The demand for successful lawyers on Wall Street is so high these days that the bidding wars between law firms for their services resemble the frenzy between teams signing star athletes.
Eight-figure salary packages, which were rare a decade ago, are increasingly common for corporate lawyers at the top. their game, and many of these new big names have one thing in common: private equity.
In recent years, highly profitable private equity giants such as Apollo, Blackstone and KKR have expanded beyond corporate acquisitions into real estate, private lending, insurance and other businesses, amassing trillions of dollars in assets. As their demand for legal services has skyrocketed, they have become major sources of revenue for law firms.
This is driving up attorney salaries across the industry, including at some of Wall Street’s most prestigious firms like Kirkland & Ellis; Simpson Thacher & Bartlett; Davis Polk; Latham & Watkins; and Paul, Weiss, Rifkind, Wharton & Garrison. Lawyers with close ties to private equity increasingly enjoy compensation and prestige comparable to that of star lawyers who represent America’s largest companies and advise them on high-profile mergers, takeover battles and lawsuits.
Countless people compared it to a star-oriented system like the NBA, but others worried that the ever-increasing wages had gotten out of hand and could put pressure on law firms, which were forced to stretch their budgets to keep talent from would leave.
“Twenty million dollars is the new $10 million,” said Sabina Lippman, partner and co-founder of legal recruiter Lippman Jungers. Over the past few years, at least 10 law firms have spent — or acknowledged to Ms. Lippman that they must — spend about $20 million a year or more to lure top lawyers.
A partner at a law firm said that salaries of $20 million are typically reserved for people who can generate more than $100 million in annual revenue for a firm.
Last year, six partners at Kirkland, including several recruited during the year, earned at least $25 million each, according to people with knowledge of the arrangements who were not authorized to discuss the payments. Several others in the London office earned about $20 million.
A partner at a law firm said pay for top lawyers has roughly tripled in the past five years.
The take-home pay of some top lawyers is now approaching that of major bank executives. Jamie Dimon of JPMorgan Chase, the nation’s largest bank, earned approximately $36 million last year. David Solomon of Goldman Sachs earned approximately $31 million Over the same period.
At the center of the action is Kirkland, a 115-year-old law firm founded in Chicago that made an early push for private equity clients when few rivals saw them as big moneymakers. About a decade ago, Kirkland began poaching heavyweights from rival law firms — many based in New York — that had longstanding relationships with the biggest private equity players.
That led to fierce competition among top law firms, including Simpson, Latham, Davis Polk and Paul, Weiss. Some have changed their compensation structures or stretched their budgets to prevent stars from leaving. Others have responded by plundering Kirkland to set up their own private equity firms.
“Companies don’t feel like they can just be defensive about their talent,” said Scott Yaccarino, co-founder of legal recruitment firm Empire Search Partners. “They also have to be on the attack.”
Lawyers have been making millions of dollars for more than a decade. When Scott A. Barshay, one of the industry’s most prominent mergers and acquisitions lawyers, left Cravath, Swaine & Moore to join Paul, Weiss in 2016, his $9.5 million package made waves in the industry. (Mr. Barshay’s compensation has since risen significantly, two people with knowledge of the deal said.)
But the recent pay rise has come at a dizzying pace and for many more lawyers. Combined with the rampant poaching, it’s rapidly changing the economics of big law firms. Kirkland even guaranteed a certain amount of fixed partnership equity for several years, according to several people with knowledge of the contracts. In some cases, the country has provided forgivable loans as a sweetener.
Last year, Kirkland acquired Alvaro Membrillera, a well-known London private equity lawyer that considers KKR a key client, from Paul Weiss for about $14 million and a multi-year guarantee, according to two people with knowledge of the deal .
White & Case recently hired O. Keith Hallam III, a Cravath partner with private equity clients, for about $14 million a year, according to a person with knowledge of the deal. The firm also hired Taurie M. Zeitzer, a private equity lawyer at Paul, Weiss, for about the same amount, another person with knowledge of the deal said.
