Firms compete for law partners to fill gaps and boost expertise

It is not necessarily all about money when partners move between law firms. Often the lure is a potentially more satisfying career.

There is a growing trend for partners to move in teams from one firm to another. It makes for a ‘softer’ landing and less disruption.

Partner moves have increased steadily over the last three years. Prior to that the market saw a drop from the most recent high of 273 moves in financial year 2018 to 197 in financial year 2020. This recovery is indicative of the unforeseen successful financial results of major firms since the pandemic outbreak.

Put simply: law firms have the balance sheets to be acquisitive.

While there is competition for talent at all levels, it is especially intense for partners, but money is just one of the reasons that partners move firms and some moves involve bigger financial uplifts than others. A number of larger firms guarantee — or fix — the level of remuneration for a period of time for incoming lateral hires. In these cases, the guarantee is usually set for two or three years.

However, with firms having some of their most successful years financially over the last five years, many have restructured their remuneration systems. This means partners are likely to be doing well already, based on merit, so unhappiness with remuneration has receded as a push factor in recent years.

Another push factor is the style of management of a particular firm. Where partners do not agree with the way management runs things, this can manifest in a perceived lack of leadership and direction and create discontent.

In addition, where there is a change of leadership of a firm, there is often fallout, either from partners who stood for leadership positions unsuccessfully, or where partners were allied to a leadership candidate who failed to gain office. That can be a significant incentive to make radical change.

Dominic Peacock.

Another reason partners cite for moving is where conflicts with clients become significant obstacles to partners acting for certain clients, often those with which a certain partner has long standing relationships.

One final interesting fallout of the Covid pandemic years is that partners (often in lengthy tenures at their existing firms) have had time for self-reflection, and realised they wish to have a change of scenery and join a different firm.

In this scenario, they often cite the necessity of a new opportunity offering something with a point of difference to make it compelling.

We have also seen a significant flight to brand in recent years, often the case in times of uncertainty, when previously mid-tier firms had a period of unprecedented growth, often by hiring from firms perceived to be above them in the law firm hierarchy.

However, the major players in the last six to 12 months have been the larger firms who have the deepest pockets and are coming off record results driven by a boom in mergers and acquisitions activity in Australia since the pandemic with more than $85 billion worth of deals announced to date.

Companies revised their post-pandemic strategies, looking for inorganic ways to accelerate growth.

Another factor influencing the trend for increased lateral partner recruitment is where firms are being strategic in their hiring around certain practice areas, which in turn is driven by client demand and also the direction of the market generally.

Examples are environmental, social and governance risk; energy transition and renewables; cyber, data and privacy and financial services, including fintech.

The trend towards team acquisitions also continues to shape hiring activity and some of the most recent significant moves have involved a group of partners coming from one firm.

While hiring strategically, firms have also been more focused on succession planning and filling gaps from both a seniority level (of lawyers) and a practice group perspective. Firms have been supplementing home grown talent and organic growth with lateral hires, often in a very targeted manner.

Dominic Peacock is a partner at Eaton Strategy + Search.