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The Fall of Weil Gotshal · Non-Billable Hours

• 0:00
  SPEAKER_00: Now, if it was to fail, it would be the largest failure in big law that we've ever seen.
• 0:03
  SPEAKER_00: They're considered one of the best and biggest firms in America.
• 0:06
  SPEAKER_00: They're in the Vault 20, which is a ranking of the most prestigious law firms in the world.
• 0:10
  SPEAKER_00: Uh, they're number 15, which is pretty impressive.
• 0:12
  SPEAKER_00: They're pretty large overall in terms of headcount.
• 0:14
  SPEAKER_00: So something like this just falling through seemingly overnight is really concerning a lot of attorneys in big law.
• 0:19
  SPEAKER_00: And I'm trying to explain why this is happening and why you should or should not be concerned.
• 0:23
  SPEAKER_00: The biggest thing I want to say that is an issue for a while right now is kind of a confidence issue.
• 0:28
  SPEAKER_00: And there becomes this dynamic psychologically, which is basically like a run on a bank.
• 0:31
  SPEAKER_00: Everyone believes that a bank is going to fail, or you start hearing whispers that something's going wrong.
• 0:35
  SPEAKER_00: Everyone basically tries to pull out their money at once, and it kind of is a self-fulfilling prophecy that leads to the demise of said bank.
• 0:42
  SPEAKER_00: That's what I think is happening here.
• 0:44
  SPEAKER_00: People in the industry would call that a partnership run.
• 0:46
  SPEAKER_00: We've seen a steady stream of leaders from WILE, so partner leaders of major practice groups leave the firm.
• 0:52
  SPEAKER_00: That is not typical.
• 0:53
  SPEAKER_00: It's pretty rare for a partner to get poached to another firm if that partner has a leadership position.
• 0:58
  SPEAKER_00: Now, over the past year, Weill has lost about 42 partners from the start of this year, which is pretty large as a share of partnership with the amount of partners they started the year with.
• 1:08
  SPEAKER_00: I believe that's somewhere around 15%.
• 1:11
  SPEAKER_00: They've also hired some partners too, so it's not a huge net loss.
• 1:14
  SPEAKER_00: But the issue is of those 42 partners that have left, 30%, so a third of them have had leadership positions either on the executive committee, which is basically the board of the entire firm, or leading a major practice group like the head of MA, the corporate head who left for Kravath, multiple heads of private equity, heads of IP litigation and major tech groups.
• 1:32
  SPEAKER_00: So these things just keep occurring over time.
• 1:34
  SPEAKER_00: They've seen these issues over the past five years, honestly, with leaders leaving, but it's kind of accelerating in a way that is very concerning.
• 1:40
  SPEAKER_00: The biggest thing that we want to state here is financially, Weill is not in the red.
• 1:46
  SPEAKER_00: They don't like owe anyone money like what happened with Dewey and LaBeouf.
• 1:49
  SPEAKER_00: That's kind of the only example we've seen of a firm of this size relatively just dropping out of the sky.
• 1:54
  SPEAKER_00: Those firms had financial obligations that they weren't able to meet ultimately, and they were a little bit too ambitious with what they were promising their partners that they were hiring from other firms.
• 2:02
  SPEAKER_00: Weil's problem here is not so much that it's shrinking or it owes a lot of money, it's that its growth cannot keep up with its peers.
• 2:08
  SPEAKER_00: So because Weil is considered a top 20 firm, if you look at the average numbers for the past year of revenue growth overall for that peer group, it's about 15%, which is pretty healthy.
• 2:17
  SPEAKER_00: The year before that it was about 14% revenue growth.
• 2:19
  SPEAKER_00: So those are really healthy numbers.
• 2:21
  SPEAKER_00: Weil, unfortunately, has only been putting up about a 2% growth margin over last year.
• 2:25
  SPEAKER_00: But if you look at the peers, it's just not keeping up.
• 2:27
  SPEAKER_00: And so you have this kind of dynamic where all of its peer firms, which are very, very elite, have a ton of money, are growing extremely fast, know that they can go and approach leaders at Weil, which has very well-trained attorneys, it has a relatively good culture.
• 2:40
  SPEAKER_00: And so if you're going to pick off a partner from a firm, Weill is a pretty good bet.
