Why Law Firms Collapse
The Practice March/April 2017
Unlike businesses, law firms don’t just go bankrupt—they collapse. How does that occur? And who does it impact?
Why Law Firms Collapse
The force with which law firms shatter is amazing because it has no parallel in other kinds of businesses. Amazon lost money for more than 20 years. Chrysler filed for bankruptcy seven years ago. Yet both companies—like countless others that suffered financial problems before them—are still shipping goods and churning out cars. Law firms show no such resilience. No large law firm has ever managed to reorganize its debts in bankruptcy and survive.
Caught in the Collapse
Shifting the story to the human side of law firm failures, this article profiles two lawyers who went through law firm failures and breakups. The first, Gordon J. Davis, offers the perspective of a partner during not one, but two firm failures. The second, Charles Blackburn, offers insights into what it is like to go through a firm breakup as an associate.
Navigating Uncertain Waters
Clients are increasingly going to have to get used to their lawyers moving between firms, whether due to something as drastic as a law firm failure or as relatively routine as a lateral move or firm merger. The trend to watch will be how and when clients decide to stick with the firm or move with the lawyers.
Killed by Kindness?
The Harvard Law School case study, “Heenan Blaikie: The Glue Dissolves,” examines how Canada’s seventh largest law firm went from having its strongest year financially in 2010 to dissolving in 2014. The case explores the challenges of alignment between offices of a major Canadian firm, the tension between accountability and collegiality, the factors that contribute to the success or failure of a leadership transition, and firm governance.
King & Wood Mallesons’s Expansive Struggles
When Chinese law firm King & Wood merged with Australian law firm Mallesons Stephen Jacques in 2012, they became what is now known as King & Wood Mallesons (KWM), one of the first truly Asia-based global law firms. The following year, KWM merged again with U.K. law firm SJ Berwin, which then became the European arm of the King & Wood Mallesons brand.
Bank on More Failures
Dan DiPietro is the chairman of Citi Private Bank’s Law Firm Group. DiPietro sat down with David B. Wilkins, faculty director of the Center on the Legal Profession, for a one-on-one conversation on the health of the current law firm marketplace.
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