March 30, 2012

A CAUTIONARY NOTE FROM DEWEY & LEBOEUF: “In simple terms, it appears that Dewey (a) overpaid for M&A both big (firm mergers) and small (lateral partners), and (b) acted like it was making more money than it was, while not fully recognizing liabilities. One key to the Dewey story is the degree to which the wounds are self-inflicted, so the tendency of most folks will be to say ‘Well, there are no lessons there for us to learn, we would never make those mistakes.’ . . . The irony is that law, which should be managing to longer-term time horizons, seems to be more short-term oriented than most other businesses. When the Great Recession struck in 2008, most companies were able to do a “great reset,” re-setting stakeholder expectations by cleaning up balance sheets, lowering short-term profit expectations and making the case for strategic investments. But the folks running law firms don’t seem to feel they have the latitude to fess up that firms need to revamp to focus on client value, not near-term profits. That’s partly because in a cash-basis business they do have less latitude to clean things up, but also reflects deeper issues for which Dewey is an avatar, not an outlier.”

Related: The $60 an hour lawyer?