The year in headlines – the top stories of 2021 and the trends they reflect
We review a year characterised by record deal markets, a war for talent, geopolitical tension and all things ESG
In January, Coca Cola’s recently installed general counsel, Bradley Gayton, unveiled a series of diversity targets for its US advisers that included the levying of a non-refundable fee reduction for non-compliant firms. ‘We are too quick to celebrate stagnant progress and reward intention,’ Gayton said in an open letter sent out to all Coca Cola’s US advisers. The scheme was among the most radical yet proposed. And although its future was brought into question in April when Gayton stepped down in a surprise move, it set the tone for a year in which a succession of GCs underlined the need for their advisers to improve their diversity and inclusion credentials as part of the broader ESG drive, which we have been tracking throughout the year.
This has been a year in which law firms' management of their most important resource – their lawyers – has been tested. Not, as was feared at the outset of the Covid-19 pandemic, due to plunging revenue and profits, but because of an intense competition for talent generated by red hot global deal markets. Magic circle UK firms have fallen prey to raids from their more profitable US rivals in London for more than two decades, but Slaughter and May’s loss of up-and-coming corporate partner Murray Cox to Weil nevertheless caught the eye for its rarity. While Slaughters remains wedded to a pure lockstep model, it has this year modernised its management structure, ushering in a managing partner and chief operating officer. This month, however, fellow blue chip independent, New York’s Cravath Swaine & Moore, called it a day and resolved to modify its lockstep, Davis Polk having made a similar move last year. In September, Cravath suffered the indignity of losing a corporate partner of its own, in its home hunting ground of New York. Notably, the beneficiary was a UK Magic Circle firm, Freshfields Bruckhaus Deringer, a symbolic achievement for the firm. It seems inevitable that the remaining lockstep firms will follow suit in due course.
This story, on how New York firm Ellenoff Grossman & Schole was cashing in on a record run of special purpose acquisition company (SPAC) IPOs, caught the imagination of Global Legal Post readers. According to data supplied by Refinitiv Deals Intelligence, the mid-sized firm had advised on more deals than its closets rivals, international giants Kirkland & Ellis and Skadden. More generally, SPACs played a key role in powering deal markets to record levels. Last month, global M&A activity smashed through the $5trn barrier for the first time on record as companies rushed to make deals while interest rates remain low. That $5trn milestone was 40% more than the value of transactions recorded in the whole of 2020 and almost a fifth more than the previous annual record of $4.2trn hit in 2015. That translated into robust sets of law firm financial results on both sides of the Atlantic.
Given China's uncompromising clampdown on Hong Kong's pro democracy movement last year, international law firms operating out of Asia's premier legal hub were braced for a difficult year. But the imposition of sanctions on Essex Court Chambers by China over a legal opinion by four of its tenants on the treatment of the Uighurs took everybody by surprise. It had a direct impact on the leading London barristers' chambers – four of its QCs with strong Asia connections subsequently left the set – and served as a warning to law firms to keep their heads down, which they duly did. However, Mayer Brown risked China’s anger when it backed out of assisting its longtime client, the University of Hong Kong, in efforts to remove a monument commemorating the Tiananmen Square massacre. The affair neatly illustrated the challenge posed to international law firms that must make compromises to operate globally and, for that matter, advise unpopular clients, but are also coming under increasing pressure in their home markets to live by their stated values. Watch this space.
Much has been written about the permanent shift towards flexible working caused by Covid-19. At first, home working was a pandemic-imposed necessity; then it became a weapon in the war for talent as firms sought ways to persuade their associates to stick with them that went beyond simply showering them with bonuses and pay rises. An impatient letter by Morgan Stanley’s chief legal officer, Eric Grossman, in July complaining of a ‘lack of urgency’ among lawyers to return to the office went firmly against the grain. But he made a good point in that in the long run the firm apprenticeship model requires young lawyers to work together physically. Yes, hybrid working is here to stay – and will bring with it major benefits if managed properly, particularly in relation to diversity and inclusion – but office-based work will remain a crucial part of the equation.
Flexible working is a crucial weapon in the drive to promote diversity and inclusion. The importance of role models is also well understood and this year has been notable for the number of women being appointed to key management positions at leading law firms. The election by Magic Circle UK firm Linklaters of global head of corporate Aedamar Comiskey as its new senior partner, the firm’s first female senior partner in its almost 200-year history, is a case in point. Other notable appointments have been Sidley Austin's election of Yvette Ostolaza as the next chair of its management committee, making her the first Latina lawyer to be appointed to lead a top ten US law firm. And in March, Gibson Dunn announced that New York partner Barbara Becker had been elected as its next chair and managing partner to succeed longstanding head Ken Doran.
In the absence of any big ticket law firm mergers, Mishcon de Reya’s decision to go public at a potential valuation of £750m is perhaps the biggest strategic story of the year. Next year’s flotation promises to make it by far the most valuable listed firm on the planet. The much-admired firm said an IPO would enable it to 'invest in high-growth potential opportunities' and 'accelerate its expansion in the provision of legal and advisory services'. Irwin Mitchell is also understood to be gearing up for a stock market float at a hoped-for valuation of £500m.