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Market Intel

U.S. and Canadian Law Firms continue to compete for top talent after a record-breaking 2021

Stefano Barbagallo
July 26, 2022

After an unforeseen start to 2020, a welcomed change of pace to legal markets around the world began in September last year and has continued to pick up pace ever since.

Now heading further into the second half of 2021 and the largest lateral hiring frenzy seen in decades has hit both U.S. and Canadian legal markets as law firm’s fight to keep up with demand amid a record breaking year.

So, what happened in the first half of 2021?

According to financial data tracking company Refinitiv, global deal value surpassed $2.8 trillion in the first six months of this year. SPACs, for 30 years an afterthought in fuelling big M&A numbers, accounted for 14% of that overall value, or $392 billion. That was spread over a huge 201 SPAC mergers thus far in 2021.

Private equity firms have had their busiest six months since records began four decades ago, striking deals worth $533 billion – double what it was in 2020 and helping to propel global mergers and acquisitions activity to an all-time high, according to the Financial Times.

In New York alone, moves into Private Equity transactions have rocketed throughout 2021, as displayed in the Pirical data below.

Large and “mega” deals also saw a massive uptick. The value of worldwide M&A deals between $5 billion and $10 billion was $485.4 billion in the first half, an increase of 239% over the previous year.

All in all, this equates to the largest first half in deal value and volume since records have been kept.

The U.S. played a large part in the record-setting, as activity for U.S. targets accounted for $1.3 trillion in Q1 and Q2, increasing 249% from last year. As a result, Canada’s legal market has also seen a surge in demand for talent, with U.S. firms competing for limited associates in Canada. To name a few firms, Kirkland & Ellis, Latham & Watkins, White & Case and Willkie Farr & Gallagher have hired Canadians recently for positions in Silicon Valley, New York, and even Boston and Chicago.

In the US and Canada M&A moves have increased each month since Q4 of last year, as demonstrated in the graph below.

As we head into the second half of 2021, bustling legal markets show no sign of slowing down. But even after the ‘deal bubble bursts’ and the hiring frenzy slows down, Canadian lawyers will continue to strive in the US.

Here are the main factors driving long-term demand and market growth

Technology

Innovations in technology have been on the up and up even before the pandemic. However, fuelled by the need to work from home and conduct deals remotely, considerable advancements in technology have led to more efficient and seamless law firms. Videoconferencing, virtual notaries, digital documents, e-signatures and e-filing are becoming widespread.

Cloud-based company Clio’s 2020 Legal Trends Report released in early October found that 85% of responding firms are using software to manage their practice, 79% store data in the cloud and 83% hold virtual meetings with clients. The report also found that 69% of consumers prefer to share documents electronically and 56% prefer video conferencing to phone calls.

This new demand for legal tech services have opened up many new and exciting opportunities for lawyers with a keen interest in NewLaw. Learn more about new advancements in legal tech here.

SPACS and IPO’s

At the end of 2020 we saw a surge in initial public offerings (IPOs) on U.S. exchanges, fueled by a boom in offerings from Special Purpose Acquisition Companies (SPACs).

According to FactSet data, U.S. exchanges saw a whopping 365 IPOs in the first quarter, a 66.7% increase over the fourth quarter of 2020 and a 677% jump compared to a year ago. In aggregate, IPOs raised $128.9 billion in the first quarter, up 84.3% compared to the fourth quarter and up 790% compared to the first quarter of 2020.

Recently Skadden, Arps, Slate, Meagher & Flom advised Chinese grocery app Missfresh in its $273 million IPO on the Nasdaq.

Over the last three quarters, there has been over 500 SPACs go public on U.S. exchanges. There isn’t one explanation for the sudden surge in 2020, however U.S. accounting rules have provided numerous benefits to SPACs that have made them a popular vehicle for taking a company public.

In the coming months, Bowlero Corp, owner of the Professional Bowlers Association and hundreds of bowling centers across the U.S., is going public via SPAC merger with Isos Acquisition Corp. in a deal worth approximately $2.6 billion. As a result of the merger, Bowlero will be listed on the New York Stock Exchange.

