Welcome to the Big Law Business Column on the changing legal market written by me, Roy Strom. Good year! Today we take a look at a lockstep firm’s efforts to recruit lawyers in Silicon Valley. Register now to receive this column in your inbox on Thursday morning.
Among the companies competing for talent in the San Francisco Bay Area, Debevoise & Plimpton is the only one that still adheres to a strict compensation structure based on seniority.
Will this limit his ambitions?
Most companies have abandoned the strict foreclosure model, which distributes profits equally among partners based on seniority. They were forced to give themselves the flexibility to shell out the best talent.
It’s probably not a coincidence that soon after leaving the lockstep, many companies expanded into Northern California, where some of the top lawyers are making eight-figure salaries. Freshfields, Paul Weiss and Cleary Gottlieb are examples of this, and they have all been successful in recruiting local partners.
Debevoise first announced his business in Northern California in March and opened an office there in September.
The firm has imported more than a dozen New York attorneys to serve an existing roster of high profile clients, including Sequoia Capital, Lightspeed Venture Partners, PayPal Holdings Inc., Robinhood Markets, TPG, and Twitter Inc.
Debevoise has yet to do a side-hiring in the new market, although the partners say they are in advanced talks with potential hires and expect to announce something soon.
The effort is at least in part a referendum on how many partners still enjoy the perceived benefits of a lockstep culture. The number of members seems to be decreasing, but Debevoise is keen to find them.
âWe’re in no rush, but we want to grow aggressively,â said Michael Diz, co-chair of the M&A practice at Debevoise and co-CEO of the San Francisco office. âIt’s important that the lateral talent we bring is the right cultural fit. “
The recruiting effort has slowed due to the pandemic and the time it takes to explain a culture and compensation structure that is very different from other companies in Silicon Valley.
The firm’s foreclosure model presents a challenge in a market where the best M&A lawyers with their own clients are paid the most, recruiters and legal consultants said.
Silicon Valley partners develop relationships with start-ups and often stay with them for years. These relationships generate value in the sideways market. But this is not a game that companies are used to: they do not give credit to partners for having their own customers.
âThis is an emerging business market where partners can say, ‘This is my client,’ said Natasha Innocenti, a Northern California-based partner at recruiting firm Macrae. âThe premium here is on the M&A or the private equity partner because they have the connections. And other practices are often less paid.
Debevoise made its decision in Silicon Valley to provide services such as mergers and acquisitions, private funds, white collar litigation, data and cybersecurity, and intellectual property litigation to its existing client list. on the West Coast. It is open to recruiting lawyers in any of these practices.
Recruiters say Debevoise has the kind of cache and quality work that drives interest, and partners get paid well. The firm’s average profit per partner of $ 4.5 million in 2020 was 10th among the 100 largest law firms last year, according to data from AmLaw.
But companies that pay on merit have the potential to pay much higher than average profits. They could cut checks that would exceed Debevoise’s pay scales.
Thus, the company adapts. He focuses his recruiting pitch on more than just finances. Debevoise points out that his lockstep model eliminates wage disputes and encourages partners to work together on complex issues.
âThis is the way we all want to practice law,â said David Sarratt, associate co-director of the firm’s San Francisco office. âA lot of us might be able to make more money elsewhere, but in the long run the value proposition we bring to customers and others is so much stronger when we’re all in a true partnership and all of our incentives are to help each other and serve the mission of our customers.
An example of the kind of high-value, multidisciplinary work that Debevoise says his lockstep model helps deliver was a big project last year for large Silicon Valley venture capital fund Sequoia Capital.
The firm supported Sequoia in the legal strategy of its decision to redoing its investment structure in the United States and in Europe around a single fund, The Sequoia Fund. This move allows Sequoia to hold more types of securities for longer, and Bloomberg News reported it could have tax advantages.
Andrew Ahern, an associate of Debevoise who divides his time between New York and San Francisco, and who worked on the Sequoia case, said the deal represented the type of creative and highly tactile work the company aims to do for the best customers. He calls it a different strategy than gobbling up the business flow of a dozen new customers.
âA project like this builds on a multitude of different experiences with fund structures,â Ahern said. âAnd we see the West Coast as an enlargement and an extension of our team. It is not a new independent silo. This will give us closer ties with our main clients.
The company conducted a thorough review of its foreclosure strategy two years ago, coming back with what Sarratt called a “rock-solid commitment” to the system – and its impact on financial competitiveness and the ability to recruit and to retain talent.
Diz said the company hasn’t lost a M&A partner to a competitor for more than 20 years and has never seen a group departure.
But Debevoise was not immune to departures in the era of Big Law’s free agents. Notably, two main investment fund partners, Erica Berthou and Jordan Murray, left for Kirkland & Ellis in 2017, where they held management positions.
Most recently, banking regulatory partner David Portilla switched in February from Debevoise to Cravath, which changed its lockstep model late last year.
Kent Zimmermann, director of the Zeughauser Group legal consultancy, said competitors and clients view Debevoise as an elite firm. But he said Debevoise still faces a unique challenge in breaking into the Northern California sideways market.
“It’s one of the most competitive markets in the world, and all of the companies that have driven the Northern California market forward, entering the last decade, have paid on merit,” Zimmermann said. . âThese companies often set the market on compensation.â
Still, Ahern, Diz, and Sarratt said Debevoise’s foreclosure strategy has become a differentiator. âI don’t see him as a limiter,â Ahern said. “I consider it necessary for us to have this distinction.”
Worth your time
About Dentons: Dentons has appointed Sonia Martin as the new CEO in the United States, filling a void created six months ago when the company abruptly removed Mike McNamara from his post. Martin is a Bay Area litigator who has been with the firm since 1996, when she joined as a summer partner.
On Google: Sticking to the Bay Area theme, it’s hard to imagine a law firm rivaling the salary of Alphabet Inc.’s General Counsel, J. Kent Walker Jr. He will receive shares worth $ 23 million plus an annual salary increase. to $ 1 million from $ 650,000.
On law firm mergers: Law firm mergers remained depressed last year at 41 deals, according to Fairfax Associates, which notes the number is up from 40 a year ago, but well below the historic average of 55 mergers per year during the previous decade.
This year : I’ve written about four practice areas that could fuel Big Law in 2022. If you want to test the effectiveness of my predictions last year you can find my calls here. I’ve had at least two, as the capital markets and mergers and acquisitions have performed at record levels. Two out of five is not bad (for a baseball player)!
It’s all for this week ! Thanks for reading and please send me your thoughts, critiques and advice.