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Coronavirus has got nothing on the 2008 financial crisis, says ex-Clifford Chance boss

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Tony Williams reckons the pandemic is less of a threat to law firms than the crash

Coronavirus is less of a threat to law firms than the 2008 financial crisis was, according to a former Clifford Chance boss.

Tony Williams, who was global managing partner at the megafirm until 2000, also says that the legal sector is “significantly better off” than other industries.

Now a legal consultant, Williams told The Global Legal Post that the pandemic may be “scary” but that “in terms of the financial impact, this feels very different” to the last big crash.

“During the financial crisis law firm leaders were asking themselves whether their firms would survive”, Williams recalls. “There was a massive liquidity crisis; the banks didn’t trust each other to lend money. We don’t have that. There is no shortage of liquidity with the risk of the whole economy grinding to a halt”.

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While deal-making is going to be hold for now, the industry veteran expects it to bounce back once the market finds its floor.

In terms of the employment impact on lawyers, Williams reports that “so far as I am aware, the vast majority of salaries have been paid in full in March”. But he added that “it may make sense” to put some staff members, such as receptionists, on furlough and have the government cover 80% of their salaries.

Last week, Norton Rose Fulbright confirmed that it had asked its lawyers to drop down to a four-day working week and take a pay cut in order to protect jobs.

The former Clifford Chance partner also called for partners to delay taking money out of the business, saying that those at the top should be “tightening their belts through the period”.

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42 Comments

Anon

Right,,well Pinsents announced furloughs this morning

(17)(1)

Anon

It looks like they had problems for a while though, not sure how much of this is the effect of the virus:

“Pinsents’ partner distributions have already been derailed this financial year. The firm deferred half of the quarterly distribution due in October 2019, when it failed to hit billing and cash collection targets at the start of the financial year.”

(17)(2)

Interested party

Fee earners or non-fee earners? Are they topping up the £2,500 at all?

(1)(1)

Angus, Exeter University LL.B.

Article says non fee-earners. Quite shameful they are resorting to hitting those people – in reality, what is the cost per partner of secretaries, the facilities team, etc.?

(5)(7)

Anon

To be honest, it’s not – fee earners literally bring in the firm’s profits. It doesn’t make sense to keep those who aren’t making money at the expense of those who are assuming fee earners are at least covering the cost of their own salary (which granted I suppose not all of them will be).

(18)(2)

Coofer

Non-fee earners, and they did it only to bail them out, I’m not sure why people here are presenting it as bad news.

https://www.law.com/international-edition/2020/04/07/pinsent-masons-defers-partner-profits-furloughs-staff/?slreturn=20200307055545

Commenting on the decision to furlough staff, Pinsents senior partner RIchard Foley said: “In light of the Covid-19 pandemic we continue to carefully consider our approach to managing our business. Our key consideration right now, is those employees who, through no fault of their own, are simply not able to carry out their role from home.

“We need to provide them with immediate assurance as to their roles and salaries and the Government’s furloughing scheme enables us to do just that.”

“Having consulted carefully and widely, we have decided to furlough a group of employees who are unable to work at home and to ensure their salaries and benefits remain unaffected.”

(9)(1)

Gary

Ok boomer

(2)(5)

Anonymous

OK basic dullard with no wit, imaginative or new material.

(15)(0)

Barry

Ok boomer

(0)(5)

Anonymous

Not a boomer. But you keep to your ageist ‘humour’.

(3)(2)

Archibald Pomp O'City

How old are you, pal? You sound awfully defensive about your age.

Anonymous

Not you’re “pal” either.

Bien bien

Tsk tsk, *your.

Back to grammar school you go, my dear illiterate peasant.

Future US trainee

Only the shit firms are having to freeze pay. Won’t catch K+E or Latham worrying about cash anytime soon. Just another reason to go Americans.

(46)(39)

Randy Cocks

Lmao they’ll be the first one to give you the chop you mongoloid.

Also: “Lathamed”.

HTH

(25)(40)

Anomanous

Judging by the firms’ reaction to the virus (so far), we will need to popularise the term”Fieldfishered” for the layoff of all NQs while they are away on the qualification leave.

