2023 marked a year of significant change and challenge for New York’s legal scene, traditionally a trendsetter for the U.S. legal industry. Amidst a climate of uncertainty and transition, New York law firms grappled with issues ranging from consolidation pressures to salary hikes, reshaping the landscape in ways that will have lasting impacts into 2024 and beyond.
New Era for Two Old-Line Firms
The year saw dramatic shifts for two of New York’s most venerable law firms. Stroock & Stroock & Lavan, founded in 1876, began the process of dissolving, while Shearman & Sterling, established in 1873, announced a merger with London-based Allen & Overy. This move, seen as a significant trend in the global legal market, highlights the increasing pressures on traditional firms. Though distinct, the struggles of these firms shared a common theme: partner exits led to further departures and an urgent search for mergers. In Stroock’s case, this search was ultimately unsuccessful.
Consolidation Pressure
The trend towards consolidation was not limited to Shearman & Sterling. Other notable mergers in 2023 included Maynard Cooper & Gale with Nexsen Pruet, Holland & Knight with Waller Lansden Dortch & Davis, and Ulmer & Berne with Greensfelder, Hemker & Gale. Fairfax Associates said 41 law firm combinations were completed by the third quarter of 2023, surpassing the previous year’s total. This reflects a growing movement towards consolidation as firms seek growth in a competitive market.
Salary Hikes
New York’s Milbank initiated seniority-based pay increases in early November 2023, setting first-year associate salaries at $225,000 in a move that rippled across the U.S. legal industry. Similar announcements from other major firms, including Cravath and Swaine & Moore, quickly followed this, leading to widespread salary hikes. However, these increases sparked concerns about the ability of less profitable firms to keep pace.
Remaking Partnerships
2023 also saw a shift in the traditional law firm partnership model. Firms like Cravath reportedly added a salaried partner tier, moving away from the single-tier partnership structure. Paul, Weiss, Rifkind, Wharton & Garrison are considering a similar move. Meanwhile, firms like Davis, Polk & Wardwell and Skadden, Arps, Slate, Meagher & Flom remain silent on their plans, and Cleary Gottlieb Steen & Hamilton has affirmed its commitment to the single-tier partnership model, at least for the foreseeable future.
The tumultuous developments of 2023 have set the stage for a year of introspection and potential transformation in New York’s legal industry. As firms navigate the challenges of consolidation, competitive salary structures, and evolving partnership models, the legal services landscape in New York and across the U.S. is poised for significant changes. The decisions made in this period will shape individual firms and influence the direction of the legal profession nationwide.
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