• 2:43
  SPEAKER_00: Their partners are very well respected, they're considered elite, and we know that there's a little bit of a shakiness happening with the confidence inside and outside of the firm.
• 2:51
  SPEAKER_00: Part of that is kind of like a snowball effect where if there's a little bit of a fright in terms of partners seeing a long-term future at the firm, it kind of leads to other partners freaking out.
• 3:00
  SPEAKER_00: A couple partners might think I'm getting an offer from a peer firm that's really elite, like Latham or Kirkland or Paul Weiss really wants to hire me to a leadership position or a position that's gonna give me way more money than I'm making here, that has prospects for me to attain leadership later.
• 3:14
  SPEAKER_00: And maybe I don't feel super confident about the direction of Weil.
• 3:18
  SPEAKER_00: So I'm gonna take that offer because it's gonna be a pretty shiny offer.
• 3:20
  SPEAKER_00: Helvin and Cromwell, Davis Polk, Simpson Thatcher is a huge one, Sidley Austin is a more recent one.
• 3:26
  SPEAKER_00: These are not shabby offers.
• 3:27
  SPEAKER_00: These are very strong offers both financially and in terms of elite status of the firm that they could be joining.
• 3:32
  SPEAKER_00: Every successive partner that leaves Weill is giving more motivation to the next partner to leave for a lot of reasons.
• 3:38
  SPEAKER_00: One, it kind of diminishes the future prospects of the firm, where every additional person, every additional leader or partner that leaves the firm is making it less likely that that firm is going to see future growth or a turnaround anytime soon.
• 3:50
  SPEAKER_00: And if you're a partner and you're building your book of business or you're trying to bring in money and have a stable platform, you do not want to worry about this stuff happening on the back end financially or reputationally, or in terms of cross-selling to other groups, which is how a lot of partners get their money.
• 4:03
  SPEAKER_00: If someone comes into the firm looking for a bankruptcy representation, and then later maybe their business turns around or they have another venture and they want to hire an MA attorney.
• 4:11
  SPEAKER_00: If they have a relationship with Weill already, that's how you get a cross-sell where an MA partner might benefit for the fact that that group is very strong.
• 4:18
  SPEAKER_00: And so the more leaders that leave across different groups, the less likely cross-selling will be an option for these partners to build their books of business.
• 4:25
  SPEAKER_00: The other thing is clients could start to get concerned if they start seeing all these headlines about Weil losing leadership and then having failed merger talks and other things like that.
• 4:33
  SPEAKER_00: It starts to make a client a little bit nervous.
• 4:35
  SPEAKER_00: We don't really know what's happening with your firm.
• 4:37
  SPEAKER_00: We don't want to see our lawyers in the news for issues of stability that's not really inspiring confidence.
• 4:43
  SPEAKER_00: And so what you're likely seeing is a lot of conversations happening behind the scenes between major partners at Weil and their top clients.
• 4:50
  SPEAKER_00: And their top clients are saying, if you find a good platform at a peer firm that seems stable, we'll totally bring our business with you.
• 4:56
  SPEAKER_00: Seems like things are a little bit shaky there.
• 4:58
  SPEAKER_00: We'd rather just have something a little bit more stable.
• 5:00
  SPEAKER_00: We want to be at a firm that has a good platform where we can bring other forms of business and trust that is top quality.
• 5:06
  SPEAKER_00: But because Weil is losing so many leaders, it's really concerning for clients, I'm sure.
• 5:10
  SPEAKER_00: Now you end up in a situation where all the people that are supposed to lead us on this charge forward are abandoning ship, which does not inspire confidence.
• 5:18
  SPEAKER_00: Well, last night I got a notification that the partner that was set to take over the entire firm that has been teed up for years now, this was inspiring a lot of confidence and excitement for new leadership of the firm.
• 5:28
  SPEAKER_00: So she was the one hope I had in terms of things turning over.
• 5:31
  SPEAKER_00: She is not taking the job.
• 5:33
  SPEAKER_00: She has decided to not take over the number one position at the firm, which is essentially like their CEO.
• 5:38
  SPEAKER_00: She's decided, you know what?
• 5:39
  SPEAKER_00: Like, I'm okay.
• 5:40
  SPEAKER_00: That is not good.
• 5:41
  SPEAKER_00: If someone is set to take over your firm to be the leader and has been groomed for leadership for years, and is set to take your firm into the next generation, and that person gets up front and decides, you know what?
