Corporate law firms in Texas are going to take a financial hit from the one-two punch of the coronavirus and plunging oil prices, according to one of the nation’s leading law firm management experts.
The disruption could range from minimal for some firms to quite significant for other legal practices, according to Kent Zimmermann, a consultant at Chicago-based Zeughauser Group.
Zimmermann, who has advised several Texas law firms during the past few years, said the COVID-19 crisis is also a huge opportunity for some struggling law firms to make major and controversial senior management changes, including pushing underperforming lawyers out the door.
“Is this going to impact the bottom line of law firms? Yes,” he said. “There will be a financial hit. Many law firms in Texas will have a demand-challenged year. But as the former mayor of Chicago (Rahm Emanuel) infamously said, ‘Don’t let a good crisis go to waste.’”
Zimmermann said the crisis will impact several areas of law firm management, including recruiting, business development, summer associate programs and firm training.
“For most lawyers, it is a lot easier to do business development and pitch business to clients in person,” he said. “After the last financial crisis, several law firms rescinded offers to first year associates and curtailed their summer clerkship programs. It is too early to know how long this will go on or what the impact will be.”
Courts have shutdown nearly all trials and suspended most hearings for the next few weeks, which will mean fewer billable hours for lawyers in litigation sections. At the same time, the decline in oil prices will have a negative impact on practices ranging from mergers and acquisitions to capital markets.
Law firms with significant bankruptcy, restructuring and regulatory practices should see an uptick in business.
“As the federal government acts to stimulate the economy, and it seems almost certain that it will, lawyers will be needed to help businesses and government agencies navigate the laws and regulations,” he said.
Zimmermann noted that firms with large public finance and municipal bond practices should reap the benefits.
At the same time, the crisis presents law firm leaders with an opportunity to make some significant and difficult internal reforms.
“This crisis gives law firm management the cover to cut underperforming partners from the firm,” Zimmermann said. “The crisis allows firm leaders to make changes quickly and without as much internal blowback as they would have experienced before the crisis.”