Mergers & acquisitions and other market rebounds were much anticipated, but it has laid bare a significant shortage of junior lawyers trained in deal-making practice.
"There is a scarcity of junior mid-level transactional lawyers," said David Garber, president of Princeton Legal Search Group. "They're really hard to find."
"I think it is more dire than the typical business cycle, the typical ebb and flow," he said.
Raj Selvadurai, branch manager of Robert Half Legal's midtown Manhattan office, said a shortage "is definitely going on."
"Deals were not happening for a long time." he said. "When certain practices start to heat up, [firms] find themselves in a precarious situation."
Lawyers and recruiters blame the bottoming-out of the market in 2008-09, and the sluggish recovery that followed, for the scarcity. Many firms, if they were hiring at all, funneled newly minted lawyers to other areas within transactional, such as bankruptcy, or to litigation groups.
Retraining lawyers in new practices—"retooling," as it's pervasively termed—is easier said than done, and firms of all stripes are out hunting for associates with the requisite experience, the recruiters said.
Indeed.com, as of March 4, listed about 60 transactional associate positions in New York, according to Selvadurai, who said he recently received a call from an out-of-state firm seeking an M&A associate for its New Jersey office (though he declined to identify the firm).
"In any sort of group where there is a demand, a natural byproduct is going to be people moving," Selvadurai said.
Garber noted that transactional associates are fetching annual salaries of $150,000 to $180,000 in New Jersey, $185,000 to $265,000 in New York City, and $120,000 to $200,000 in Philadelphia.
Glenn Kazlow, administrative partner of Hackensack, New Jersey-based Cole Schotz, said, "They're harder to find, no question about it."
"Certainly there was a void that was created when deal flow stalled," Kazlow added. "Transactional departments who would routinely hire two, three, four associates right after law school and train them, stopped doing that. ... The more senior people were just hanging on, trying to get as much work as they could."
Cole Schotz—whose real estate practice was hit hardest by the market downturn—resisted layoffs and diverted some would-be transactional associates elsewhere, including to litigation practices, where many of them "stuck," Kazlow said.
Since the rebound, the firm has been hunting for laterals via recruiters, word-of-mouth and referrals by existing associates, and has been "fairly successful in having a few of them join us," Kazlow said. Such associates will be drawn to firms that have "enough business to fill their plate," he added, noting that Cole Schotz devotes about 40 percent of its practice to transactional work.
"When you have ambitious people who are trying to make their career, they want to make sure you have the work," Kazlow said.
James Leipold, executive director of the National Association for Law Placement (NALP), said the problem is twofold: Not only were existing associates rerouted to non-transactional practices, but there were fewer of them in general.
"If you look at the overall hiring volume of associates, it really took a hit during the recession," Leipold said.
Citing NALP statistics, he said BigLaw absorbed about 2,800 new associates in 2011—those who would have been summers during the recession's peak. That's almost half the roughly 5,200 associate hires from 2008.
"Associates get hired not necessarily to a specific group, but they're assigned where there's work," with many in years past going to "some of the counter-cycle practices" like bankruptcy, Leipold said.
He added that "lawyers are trained to be adaptable," but "the way [firms] define mid-level talent are people that have certain experiences."
Michael Mann, managing partner of the Princeton, New Jersey, office of Philadelphia-based Pepper Hamilton, recalled the hiring slowdowns of years past.
"I can't tell you how many clients and friends called me in 2009 when their kid or their nephew was graduating from law school," Mann said. "We all had the calls. ... I don't know what that kid's doing today. A lot of them aren't practicing."
With past hiring scale-backs, "even if it's 10 percent … you lose that float," Mann said. "As time goes on, you realize you didn't hire anybody those years."
Audrey Wisotsky, a Princeton partner of Pepper Hamilton who handles secondary mortgages and other transactions, said transactional associates "have not been trained up."
"There were no deals going on for a couple years—partners didn't even know what they were doing," she said.
During that period, firm associates were funneled to bankruptcy and commercial litigation, which were busy. Pepper Hamilton, like other firms, has utilized recruiters, though there's a limited pool of candidates, they said, noting that the shortage has been felt most in corporate securities and financial services groups.
Mann pointed out that even a so-called fifth-year transactional associate might have done stints in public-interest law or unrelated practices before starting to learn the craft.
"What you find is, the people you see don't really have the experience you're looking for," he said. "A lot of people were doing a mixed bag back then."
Larger firms can be nimbler when it comes to redistributing resources, but the shortage has been felt there, too, attorneys and recruiters said.
"We're looking, just like everybody else," said Alan Annex, chair of the New York corporate & securities practice at 1,800-lawyer Greenberg Traurig. "I'm always replenishing."
Still, "I think the size [of the firm] does help," Annex added.
"I can pull resources from Florida" or another office, he said. "It probably hurts the smaller firms more."
Within Greenberg Traurig's corporate practice, associates typically cycle around, then zero in on a specific group, such as M&A or securities, in the fourth or fifth year, Annex said.
The firm avoided layoffs in down years but, like other firms, had to redistribute.
"If someone moved into litigation because litigation was busy, it's hard to retool them," Annex said.
Annex pointed out that market recovery was not instantaneous.
"The uptick didn't just start," he said. "It was a slow enough uptick that we managed it."
Some said increased mobility means regionals can compete with firms the size of Greenberg Traurig for top talent, though Garber said transactional associates, in-demand or not, will continue to find it difficult to swim upstream from a regional.
"Notwithstanding the scarcity of this particular type of lawyer ... the firms still remain very, very selective," Garber said. "There's a reluctance to compromise on quality, on education."
AmLaw 100 firms "want the best of the best, they really do," he said.
Garber added that firms, unable to dig up mid-level associates, might reach for more experienced transactional lawyers—but the price is higher and loyalty might be lacking if the work isn't engaging enough.
According to Selvadurai, the shortage could mean firms are speeding less-experienced transactional associates to the front lines.
"One to three years of experience in the practice is better than having to retool somebody," he said.
Reprinted with permission from the March 6, 2015 edition of the New Jersey Law Journal © 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 - email@example.com or visit www.almreprints.com.
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