A $2 BILLION LAW FIRM JUST HAD A BANK RUN
Weil Gotshal & Manges brought in about $2 billion last year. Its partners averaged roughly $5.4 million each. On Wednesday its management committee recommended an "orderly wind-down", and partners are voting in the coming days.
How does a firm that profitable die? Matt Levine has the best explanation, via his Money Stuff newsletter (Bloomberg Opinion): it was a bank run.
The numbers
- About 1,200 lawyers in 16 offices. Clients include Apple, Goldman Sachs and Dow Chemical.
- $2.02 billion in revenue and $5.37 million in profit per partner, per the industry rankings.
- More than 30 partners left this year, including members of its executive committee, after merger talks with Willkie Farr & Gallagher fell apart.
- 95 years old. Weil worked on the Lehman, GM and Enron bankruptcies.
The run
Levine's argument, in short: a big firm runs on a few rainmakers who bring in far more than they take home. That surplus pays the partners who bring in little.
So a rival calls a $50 million rainmaker who keeps, say, $15 million. They offer her $30 million to bring her book across the street. She wins and so do they. Weil loses.
Then it compounds. Each exit leaves less profit for everyone still there, so the next pitch looks better than the last. Nobody wants to be the last partner stuck with the lease on the GM Building. In Levine's words: "So everyone sends out their resumes at the first sign of trouble, the end."
Yale law professor John Morley's paper "Why Law Firms Collapse" found the same pattern. At failed firms, profits and revenues "barely declined in the last year" before collapse, and many closed "when they were still quite profitable."
Why banks don't do this
Banks and hedge funds lock in their stars with non-competes, garden leave and deferred pay. Law firms can't. The lawyers' own ethics rules forbid "covenants not to compete," Morley notes, so a partner can walk out on Friday and bill a new firm on Monday. That's great for each lawyer. As Levine puts it: "It's certainly bad for Weil."
What happens now
According to Reuters, the plan is to wind down outside of court, with Davis Polk and AlixPartners advising. Associates and staff get 90 days of pay plus their year-end 2026 bonuses. Rival firms have been luring top partners with aggressive pay packages.
Weil follows Stroock, which dissolved in 2023, and Dewey & LeBoeuf and Howrey, which both went bankrupt.
Photo: Weil Gotshal signage. Reuters, via Investing.com.
