make.  As we begin the new year we are already observing an upsurge in lateral recruiting and hiring of law firm partners. This is the time when partners who were disappointed by their profit distributions last year seriously consider moving to another firm. This is also the time when lateral recruiting becomes attractive to many law firms that want to expand their practices or client bases quickly.

Does the phrase instant gratification come to mind?

It is true that lateral recruiting of partners can be a very effective way for a law firm to jump-start growth in a desired direction. It is also true that for many law firm partners, moving to another firm may be the only realistic path to achieve their financial and professional goals.

Nonetheless, the risks are formidable.

This is why my colleagues and I advise law firms and partners to bring the same level of thorough strategic thought and attentive business due diligence to a lateral hiring as they would to a law firm merger.  This means:

  • Both parties should have clear, long-term strategic goals that they want to achieve.  These should be developed and examined early in the negotiations.
  • Both parties should be realistic about the opportunities. How realistic are the partner's financial aspirations at the new firm. How realistic is the firm's evaluation of the book of business that the new partner will bring to his or her new firm?
  • Consider the cultural fit. How comfortable will the partner be in the new firm?  From the firm's point of view, will the new partner fit into the firm's professional culture, or will he or she disrupt it?

Both parties should answer all of the questions and clarify all of the ambiguities before closing the deal. Do not assume that good intentions and "trust" will prevail and the problems will solve themselves.  They almost never do.

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