For some, the changing landscape represents a more meritocratic system in which partners can expect compensation based on talent rather than seniority. Cravath, a legendary 205-year-old company, had long followed the so-called lock-step system linked to seniority, but adjusted this in 2021. Debevoise & Plimpton is one of the few remaining companies that continues to follow the lock-step system model.
“Law firms have become much more commercial in the way they run themselves,” said Neil Barr, chairman and managing partner of Davis Polk. “Businesses operate as corporations rather than old-fashioned partnerships, and it has led to more rational business behavior.”
Kirkland’s early bet on private equity has paid off. Globally, private equity firms managed $8.7 trillion in assets in 2023 – more than five times what they managed at the start of the financial crisis in 2007, according to data provider Preqin. Blackstone alone manages more than $1 trillion in assets, and other companies including Apollo, Ares, KKR and Brookfield collectively oversee trillions more.
As the private equity business took off, Kirkland’s clients began sending hundreds of millions of dollars in business their way every year. Kirkland will earn more than $7 billion in gross revenue by 2023, according to The American Lawyer’s. annual rankingmaking it the most profitable law firm in the world.
A single firm like Blackstone or KKR can generate legal work from the constellation of firms, banks and others in its universe. For example, even though Blackstone’s main law firm is Simpson, it paid Kirkland — one of its secondary law firms — $41.6 million in 2023, according to a regulatory filing.
“The private equity clients of these firms are making money,” said Mark Rosen, a legal recruiter.
Simpson, a storied Wall Street firm with Gilded Age roots and one of the largest private equity practices, has been a particular target of Kirkland’s poaching. One person with knowledge of the rivalry called the Kirkland firm “the farm team.” Kate Slaasted, a spokeswoman for Kirkland, said in an email: “As a firm, we have the highest regard for Simpson Thacher.”
At least seven of Simpson’s top partners, including Andrew Calder and Peter Martelli, have moved to Kirkland in the past decade. Kirkland also brought on Jennifer S. Perkins, a star lawyer from Latham who has represented KKR on a number of deals, to join its private equity practice.
Mr. Calder and Jon A. Ballis, Kirkland’s chairman, were among the partners who earned at least $25 million last year, according to three people with knowledge of the compensation details. Mr. Calder and Melissa D. Kalka, also a partner at Kirkland, work closely with Global Infrastructure Partners, the private-equity firm that recently announced a deal to sell itself to BlackRock for $12.5 billion.
In 2023, Paul Weiss—which counts Apollo Global Management among its top clients and is aggressively building its private equity business—poached several Kirkland lawyers to build its London office. The firm also hired Eric J. Wedel, whose clients include Bain Capital, KKR and Warburg Pincus, outside of Kirkland, and Jim Langston, another private equity-focused lawyer, from Cleary Gottlieb Steen & Hamilton.
Simpson has changed its pay structure over the past year to better compete with Kirkland and other rivals. “We made a conscious decision to adjust our compensation structure to attract and retain the best talent in strategically important practices across our global platform,” Alden Millard, chairman of Simpson’s executive committee, wrote in an email .
One sign of the frenetic nature of hiring: the use of multi-year compensation guarantees to attract lawyers. These fell out of favor after Dewey & LeBoeuf filed for bankruptcy in 2012, unable to meet millions of dollars in fixed payments and bonuses they had promised their partners. Now, another type of guaranteed payment has become popular.
Some companies give new employees a number of shares in the partnership for a specified period, usually in the range of two to five years. Such offers are attractive because they guarantee a specific share of a company’s profits, regardless of annual performance.
This frenzy has meant that even lawyers without private equity connections have seen their wages rise. Freshfields — a major British company building a beachhead in the United States — has hired lawyers worth $10 million to $15 million, and given additional pay guarantees to some, according to three people with direct knowledge of the details of the compensation.
“Law firms want people who are motivated by culture,” says Ms. Lippman, the recruiter. “But at some point, when you have such a big difference between companies, everyone has a price.”
