Amid a highly competitive legal market, most firms are always looking for strategic ways to grow and stay ahead of the competition. Traditional methods of growth, like one-off lateral hires and whole-firm acquisitions, come with quite significant risks. However, there is a new trend emerging that seeks to strike a balance between these two extremes: the large group liftouts. This approach, often seen as the "Goldilocks solution," is proving to be just right for many firms looking to expand their practices and client bases.

The Appeal of Group Lateral Hires

Since the beginning of June 2024, at least five Am Law 200 firms have engaged in significant group lateral hires. This was driven by the numerous advantages that group hires offer over individual lateral moves or full firm acquisitions.

Unlike one-off lateral hires, which might struggle to bring clients along, group hires often come with an established practice and a network of clients that follow the team. Doing this creates a much more reliable and stable transition.

Jennifer Henderson, a Partner at California recruiting firm Hatch Henderson Fivel, attributes the rise in group hires to the economic success firms experienced between 2019 and 2022. The success has seen firms invest more in the strategic acquisition of high-performing groups to leverage ongoing market activities.

More Stability for Clients

From the client's perspective, group hires provide both stability and reliability. A group of familiar faces moving together to a new firm is an assurance to the client that their services and relationships remain intact. According to Divya Bala, a California-based Partner recruiter, clients are more likely to follow a group if they are promised the same service but on a better platform.

For lawyers, group hires are more often the best when it comes to mitigating the risk of cultural misalignment that can occur with individual lateral moves. Law firms that push for the integration of cohesive grouping makes transitions smoother and more effective.

Jon Truster of Macrae notes that entire practice groups, such as M&A teams, are more likely to bring their clients along, making them highly desirable targets for firms looking to expand.

Recent Trends and High-Profile Moves

The popular trend of group lateral hiring is changing the current landscape when it comes to talent acquisition, making hiring dynamic and fast-paced. In just one day, Law.com reported on three major group moves involving at least 11 lawyers each:

• Latham & Watkins lost 11 restructuring lawyers to Willkie Farr & Gallagher's new office in Munich, Germany.
• Burns & Levinson lost 13 IP lawyers to ArentFox Schiff's Boston office.
• Bryan Cave Leighton Paisner lost 12 financial services investigations lawyers to Norton Rose Fulbright.

This highlights an even broader trend seen earlier in June when 11 private credit partners moved from King & Spalding to Paul Hastings, and a five-lawyer group transitioned from Goodwin Procter to Allen Matkins.

The Formation and Attraction of Portable Groups

When it comes to creating both reliable and efficient portable groups, firms must be willing to acquire several factors to align. For starters, these groups must be cohesive, with established mentorship and career trajectories that are synchronized.

Dan Hatch of Hatch Henderson Fivel points out that the most successful group moves often involve a lead partner who drives the decision-making process. This hierarchical structure simplifies the transition and enhances group cohesion.

Dean Pappas, who moved from Goodwin Procter to Allen Matkins with four colleagues, emphasizes the importance of mentor relationships in these transitions. His experience underscores how junior lawyers often follow mentors, creating a tightly-knit group that can transition seamlessly to a new firm.

Financial and Strategic Implications

While group hiring is a big plus for many firms, it also comes with significant downsides. A good example of this is group exits. Group exits can have a destabilizing impact on the firms they leave behind.

For example, Burns & Levinson found itself in a precarious position after losing a significant portion of its attorneys to ArentFox Schiff, prompting considerations of a merger. To mitigate this, some firms have chosen to break up the groups into smaller numbers when letting people go. They opt to only let go of those who no longer fit their economic model or practice focus.

The case of Munger Tolles & Olson, which lost almost its entire corporate department to Baker McKenzie, highlights the pressures firms face to meet clients' expanding needs. This move solidified Munger's position as a litigation-focused firm, while Baker McKenzie benefitted from the acquisition by enhancing its corporate capabilities.

The Evolving Market for Talent

With competition for legal talent fiercer than ever, full-service firms that boast a global reach are trying to outperform small firms by offering robust compensation packages that are better positioned to attract group hires.

This has made it increasingly difficult for boutique firms to retain top talent long-term. The ‘Goldilocks solution’ of large group liftouts offers a balanced approach to law firm growth. It combines the stability and client continuity of whole-firm acquisitions with the strategic flexibility of lateral hires.

As the legal market continues to evolve, firms that can successfully navigate this middle path are likely to achieve sustainable growth and maintain a competitive edge.

For firms looking to engage in large group liftouts or other strategic hiring initiatives, Legal.io offers a comprehensive platform to connect with top legal talent. Whether it's for temporary or permanent roles, Legal.io facilitates the hiring process to ensure a smooth transition and integration of new teams.

Additionally, for legal professionals seeking new opportunities, the Legal.io job board is an excellent resource to find positions that match their expertise, while law firms can post job openings to attract the right candidates.

Understanding the market and compensation trends is also crucial for both firms and individuals. Legal.io's salaries database provides valuable insights into the current compensation landscape, helping to inform strategic decisions.

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