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Editor’s Note: This story is adapted from ALM’s Mid-Market Report. For more business of law coverage exclusively geared toward midsize firms, sign up for a free trial subscription to ALM’s weekly newsletter, The Mid-Market Report.
Lately it seems all eyes are on Boston, as out-of-state firms size up which local lawyers are ripe for the picking.
"For many years, it appeared to be kind of a closed market to the outside… it was just impossible to break into," said Jeff Coburn, a midsize law firm consultant based in Boston. "That has all gone by the boards… it has become arguably one of the most attractive places for law firms to come in."
The local life sciences, technology and biotech industries are drawing big firms into the city, along with increasing activity in financial services and private equity.
"The connection between what’s happening in the market and what’s happening in our growth is around having a knowledge economy and life sciences growth," Bill Dillon, co-managing director of Boston-based Goulston & Storrs, said.
Some of the most recent entrants are Arent Fox, which merged with midsize firm Posternak Blankstein & Lund; Orrick, Herrington & Sutcliffe, which hired lawyers out of Ropes & Gray's cybersecurity practice; and Morrison & Foerster, which took a sizeable group from midsize firm Riemer & Braunstein. Atlanta-based midsize firm Freeman Mathis & Gary also entered the market this year, taking 18 Boston lawyers from LeClairRyan.
"We’re a small town, but there’s so much going on here, it’s packed," Coburn said. "It’s just a place to feast on talent."
Midsize firm leaders in Boston said they're quite aware of the influx of large firms, and they're not fearful, but they're also not letting their guard down.
Based on the National Law Journal's NLJ500 data, which ranks U.S. law firms by head count, there were 13 midsize firms with their largest office in Boston in 2018. Nine of them saw head count increase or stay steady from 2017 to 2018, and five saw head count grow by 4 percent or more.
"As a firm, one thing that you can never take for granted is your talent," said Deborah Manus, managing partner of Nutter McClennen & Fish, which has offices in Boston and Hyannis, Massachusetts. "We know that’s what’s happening in the market, so we’re being very conscious about the need to not just maintain, but grow."
Martin Fantozzi, also a co-managing director of Goulston & Storrs, said he and his colleagues get calls from headhunters on an almost daily basis. That includes merger offers from time to time, which his firm is not interested in. Goulston & Storrs is constantly thinking about how to keep up and stay ahead in the race for talent, he said.
"To some extent, I do think the firms that are here today and are thriving are compelling firms, and are doing well," Fantozzi said. "On the other hand, we don’t take anything for granted. I don’t know that the recent influx over the last two to three years, that we’ve seen the end of it."
According to Barbarians at the Gate, a report released last year by ALM Intelligence, the number of law firms with a presence in Boston increased by 79 percent from 2001 to 2017, as 26 of the largest 250 law firms by head count opened offices in the city during that time. That was the eighth highest number of office openings among U.S. cities. The city also came in sixth for the number of lateral partner moves—over 1,300 of them—taking place during that time period.
That report noted the risks to native firms of losing clients when big firms come to town. Only one Boston firm with more than 150 lawyers saw local head count increase from 2001 to 2017, the report said.
And several one-time mainstays of the Boston legal community shut their doors in the years leading up to that period—firms like Herrick & Smith, Gaston & Snow, Hill & Barlow and Testa, Hurwitz & Thibeault.
But a number of Boston-based midsize law firms, many of which have fewer than 150 lawyers, have managed to stick around, even as large, out-of-town firms moved in. Those that remain appear to have found their competitive advantage in the city.
"The old network of long, old-time firms is still there," Coburn said, while acknowledging that several have closed or merged. "They’re doing great and the lawyers in them are saying, 'I’d rather be here, getting good money, good rates and good work.'"
John McGivney, managing partner of Boston's Rubin and Rudman, said the large firms that enter Boston by bringing on lawyers from smaller firms may not have the stickiness of midsize shops, because of their rate structures.
"There’s an immediate rate pressure on the lawyers in that office… to bring their rates up to scale with New York," he said, but most New England regional clients cannot support that rate structure.
"Often they look for other firms where they can go… that makes midsize firms attractive to partners," McGivney said.
Fantozzi said Goulston & Storrs has recruited a number of laterals from larger firms over the last several years. Some of those large firms did not live up to those lawyers' expectations for the ability to collaborate across a national or international platform.
"The intimacy you can have in this environment and the personal connectedness you can have in this environment is different," he said. "In order to collaborate, you have to trust one another, and usually that means you have to know each other."
Manus, of Nutter, echoed the same, saying "a lot of people like to work at a place that is a true partnership." And that helps the firm gain and retain business.
"That talent advantage also translates into a value advantage for clients," she said. "They do want high-level partner touch... they want to know who they’re hiring, and they’re under pressure to deliver value to whoever they report to."
Next week, we'll look at how some midsize firms are benefiting from the increased presence of Big Law in Boston, and what midsize firms in other cities can learn from their success.
Meghan Tribe contributed to this article.
Boston skyline (Photo: Shutterstock.com)