[Invest&Law] M&A and Corporate Case Drought Leaves Large Law Firms Parched

Large law firms are tightening their belts amid a slump in the M&A market and a drought in corporate cases. Some firms have effectively begun restructuring by letting go of partner attorneys, while others have entered a phase of 'austerity' by controlling corporate card usage and other expenses.

One major law firm, Firm A, reportedly did not pay dividends to some equity partners (EP) this year and even reclaimed part of the dividends that had been prepaid. Recently, founding members known as the pioneers of the firm's establishment have resigned, prompting speculation that "if you don't deliver business results, even the founding members might be let go." This has been interpreted as a sign of how difficult Firm A's management situation has become.

[Image source=Beomryul Newspaper]

Firm A is not the only large law firm facing tough management conditions. Other major firms are also entering a phase of financial tightening by strictly managing corporate card expenditures or reducing personnel.

Firm B recently advised its members to use corporate cards only for essential purposes, effectively recommending a reduction in corporate card usage. Additionally, some firms are not replenishing staff after lawyers and employees leave, effectively reducing their workforce.

The background to the worsening management situation of large law firms is attributed to a 'drought in corporate cases.' Following interest rate hikes, the M&A market has entered a slump, and with the prosecution focusing on political cases after the new government took office, major corporate cases have decreased. This has been compounded by a significant increase in labor costs in recent years, as large law firms have competed to raise associate attorneys' salaries.

A law firm official explained, "Recently, large law firms simultaneously raised associate attorneys' salaries significantly once, and since then, overall labor costs have increased."

A criminal team lawyer at a major law firm said, "These days, when lawyers meet, they often say things like 'Is it only our firm that is struggling?' or 'Is it only our firm that lacks corporate cases?'" He added, "Seeing how firms are rushing to cut expenses lately, it seems clear that the situation is indeed difficult."

However, as the M&A market gradually begins to revive, there are also forecasts that the case bottleneck at large law firms will ease from the second half of the year. A senior official at a major law firm stated, "We are already actively taking on cases behind the scenes," and added, "Firm revenues are not expected to decline compared to last year."

Reporter Hyun-kyung Lim, Legal Times

※This article is based on content supplied by Law Times.