More Opportunities

Lawyers view the bustling legal market as an opportunity to move up to a higher tier, advance their career or take a new direction – and rightly so! The pandemic has presented many new opportunities for lawyers, especially within Corporate, Disputes, Banking & Finance, Projects & Energy and Restructuring & Insolvency.

In addition, we are finding that some lawyers are feeling overworked in their current firms and think they may be better supported in a firm with more resources and better incentives – encouraging firms to quickly act and compete with rivals in order to retain top talent.

For NQ’s, now is the time to shine! According to Law.com, as the associate attrition rate kicks up this year, young lawyers are getting many more opportunities at prestigious firms in the US.

Salary increases

If the latest salary increases across Big Law are any indication, demand for associates has likely never been higher in recent years.

Many firms are now scrambling to attract and retain talent – as recent headlines on associate compensation make clear. Some firms have increased base pay for associates, matching New York rates in smaller cities, and a raft of firms announced special bonuses reaching $64,000 this spring.

Moreover, the influx of deal work has prompted law firms to attract and retain mid-level associates in mergers and acquisitions, private equity and capital markets.

Those associates are most frequently targeted with signing and retention bonuses—but the rewards may also come with strings attached, including the requirement that an associate stay at a firm for one to two years to keep the money.

Law firms are also rushing to entice junior lawyers to come aboard, stay aboard and help handle the tsunami of deal work, using special bonuses, signing bonuses, salary increases and other perks.

Flexible Working

Effective working from home policies implemented in light of the pandemic has allowed firms in the US to operate effectively and entice new talent with flexible benefits. Since last year, a war for talent has driven new policy announcements.

Linklaters was the first firm to enact a new global agile working policy for a post-pandemic world whereby the firm will allow lawyers and employees – including partners – to work remotely for up to 20-50% of their time across all of its offices.

Reed Smiths 17 U.S. offices will be fully re-opened by Sept. 7, but even then it will have a “new flexible work policy” that won’t require lawyers to come to the office every day, it said.

Most are being flexible, for now at least, by encouraging rather than requiring lawyers to return and hinting that some aspects of remote work are here to stay.

Looking Ahead

Corporate and private equity executives believe the M&A gravy train, and all that comes with it, is going to keep on keeping on at least through 2021, according to a recent survey.

Jonathan Russo, co-leader of Pillsbury’s M&A group said:

“An overwhelming number of corporate and PE executives expect U.S. M&A dealmaking to continue to grow in the near term,” Russo said in a statement. “With significant tailwinds from stimulus measures, the low cost of capital and a strong U.S. vaccine rollout combined with proposed infrastructure investments and the need to deploy capital.”

Russo also said there was some concern from executives over the potential increase in the corporate tax rate and the likelihood of increased regulatory scrutiny on Big Tech, but the other factors pushing M&A forward would be able to offset that.

The sustained surge of M&A activity, SPACs, de-SPACing and IPOs has major dealmakers scrambling to find enough associates to staff their deals, risking burnout for the associates they do have on staff, so sourcing new talent in the coming months will be a priority for most.

We believe Firms may seek news ways to retain top talent, rather than just offering salary increases and being stuck with expensive associates later down the line. Attractive remote working policies will come into play, as well as diverse firm vision and values, attractiveness of deals and the opportunity to become partner in X amount of years.

Scott Barshay, chair of the corporate practice at Paul, Weiss, Rifkind, Wharton & Garrison, said he has concerns about attracting and retaining enough associates to staff all the firm’s deals right now. But he also feels that his firm is doing some things differently that may help it pull ahead.

“We are known as a firm that is attractive for diverse and women candidates and those are large parts of the law school populations,” he said. “Second, we are making partners after seven or eight years, while others are taking 10 to 12.”

All in all we are excited to see what unfolds in the year ahead, but rest assured there will be exciting opportunities for both US and Canadian lawyers for some time to come.

If you are looking to take the next steps in your career in the US, talk to our specialist US Consultant Naika Quiñones, for a confidential discussion about your options.
“The best way to predict the future is to create it”
– A Lincoln

Stefano Barbagallo
New York Director
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