My Times interview from April 2008 – before Lehman Brothers’ collapse – with Eversheds’ partner Jon Roper about surving a downturn makes interesting reading now as we lurch towards a double dip recession. Things have turned out far worse than most expected – although quite a few of Roper’s predictions have proved correct.
Maintain a sense of perspective. I started my career in 1974, the year of the oil crisis, the three day week and one of the worst stock market crashes in recent history. When I arrived for my first day at work there was a car battery sitting on the partner’s desk with a fluorescent tube attached to it for the days we didn’t get power. I don’t envisage that happening again.
Don’t panic. Many lawyers will, in all likelihood, do rather well out of this downturn. When there’s less money around people fight harder over what remains, so commercial litigators should find themselves in high demand. Yes, there may well be a drop in transactional work, but there’ll always be deals and related corporate work about.
Hope that your firm didn’t get carried away during the good times. At the height of the early 90s boom, Jaques & Lewis (which subsequently became the London office of Eversheds) very nearly moved to a smart new premises. I remember the partners’ meeting: on one side was a bullish faction arguing that profits were up and it was time to re-locate, on the other was a cautious group concerned about the possibility of economic problems ahead. Fortunately, the cautious group edged it. Soon afterwards the property market crashed, plunging several firms who’d given the go ahead to similar moves into severe financial difficulties.
Strategy tends to be rather more carefully thought out these days. Even just going back a few years to the dot-com boom, there was a much greater element of simply hoping for the best. The fact that most firms now have full-time executive partners who’ve spent the last few years concentrating on long-term planning, should hold us all in good stead.
What we don’t have this time around is as much flexibility. When the IPOs dried up and M&A transactions slowed during the last recession, I found myself doing quite a lot of banking re-structuring work. Nowadays, with the profession much more specialist, lawyers won’t be able to turn their hands to other types of work in quite the same way. If the downturn is deep, firms may well find themselves having to implement re-training programmes.
Stick together. Competition has become such that lawyers can no longer afford to shut themselves away and forget about the rest of the firm. Just as you hope that colleagues specialising in other areas will send work your way when the market is buoyant, it’s important to point struggling clients in the direction of those at your firm with expertise in insolvency, restructuring and corporate recovery-related fields.
Watch out for the big fish. In the good times big law firms go after big clients. In the bad times they start reaching into smaller ponds. You may suddenly find that a client, with whom you thought you had a sole and exclusive relationship, has instructed another firm to act alongside you. Of course, that’s less likely to happen if you’ve fostered loyalty by maintaining high standards when there was plenty of work around.
Be ready to take advantage of unexpected opportunities. A change in economic conditions can throw up all kinds of possibilities that you wouldn’t necessarily foresee. We ended up using the last recession to recruit lawyers to bolster our corporate practice. Strange timing, you might think, but it was something we’d wanted to do for a while and the fact that things were relatively quiet meant that people were more willing to consider a move.
Keep your passport handy. The spread of law firms abroad will probably play a part in how this downturn is dealt with. If, for example, our Beijing office was busy and London was comparatively quiet, we’d certainly consider sending some associates — and maybe even a few partners — to work out there for a period.
The last thing we want to do is lose our lawyers. Not least because we put a lot of time and effort into recruiting and training them. There were, however, redundancies in the previous recession. Not very well-publicised, as I remember it, but if you trawl back through the archives of the legal press, you’ll see that it happened. Although it was nothing compared to the cull that took place at the investment banks.
Get ready to swot up on new legislation. Once people identify the cause of economic turmoil, laws are usually introduced to prevent a repeat performance. The 70s gave rise to a lot of counter-inflation regulations; this time it will probably be rules against banks lending to sub-prime borrowers. And, of course, more law means more work for lawyers. And so the cycle continues . . .
Jon Roper is a partner specialising in corporate finance at Eversheds