Weil, Gotshal & Manges wrote the playbook on corporate failure. It ran the bankruptcies of Lehman Brothers, General Motors and Enron. Now it has hired a bankruptcy lawyer. The client is Weil. That's the kind of irony you'd cut from a movie script for being too neat.
The Journal's Erin Mulvaney, Cara Lombardo and Alexander Gladstone report that Weil has tapped Brian Resnick, a bankruptcy partner at Davis Polk. His job is to advise on the firm's options if things keep getting worse. Another Davis Polk partner handled Weil's merger talks. Those talks fell through last week. Since then, at least four more top partners have said they're leaving for rivals. The partner elected to lead the firm next told it in September she won't take the job. The management committee met all day Sunday and again Monday, with fewer members than it used to have.
The numbers make the fall stranger. Founded in 1931, Weil took in $2.1 billion last year, by American Lawyer's count. Profit per equity partner topped $5.6 million. Last month the Journal reported that the head of its more than 600-person corporate practice is taking M&A partners to Cravath. On Tuesday, Skadden said two Weil litigation partners are joining it. Sidley Austin, White & Case and Simpson Thacher have all been getting résumés from Weil partners in other groups. Rivals are also courting the head of the restructuring practice, the very group that made Weil famous. He's told partners he isn't planning to leave.
Why a law firm can fall this fast
A law firm has no factories and no patents. Its assets ride the elevator down every night. When partners leave, their clients go too, and the fixed costs stay. At Weil that includes some 380,000 square feet of office space in the General Motors Building, right across from Central Park. Once a few big names walk, the rest start to worry about being last out. That's a run on the bank, lawyer style. Weil's own restructuring team has watched it happen to other people's companies for decades.
Our read
This is a Career story, and a partnership one. If you're a partner in a law, accounting or medical practice, your paycheck and a chunk of your net worth sit in the same place. Your capital account is in the firm. Your draw comes from the firm. Often the loan you took to buy in is tied to the firm. And depending on how the partnership is set up, you may stand behind some of its debts and leases too. A $5.6 million year feels permanent. Weil's partners had one last year. The experts in failure needed a plan B, and so do you.
The concrete thing in your plan is how much of your wealth depends on one firm. This week, add up your capital account, any loan tied to it, and the retirement money that's still invested in the practice. If that's most of what you have, your plan has one point of failure. Build the outside pile on purpose, a little each year. We'd rather you own the umbrella before the lease comes due. That's what a review is for.