• 5:55
  SPEAKER_00: I'm good.
• 5:57
  SPEAKER_00: Everyone below is gonna panic.
• 5:59
  SPEAKER_00: I don't see any other option here other than people to panic, and the panic is what ultimately kills the firm.
• 6:04
  SPEAKER_00: Everyone just jets for the door, everyone starts taking offers more seriously.
• 6:07
  SPEAKER_00: Every recruiter, every major firm competitor knows that now is the time to strike.
• 6:11
  SPEAKER_00: Now is the time that people are the least confident in their future at the firm, and now's the time where you can kind of buy low, essentially.
• 6:18
  SPEAKER_00: Now I think the only hope for Weil to not have a situation where they basically fold in a year or so is to merge with another firm.
• 6:26
  SPEAKER_00: That's literally the only thing that's gonna lead to success here.
• 6:28
  SPEAKER_00: Now, Weil had merger talks with Wilkie as recent as last week, which I wasn't very hopeful about.
• 6:34
  SPEAKER_00: I think Wilkie has had a really strong trajectory over the last few years.
• 6:37
  SPEAKER_00: They're a very large firm with a promising future, and I just could not see why they would consider merging with a firm that has so many question marks around it right now.
• 6:45
  SPEAKER_00: Those talks predictably fell through on Thursday of last week.
• 6:48
  SPEAKER_00: What they need to do, in my opinion, is they need to expand their merger talks and they need to lower their expectations in terms of who they're going to be able to merge with.
• 6:58
  SPEAKER_00: I don't think a SCAD and merger is happening, like people have said.
• 7:00
  SPEAKER_00: What I think should happen is Link Later should merge because the main value that you can get from Weil at this point, because of all these issues, is strong lawyers.
• 7:10
  SPEAKER_00: Yes, they are trained, but the thing with getting strong lawyers, both at the partner and the associate level, is that you can pull those partners from WILE, regardless of if you merge.
• 7:19
  SPEAKER_00: So if you are a Wilkie, for instance, why would I want to merge with a brand that's becoming a little bit toxic right now in terms of not being stable?
• 7:27
  SPEAKER_00: When I could just approach the partners directly and say, hey, why don't we cut out all this noise?
• 7:31
  SPEAKER_00: You just come join us now, we can get it over with.
• 7:33
  SPEAKER_00: We don't have to deal with this long drawn-out merger process, which can get kind of messy in terms of what are your role's gonna be when you get here, et cetera.
• 7:40
  SPEAKER_00: We can just figure that out right now.
• 7:41
  SPEAKER_00: We'll give you a good guarantee, come over now.
• 7:43
  SPEAKER_00: In a situation where all the top firms who are their peers, who could potentially be merger partner in the past, are just probably gonna opt to pick off partners one by one, pick off groups one by one, and t instead of taking on all the baggage and messiness of a merger.
• 7:57
  SPEAKER_00: So what I would like to see is to see them have a more serious talk with firms that are looking to expand their prestige and foothold in the US.
• 8:07
  SPEAKER_00: And the only firm that makes sense for me is Linkladers, which is a magic circle UK-based firm that has a sizable footprint globally and in the United States and has been actively trying to grow its prestige over the past few years.
• 8:20
  SPEAKER_00: Now, Link Leaders has approached other firms in the past and been rebuffed, but I think this is a pretty good opportunity for them to take something that's a pretty good brand play, because Weil has been traditionally and historically one of the best, most elite firms in the United States, especially in New York, and this would give them more credibility in that market as well as attaining really strong lawyer talent for the people that are left by the time the merger follows through.
• 8:43
  SPEAKER_00: If something like that doesn't happen, you're just gonna end up seeing this relatively fast decay of talent and the vultures will just circle and pick everything off the bones of Weill for the next year or so.
• 8:54
  SPEAKER_00: You really need some kind of way to signal confidence in this firm at this point.
• 8:58
  SPEAKER_00: And the only thing I can possibly think of is if you merge with a more stable firm with either a similar or larger platform than Weill already has.
• 9:07
  SPEAKER_00: So, unless I see that happen, my advice is you need to weigh all your possible options and take the best possible route to a more stable future where you can grow at a firm with a stable platform that has better days ahead of it, essentially, in the near distant future.