It was in March 2021 when legal recruiter Art Gunther started getting a different kind of call from law firms. It wasn’t hiring partners on the line; instead, he was hearing from heads of mergers and acquisitions departments and capital market groups. They needed quality associates and needed them fast.
A sudden skyrocketing boost in demand for the junior lawyers who help hammer out deals mirrors the huge surge in global mergers and acquisitions that hit a record high $4.33 trillion by the end of September, surpassing the prior mark of $4.1 trillion in deals for the entirety of 2007, according to Reuters. The M&A boom, which included a frenetic summer that saw a spike in deals compared with the same time period in 2020, also has seen senior M&A partners become recruiters.
“When I hear from a busy person who bills $1,000 an hour wanting a one-on-one with me to talk for an extended time about why his firm is attractive to young talent, you see how great the need must be. Partners are suddenly peering down the virtual hallway looking for someone to write first drafts of agreements and perform due diligence—and they are seeing a lack of help,” says the president and founder of Chicago-based Gunther Group.
The result is a hiring frenzy, a leap in bonuses and creative moves in recruiting.
“One candidate got accepted, and the firm sent him a hell of a big bouquet of flowers,” Gunther says. “It’s like nothing I’ve seen in my 23 years of recruiting.”
Gift sprays of posies may not be the norm, but the need for more law firm help is real. According to Leopard Solutions, as of mid-May, there were 8,268 open jobs for lawyers at about 1,000 firms in the U.S., a 150% increase from the start of the pandemic—6,048 of these were for associates. As of mid-October, Leopard reported that those numbers had increased to more than 11,000 openings, a growth of 270% since the start of the pandemic—and 7,543 available jobs for associates.
“We have low interest rates, so the cost of capital is low,” Gunther says, explaining the M&A delirium. “Companies are diversifying in the new economy. If you’re a maker of men’s business suits, you need to buy a company that makes casual wear. I don’t see this boom market ending anytime soon.”
Six-figure signing bonuses
Jeffrey A. Lowe, the head of Major, Lindsey & Africa’s law firm practice group, calls the job search competition in the associate marketplace “insane.” He adds: “The supply is fixed. People are getting pulled away in lateral moves even as you hire them. We see the high-profit groups pull people they might have passed on before.” The reason is simple. “The M&A work may come in, but partners don’t draft disclosure schedules and perform other menial tasks,” Lowe points out. “If you can’t staff the deal, you can’t progress the deal. We’re watching associate signing bonuses go to $50,000 to $100,000, and I have never seen anything like that level since the dot-com boom.”
Meanwhile, according to an Oct. 24 article in the Houston Chronicle and Texas Lawbook, firms in the Lone Star State are even offering up to $500,000 signing bonuses for the most experienced corporate associates.
Still, there can be boomerang moves, according to Lowe, who also serves as managing partner of Major, Lindsey & Africa’s Washington, D.C., office. “People can be lured by high salaries but then find themselves under tremendous pressure and a killer workload,” he says. “Pulling all-nighters gets to be too demanding. Some go back to a firm that works at a slower pace. Lawyers at this level make a lot of money, but they earn every penny.”
The growing call for quality transaction associates started around the beginning of 2021, says Nicole Kennedy, the national legal associate practice group leader at Lucas Group. “Every top candidate with M&A or capital markets or tax and finance qualifications gets multiple offers quickly, and Davis Polk set the scale.”
That would be the $202,500 starting salary for associates that Davis Polk & Wardwell announced in June, upping the offer set days earlier by Milbank. According to Bloomberg, Davis Polk’s most senior associates can make up to $365,000. Bloomberg also reported that in the week following Davis Polk’s move, nearly 20 other major firms matched its pay scale.
Kennedy, who works from Houston, says firms are offering full year-end bonuses even to new recruits who sign on midyear, plus a signing bonus of $50,000 for rookies that can rise to $200,000 for specialist associates.
“It’s an excellent time on a compensation basis to be a lawyer, but they’re working their tails off,” she says.
In San Diego, veteran legal recruiter Larry Watanabe of Watanabe Schwartz places only partners. Even so, he’s getting calls from desperate clients looking for associates. “This is a once-in-a-lifetime opportunity for people to move up from a second-tier firm,” he says. “Some top firms have made it clear they’ll hire you to work remotely no matter where you live. Everyone is cutting down on office space and going to distributed work as their M&A departments are running very hot and deals are flowing. The demand for legal services far outweighs the talent available.”
One Am Law 50 firm partner recently told Watanabe that gross revenues were up 22% in 2021, and profits per partner were up 10%.
“They’re flush with cash right now. But I’d offer two notes of caution,” Watanabe says. “If you’re hired on to work remotely, the prospects of making partner are low. And no industry will be able to maintain this pace forever.”
This story was originally published in the December 2021/January 2022 issue of the ABA Journal under the headline: “Red-hot: Amid a booming M&A market, firms are desperate for associates.”