WHILE REFUSING to accept defeat over a potential economic downturn this year, law firms globally are anticipating a shift in priorities. Some firms plan to move lawyers between practices as they are needed and retrain those in less profitable areas to be skilled in insolvency, restructuring and litigation.
Blake Dawson, which has one of the largest insolvency practices in the country, has in recent years had people within other practices trained in insolvency in case they are needed in the event of an economic downturn. Melbourne partner Michael Sloan says the firm has been busy despite 16 years of economic growth, but said the past week has seen a number of large matters come through.
“We have been called upon in relation to two or three major matters in the past couple of days,” Sloan said last Friday. “There is no mistaking that the rather spectacular fall on Tuesday has created some degree of stress in a number of highly-leveraged companies. That does entail necessities of providing insolvency advice,” he said.
Sloan told Lawyers Weekly that if there were to be a recession or a crash, things would change quite markedly in terms of where lawyers would be placed within firms nationally. “You’d get a lot of rebadging. Basically what has happened in a lot of firms is that insolvency departments have become non-existent or absolutely tiny. Some major firms don’t even have insolvency partners in major offices — or they’d be part-time players at best,” he said.
Sloan says this is a national and common practice, and noted that one partner at PricewaterhouseCoopers told him that the firm is considering training up people in other areas of the firm, “so they can talk the talk and do the work”. At Blakes, though, “given that we have been doing a lot of large-scale work, we’ve got people in other teams who know what to do,” he said.
“We’re not concerned because we know that our employment team, or our litigation people, for example, have dealt with this work outside a recession. So we know if it comes in we have the insolvency team managing it all but the other areas of the firm are able to come in. So it’s not like we have one tiny team that will have to spread out. We have eight or ten insolvency partners across the country, with teams of people supporting them.”
Blakes’ Sydney office is looking to recruit more lawyers to its insolvency practice as well. “Our Sydney insolvency team is second only in average chargeable hours to corporate. And corporate is dealing with BHP,” he said.
But Sloan plays down the impact an economic crash or recession would have in the short-term on work of firms. “One insolvency partner, who is the main HIH partner here, Raymon Mainsbridge, says he can remember going down in 1987 and watching the share market fall and thinking ‘great, we’re in insolvency’. But it wasn’t for months that the work did flow in and then it was a pretty steady stream for about five years. If that were to occur then we would have to be recruiting more broadly than we are. But maybe if, I don’t know, AMP fell over or something like that then it would be a little different,” Sloan joked.
Mahlab Recruitment consultants echo the non-urgency of Sloan’s and Blakes’ plans for the future. According to Alex Neskes, Mahlab Recruitment’s manager for private practice, while firms anticipate more work in insolvency, litigation and restructuring, for example, they won’t yet be rushing to recruit heavily in these areas. Neskes, too, expects firms to first find where they could move people from other areas.
“I would anticipate that in insolvency, because we haven’t had a lot of large administration work and voluntary administrations and so on, there will not be a lot of lawyers at two to three years with experience in this area. So when work starts flowing through they will get lawyers from corporate and commercial, with experience in the Corporations Act, to work in these areas. Banking and finance lawyers who have had experience working in backend matters will probably continue to be busy even if things do get difficult, because there are transferable skills there too,” she said.
Neskes notes that there has been a shift in recruiting patterns from firms in anticipation of the changes to the economy. But, she argues there needs to be a strong case for recruitment and firms will ensure strong utilisation in each practice area before moving to recruitment.
However, the market is beginning to see some active recruitment drives in this area. The latter half of last year saw firms appropriating recruitment agencies such as Mahlab Recruitment with requests for lawyers in litigation and insolvency in particular. “They had active briefs out there to recruit, partly because of work they had received and party because they expected more work in this area this year. Large national firms in particular anticipate some large insolvency work coming through,” said Neskes.
The market generally has some very driven insolvency partners who have been working on the sideline in recent years. Blakes’ Sloan said that given that the last economic recession was in 1991, a good number of insolvency practitioners have ended up in top management positions within firms. “But a lot of them have now rebadged and have gone back to doing what they normally did,” he said.
He acknowledged that there has been some large scale insolvency work during that period, including HIH and Ansett, so there is still a reasonable number practicing in the area. “You can still get some large, complex and difficult matters that sustain practices. But I would say their practices have diminished in size generally speaking — though at Blakes we have increased, as they have at Henry Davis York,” Sloan said.