Could be cooler than “Lathamed”, sounds like something from the “Godfather”: those NQs “field with the fishes” now etc.

(47)(0)

JDP

7/10, decent bantz old boy.

(1)(0)

The Fieldfisher NQs (no, really)

Er what? If Fieldfisher NQ’s were laid off on quali leave that’s news to us! Where did you hear this?

(0)(0)

PE Associate

Jealous MC trainee – enjoy being a gimp for the rest of your career

(9)(5)

Take a look at this rtrd

Yeh sure, thx “PE Associate” dumb f*ck lmao

(5)(6)

Current US solicitor

Randy Cocks is 100% right! Agree with him/her completely… the US firms will generally not come out and say they are reducing head-count because it does not pay for them to say that. US have their own ways of chopping heads without the need to resort to redundancies or other measures. That is the culture at US firms. They have already started reducing head count as a result of a slowdown in transactional work and the Coronavirus has just accelerated the process! Anyone who thinks US firms are not chopping heads or is unlikely to get fired is fooling and has clearly never worked for a US firm. Coming from someone who is working for one and is seeing people disappear all around her/him!

(8)(6)

RE

Shearman has frozen pay globally.

(5)(0)

Lets get real...

Imagine being in the graduate recruitment department of a major law firm who laid off the majority of their first-year associates and 20% of junior associates in 2008, and then visiting the LegalCheek comments section to see ignorant students sucking your firm off in the belief that it’s a safer place to work.

Meanwhile, NRF promises to keep everyone on and, if necessary, move volunteers to 80% capacity at 80% pay.

Graduate recruitment at ruthless firms. Either the easiest job in the world, or pay rises all round for a successful propaganda campaign.

(5)(29)

US-Firm PE Lawyer

You are completely incorrect with your figures here. We laid off 12% of associates post the ‘08 crisis. NY was most affected by the cuts, and only 10-15 jobs were lost in London.

Tough decisions like these are why our balance sheets now are so strong. If ‘McDonald’s’ type firms like NRF want to make any money in the next few years they’ll have to be more aggressive with restructuring their frankly bloated operating model.

(14)(4)

MC Assoc

You really don’t understand how a legal business works, do you? It is not about instructions coming in (and even if that was the case, MC firms would be better off than US firms given that their practices are more diversified across sectors and geographically)

It is about CASH COLLECTION. You get the work but the client will not pay on time because they are struggling – they will ask for discounts, deferrals etc. Smart firms act quickly by injecting capital and freezing pay reviews so that they can’t keep all the staff until the worse has passed.

And on the cash liquidity – are you joking? US firms rely heavily on credit. One of the big US giants has USD 4 billion debt. By contrast A+Os debt is zero.

(11)(9)

US-Firm PE Lawyer

Sorry… was this post a rely to me? I’m just going to continue on the basis that it was.

Of course collection is important, but that’s the case with any business which requires receipts that aren’t transferred at the point of sale. Hardly unique to law firms.

You also need to get the instructions in the first place… which US firms in my field have been completely dominant in securing since the start of last decade.

The assertion that Vault 10 Firms are less diversified than MC is also without basis (except the likes of Cravath, Wachtell etc.)

(7)(2)

MC Assoc

My response was to the “Future US trainee”, not you. And I never said cash collection was unique to law firms – my point was that a lot of “wanna be lawyers” focus on work coming in thinking that this is enough for law firms to refrain from introducing protective measures – this is clearly the mindset of a first year law student who does not understand how the business works and how the pandemic affects law firms.

I do agree that US firms dominate the PE area but apart from that, and maybe perhaps the M&A work in some of the markets, they are still very much in competition with MC firms and often loosing. There is nothing wrong about it.

The same with diversification of business, because yes, most of them are much less diversified. This is just a different business model – less offices around the globe and less focus on some of the practice areas, i.e. the counter-cyclical response is less robust. Why? In part because they dont have to grow the same way as MC firms – they have access to one of most profitable legal markets – the US. Also, it helps avoid some of the conflicts with their US litigation work, which btw, is where the gigantic share of their profits comes from.

