Thursday, January 30, 2003

Brobeck's bubble burst

Brobeck Dissolving

Brenda Sandburg
The Recorder
Brobeck, Phleger & Harrison — just two years ago the most profitable firm in the Bay Area — is dissolving following the collapse of merger negotiations with Philadelphia-based Morgan, Lewis & Bockius. [more…]

This has been in the cards a while. When you rack up $90m in debt, don’t pay your bills and have tens of thousands of square feet of office space you’re not using, your choices are pretty slim. They tried merging with Morgan Lewis & Bockius, but my bet (and this is just a guess) is that the Brobeck guys were just a tad strong in their demands. When your hat is in your hand you shouldn’t hold out for richer offers.

A little over a year ago, I predicted that Brobeck (which was then more than 600 lawyers) would be at 300 lawyers by this summer. Turns out I was wrong – I was being conservative.

The firm’s demise is really rather spectacular. I reported on this back in May of last year:

It has been a tough year for Brobeck. Their attorney ranks have shrunk by 26% (mostly by layoffs, but attrition is included), they pulled their first-of-a-kind-for-law-firms ad campaign on CNN and MSNBC (and the CMO left as a result)their managing partner (Tower Snow) was ousted, profits per partner are down more than 40%, [and] they let more than half of their team of KM lawyers go. [full post]

And it only got worse. When Snow ultimately left to go to Clifford Chance, he brought Jeff Rovner with him which marked the end of Brobeck’s well- publicized KM efforts. (At its peak, Rovner led a team of five attorneys in a full-time KM initiative. Rovner is now at Clifford Chance – as head of KM for Clifford Chance Americas – and the other KM lawyers were let go.) Snow’s CMO (David Geyer) is now the CMO at Orrick. The lawyer attrition got worse – and the debt and unused office space just got higher and higher.

Morgan Lewis & Bockius made the right call. While Morgan Lewis needs a strong west coast presence, their culture is 180 degrees from Brobeck’s ax-at-the-door culture. It would have been a match made in hell – and I’ll be willing to wager that a number of the more progressive lawyers from Brobeck will end up at Morgan Lewis anyway once the dust settles.

What a shame. Brobeck had an opportunity to leave a legacy of forward-thinking, aggressive business-oriented law firm management. Instead, they’ll be remembered for the back-stabbing, the in-fighting, and the implosion triggered by a pile of debt and a whole lot of bitterness. Out of Brobeck’s ashes, the largest law firm in the world (Clifford Chance) got bigger. And if a significant number of lawyers end up with Morgan Lewis, Brobeck will end up just making two already-strong law firms stronger.

For many of the non-law firm press, the angle on this will be that the law firm that rode the .com wave finally got its due. There’s a whole lot more to it than that. But it’ll at least be a nice sound bite.

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