THE current market turmoil is reshaping many businesses, and the legal profession is no exception. Globally, law firms are laying off professional staff, delaying new recruitment , and in some instances even closing their doors, forcing lawyers to take to the pavements to look for work.
As many as 10000 lawyers could be out of work in the UK in the next two years. Scores of partners have been pushed out of the “magic circle” of law firms and many others have been forced to take a pay cut.
David Lancaster, chairman of Webber Wentzel, says that in the UK there has been a breach of trust as “law firms have been shaken to the core”. “Law will never be looked on as the same distinguished profession. Young people will re-look at their choice of career.”
The legal profession overseas grew too quickly — firms merged across continents — driven by merger and acquisition work, private equity and securitisation, Lancaster says.
SA’s legal profession has not experienced a severe downturn in work — but there are exceptions.
“It must be a stressful time for a law firm that does property and conveyancing work only; these firms must be going through challenging times,” Lancaster says. And law firms that rely on private equity and securitisation work would also be struggling .
Lancaster says the firm’s litigation and insolvency practice has picked up considerably . But, he says, “this year, there is no doubt that the big six law firms will be under pressure profit-wise. It is going to be a tough year for the legal profession.”
The firm has no planned retrenchments on the cards.
“We have had numerous job applications from lawyers overseas. We will continue to hire in this market but we will be strategic and selective about recruiting.”
Lancaster doubts whether law firms in SA will continue to consolidate on the same scale as they have in the recent past.
Mzi Mgudlwa, deputy CEO of Edward Nathan Sonnenbergs, says there is no room for a strategic merger in the light of the economic turmoil.
“However, there may well be room to expand in certain areas,” Mgudlwa says.
He says a struggling law firm has a choice: either close shop or join an entity as a department.
Chris Ewing, chairman of Cliffe Dekker Hofmeyr, says the financial crisis has affected certain areas of work, such as mergers and acquisitions, securitisation and debt equity. Mergers and acquisitions work has changed in nature, Ewing says. There is a restructuring of transactions rather than new transactions coming through . “Funding for new deals remains difficult.”
Des Williams, chairman of Werksmans Attorneys, says the profession has been sheltered to a large degree from the financial crisis. Work has picked up in some areas such as insolvency and litigation, he says.
The firm is continuing to hire lawyers on a selective basis.
Terry Mahon, chairman of Routledge Modise in association with Eversheds, says the profession has not got caught up in the “bloodbath” in the US and the UK. “The financial crisis has given us the opportunity to re-look our own business,” Mahon says. “It gives us the opportunity to select and hire capable people.” But some law firms will suffer in the downturn, particularly those who do banking and property work.
temkins@bdfm.co.za