Weil, Gotshal & Manges is moving to wind down after 95 years, a collapse that leaves in-house legal teams with an outside counsel question few panel reviews are built to answer. What happens to your matters when the firm handling them closes?
The New York firm, founded in 1931, employs about 1200 lawyers worldwide and generates more than $2 billion in annual revenue. On Oct. 28, its management committee recommended that the firm “pursue an orderly wind-down,” with partners expected to vote within days. A Weil spokesperson said the firm would keep serving clients during the process, which is expected to run over the coming months.
Weil intends to complete the wind-down outside bankruptcy and has brought in restructuring adviser AlixPartners, according to a person familiar with the matter.
The firm built much of its reputation on other companies’ distress. It handled the Enron and Lehman Brothers bankruptcies, among other high-profile matters. Its own closure would be one of the most significant failures in the US legal industry since Dewey & LeBoeuf collapsed in 2012.
A handful of partner exits set off the Weil Gotshal collapse
Weil had no shortage of revenue or clients. What it lost was the confidence of its partners.
In September, Michael Aiello, a leading dealmaker and reportedly the firm’s highest-paid partner, left for rival Cravath and took 5 partners with him. Aiello oversaw a corporate practice of more than 600 people. His exit helped trigger a broader wave of departures.
Weil then explored a merger with Willkie Farr & Gallagher, but the talks did not produce a deal. The wind-down recommendation followed.
The speed is what stands out. A firm with a roster of major corporate clients went from losing a group of senior dealmakers in September to planning its own closure by late October.
For general counsel, that timeline is the warning. A firm can look financially healthy on paper and still come apart faster than its clients can plan around it.
Star-partner dependence is an outside counsel risk too
The collapse has been widely read as a lesson in what happens when a business leans heavily on a few high-value individuals. Top partners win work and draw other lawyers to a firm. When client relationships and know-how sit with a small group, losing that group can shake everything around it.
Legal departments face a mirror image of that risk. Many corporate legal teams hire a firm, but in practice they rely on a particular partner and the team around that partner. When the partner moves, the client usually decides whether to follow the lawyer, stay with the firm, or start again elsewhere.
A dissolution removes the middle option. Clients with active matters at Weil will need to decide where their work goes next, and that choice may depend on where individual lawyers land. Moving a live deal, a piece of litigation, or a restructuring partway through brings practical work, from transferring files and clearing conflicts at the new firm to agreeing terms and making sure no deadline slips during the handover.
Departing lawyers do not always move as one. A company that used Weil for M&A, litigation, and restructuring could find its relationships spread across several new firms.
Panel management may need a firm-failure contingency plan
The Weil episode gives in-house teams reason to look at outside counsel concentration the way procurement teams look at supplier risk.
That could mean asking practical questions during panel reviews. How much of the department’s work sits with a single firm, or with a single partner? Does more than one lawyer at the firm know each important matter? Is there a second firm already familiar with the company’s business that could step in quickly?
Panel reviews usually weigh expertise, rates, and service. Weil’s story suggests that partner turnover and stalled merger talks at a key firm may deserve a place next to those measures.
None of this means abandoning relationship-led hiring. Close relationships with trusted partners are a large part of why outside counsel works well. The lesson for clients mirrors the one for firm leaders: keep the value of strong individual relationships without letting any one of them become a single point of failure.
Much about Weil’s wind-down is still unsettled, including the outcome of the partnership vote, the timing of the closure, and where the firm’s remaining practice groups and their clients end up. For legal departments, the more lasting question may be how many other firms carry the same concentration risk, and whether clients will spot it before their lawyers start to leave.
Source:
Fox Business
Fortune
