The Deal Market is Back! But Hey, What About the Rest of Us?

The American Lawyer's cover story this month is about how the corporate/transactional deal market "is back," five years after it went away.  Equity offerings nearly tripled in value in 2004 (to $43-billion, famously including Google) and an estimated $100-billion of uninvested capital is also sloshing around, mostly in private equity funds.

But for my money the story behind the story is more interesting—after all, law firms, even members of the AmLaw 10, can hardly take credit for the health of the transactional marketplace—and on this score Aric Press, editor-in-chief of "TAL," hits it out of the park.  Aric notes that we're in the midst of conference and roundtable season, where license is distributed far and wide to opine that enormous changes are afoot in the profession and that things are essentially unchanged, and it is safe to say that "both sentiments are exactly correct."

Huh?  Yes indeed, because two different worlds are being discussed just as clients divide their legal work in binary fashion:

• First there are the deals, cases, and issues where price is no object;
• And then there's everything else.

While it is devoutly to be wished to live in the exclusive precincts of Column A, as Aric slyly observes, unless you're located on the corner of Sixth Avenue and 52nd Street, you'd be lucky to get 40-60% of your revenue from there.*   Law firm management essentially doesn't have much of a challenge living in the land of Column A, since revenue and gross margins are whatever the market will bear.  But things get interesting—at least if you believe firm managers should earn their salaries—when we come to Column B.

What, indeed, is to be done?  If partners believe that their exquisitely honed skills of issue-parsing and Jesuitical dissection can't go slumming in the land of "just producing the work," you may need to rethink things.  As Aric puts it:

"You could just offer discounts. But really, that's so 2003. What the clients seem to be saying is that instead of knocking 20 percent off the rate card, they want you to make a business calculation and set a price. And then they want you to manage the cases to it."

I can't speak for you, but my reaction to this was, "Bring it on!"  What could be a stronger test of one's genuine business acumen as a lawyer (or practice group manager, or Executive Director, etc.) than to engage in an economically-driven discussion with an important client about what it really might cost to deal with subset X of their legal portfolio?  Isn't that more intellectually engaging (not to mention more fun) than multiplying [rate] x [hours]?

*For the non-cognoscenti (or just the forgetful), that hallowed corner is HQ of Wachtel.