US corporate lawyers are on track to receive record bonuses this year as a wave of dealmaking and fierce competition between firms drives up pay across the industry.
New York-based Cravath, Swaine & Moore kicked off bonus season for the biggest US corporate law firms last month, telling senior associates they would be in line for year-end bonuses of as much as $115,000 for 2021.
Since then, large US law firms including Boies Schiller Flexner and Fried Frank have matched the range set by Cravath, offering lawyers between $15,000 and $115,000, depending on seniority. Senior associates with eight years’ experience were paid year-end bonuses of up to $100,000 in 2020 at top firms.
According to BigLaw Investor, which tracks pay at the top tier of US law firms, senior associates at the highest-paying firms are set to receive more than $500,000 for the year, in salary and bonuses.
Top US law firms have been among the biggest winners from the burst of mergers and acquisitions since the pandemic, as companies seek to capitalise on the turmoil and private equity bosses look to deploy billions of dollars of funds.
“Law firms are doing whatever it takes to ensure associates are happy,” said Mark Jungers, co-founder of recruitment firm Lippman Jungers Bala. “They are very difficult to replace, particularly in areas like M&A and private equity and . . . the [big] firms have done really well this year.”
Global M&A activity this year is set to overtake the record hit before the financial crisis in 2007, when $4.3tn worth of deals were announced, according to data from Refinitiv.
That has delivered a windfall for firms providing legal advice on the deals. Elite Wall Street firm Simpson Thacher & Bartlett, for example, advised on almost 200 deals worth about $457bn in the first three quarters of the year, according to Global Data.
However, the unrelenting flow of deals has deepened concerns over lawyers facing burnout.
According to Leopard Solutions, a legal business intelligence company, the number of lawyers quitting across the 4,200 international firms it monitors rose almost 50 per cent in the first nine months of this year, compared with the same period in 2020. The number of associates dropping out was 27 per cent higher than in 2019.
“This time of the year is very tough, loads of deals get completed and it’s the end of the financial year for US companies,” said a London-based managing partner of an international firm. “The pandemic has really taken a toll on people.”
In response, US firms including New York-based Paul, Weiss, whose partners received $5.4m on average last year, are paying “special” discretionary bonuses on top of the December payouts. In a memo seen by the Financial Times, chair Brad Karp said the law firm had “been extraordinarily busy and we are on pace to have the strongest year in our history”.
Meanwhile Boies Schiller told associates it would pay those who billed more than 2,600 hours this year bonuses of between $30,000 and $150,000.
Cadwalader, Wickersham & Taft, another US law firm, said it would pay additional bonuses equal to 120 per cent of the market rate for those who billed 2,200 hours.
Associates do not charge for every hour they work, meaning those billing more than 2,000 hours in a year are working many more. A female partner at Skadden Arps, Slate, Meagher & Flom said billing that number of hours was “brutal”.