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This week, the corporate law industry received a clear reminder of the materialistic world we live in. Paul, Weiss, Rifkind, Wharton & Garrison, a US law firm, poached several top private equity partners from its larger rival, Kirkland & Ellis — individuals who make up to $20 million per year.
This is another blow to the concept of loyalty, which used to keep lawyers at elite firms in London and New York for their entire careers. These professionals would advance in a steady, predetermined manner, earning higher pay as they grew older and more senior. However, over the past decade, this system has crumbled as partnerships have fragmented.
This change is a result of the continuous growth of private equity finance, despite recent setbacks due to rising interest rates. When clients are constantly raising funds, acquiring companies, and structuring deals for themselves, their investors, and executives, it is natural for lawyers to seek a bigger piece of the pie.
This situation poses challenges for law firm leaders trying to retain their best partners. These individuals not only have the option to defect and earn more money elsewhere, but they also see no moral obligation to resist temptation. As one senior lawyer sadly states, “Loyalty used to mean something, but then pay started rising dramatically and, one by one, the lockstep systems broke.”
Firms now entice partners from other firms by offering higher pay guarantees, rather than relying solely on internal promotions. These lawyers bring their business with them, although they cannot solicit for it before leaving. In fact, some lawyers even hire their own legal counsel to advise them on what they can disclose to clients before switching firms.
Kirkland & Ellis is partly to blame for the increased mobility of lawyers. By rejecting tradition and poaching partners from other firms, it has become the world’s highest grossing law firm. While rival firms may criticize Kirkland behind closed doors, the numbers speak for themselves: its 505 equity partners earned an average of $7.5 million each last year.
Nevertheless, the criticism has not stopped other firms from adopting similar tactics. The clash between Kirkland and Paul Weiss, a New York law firm established in 1875, is a clear example. Paul Weiss recently hired four private equity partners from Kirkland’s London office, in response to Kirkland’s poaching of the head of Paul Weiss’s London office.
This dispute highlights the fact that private equity partners are now the most sought-after recruits. While facilitating such deals may be less glamorous than advising renowned public companies, it is undoubtedly a lucrative business. Private equity firms like Blackstone, Bain Capital, and CVC Capital Partners provide lawyers with a constant stream of transactions.
These firms first raise multibillion-dollar funds for company buyouts, which alone keeps lawyers busy. According to estimates, US private equity firms spend more than 4% of their fund commitments on legal costs for typical M&A deals. With CVC recently raising a €26 billion buyout fund, there are significant opportunities for lawyers to benefit.
Once the funds start acquiring companies, lawyers on all sides must negotiate not only the deal terms but also how the future rewards from each company’s growth will be distributed among investors and executives. Countless billable hours are spent ensuring financial alignment and the wealth of all parties if the business prospers.
Private equity firms now allocate much of this negotiation work to external lawyers due to their specialized expertise. Ramy Wahbeh, co-leader of private equity at Sidley, a US law firm, reflects on this trend, saying, “I am getting older but my clients are getting younger.” He recently joined Sidley from Paul Weiss after working there for 18 years.
The key is to establish trust with one of the top private equity firms in the world. This loyalty and trust used to reside among partners at elite law firms, but it now exists between private equity dealmakers and their preferred individual lawyers. This shift has not only disrupted the traditional lockstep model but also energized the talent transfer market.
Similar trends can be observed in other industries, such as entertainment and sports. As businesses expand globally and technology enables top-tier individuals to extend their reach, more rewards are channeled toward these stars. Traditional employment structures that foster team loyalty get swept away — a phenomenon that applies to both football players and lawyers.
What sets private equity lawyers apart is their emulation of their clients’ behavior in addition to their economic incentives. Firms like CVC are known for a “eat what you kill” ethos, allowing financiers to retain a portion of the deals they make. In contrast, US lockstep partnerships built their reputation by serving companies like IBM and General Motors, embodying a more conservative approach. Ultimately, these lawyers exist because of the transactions they facilitate.
These changes present risks for law firms. The need to compete for top talent drives up costs and creates fragile partnerships. It also exposes individuals to risks, as partners may not provide support if deals dry up. Nevertheless, this behavior has become ingrained in the legal profession.
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