And before anyone says I am prejudiced against US firms, I used to work at a white shoe firm and I enjoyed it the same way I enjoy working for my current firm. They are just different models offerings different things to associates.

(2)(3)

Anon US attorney in LND

@ Future US trainee – You think Kirkland and other US firms are doing well? LOL – you really are a future trainee (emphasis added on both future and trainee). For those who have missed it, Kirkland saw its deal activity fall by 74% in Q1 over last year – says it all really. Ever heard Kirkland come out and announce why +70% of its salaried partners are no longer working for the firm after 3-4 years? Ever heard Kirkland come out and announce why there’s a tremendous volume of turn-over of staff in the office? I thought so…

https://www.law.com/americanlawyer/2020/04/02/ma-activity-fell-off-in-2020s-first-quarter-even-at-kirkland/

“Kirkland & Ellis, a perennial presence in the legal adviser rankings for top M&A deal value, fell from the No. 1 spot at the end of Q1 in 2019 to No. 7 so far this year for global deals, watching its deal value totals plummet from over $210 billion in Q1 of 2019 to just over $55 billion in 2020, a 74% reduction year over year. “

(5)(0)

US Firm Partner

Can’t wait until you start…I’m gona sh**t you good and hard into the night boy. Make you really work hard for those $$$

(0)(0)

Anon

Latham were absolutely brutal during 2008/2009

(19)(21)

plant-based

i mean laying off 400 associates equalled to 10% of the associate pool back in 2008, most of which were associates in the states. very sad for the people who ended up drawing the short straw but it wasnt as cataclysmic as the law websites were suggesting!

(5)(0)

Anon

Yep well I mean he’s all the talk, sitting comfy in his Chelsea mansion, phat BMW parked outside, not a worry in the world. He’s made his millions, now he’ll just watch from afar.

(4)(2)

Anonymous

What’s your point?

(0)(0)

Lavid Dammy

That he’s some crusty old geezer who hasn’t a monkey’s about what a clusterf*ck this virus really is.

(4)(1)

Re: Covid-19

Dearest Staff,

I know you must all be terribly worried about the ongoing crisis and will likely have heard that other, less reputable, firms have been making changes to their staffing.

JAFLAS is pleased to announce that not one of its 424,000 global staff will be ‘furloughed’ or otherwise have to bear any loss of earnings throughout this crisis.

Instead, his Lordship has benevolently declared that you will all move to his various estates and, as his Lordship himself put it, ‘return to the land’.

Your tasks will involve sowing and harvesting the beet crop, tending to his livestock, and other such wholesome agricultural activities.

Please attend your branch’s muster points tomorrow at dawn and await carriages which will take you to your new homes.

Stay safe,

Barbara

JAFLAS Accounts

(6)(0)

MC trainee

Imo it really depends on the firm. Evidently silver circle or smaller firms are being effected (with work weeks being shortened and furloughs issued) but for the MC there certainly seems to be a steady flow of work either just continuing as usual or coming off the back of the Covid crisis.

(8)(1)

Tips@legalcheek.com

Classic “MC trainee”… effect vs affect?

(12)(0)

Rather worried

I have a training contract at Kirkland. I am due to start in 2022. On a serious note, am I at risk of having it canceled?

(1)(11)

Lionel Hutz, attorney at law

Probably yes, all firms fired all their associates and future trainees in 2008. They were all sent to a mysterious deserted island somewhere in the South Pacific Ocean. There is a documentary about them called “Lost”.

Hope this helps.

(11)(0)

Anonymous

How good are you at flipping burgers? And remember there is going to be a lot of competition for those jobs when they start up again.

(4)(0)

Anon

It is unlikely that you will be affected as your TC is still some time away- those due to start in September may be in a more vulnerable position. If you are affected, it will most likely be in the form of deferring your TC for 6 months – a year, for which you will be offered a monetary incentive. Hope this is more helpful than the other unnecessary replies.

(4)(0)

plant-based

dont worry. hang in there and sift the noise out – you’ll be fine

(0)(0)

Comments are closed.

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