Weil Gotshal’s trials and tribulations
When Michael Aiello told Weil, Gotshal & Manges earlier this month that he was leaving for Cravath, taking five M&A partners with him, the firm’s statement came with a sting. Aiello and his team, Weil said, were “leaving the firm for a smaller platform”.
Cravath. A smaller platform.
A week later Bloomberg reported that Weil was weighing its options, a merger with a competitor among them. According to people familiar with the matter, the firm’s leaders had grown more open to a combination, some had held informal talks to test the water, and the firm was canvassing its own partners. Weil’s answer was short: it “is not engaged in merger discussions with any firm”. Reuters, Above the Law and eventually the Financial Times picked up the story. Almost all of them were repeating Bloomberg. Read the denial slowly and it denies very little. But the rumour itself rests on one set of anonymous sources.
Partners leave firms. That is not news. Wachtell lost its litigation co-chair and five colleagues to Gibson Dunn this summer and has seen around a dozen partners go this year. Cravath has lost about a dozen too. Nobody suggests either should go looking for a merger partner.
What sets Weil apart is not the count but who is leaving. The co-head of private equity went to Paul Weiss in August, and a group of his colleagues followed. The co-head of private funds went to Simpson Thacher. The London co-managing partner went to Sullivan & Cromwell. Then Aiello, chair of the corporate department and of the committee set up to steer the firm through its leadership succession. The Financial Times counts 23 partners gone since April. These are not partners drifting off the edges. They come from the centre.
The problem for Weil is not a handful of big names walking out. It is that partners are losing faith in the platform. In my 2015 book Death of a Law Firm I described how the departure of one or more major rainmakers can set off a run on the bank. It undermines morale, erodes confidence and pushes other partners to start looking elsewhere, long before the damage shows up in the revenue figures. A bank run does not need an insolvent bank. It only needs depositors who begin to wonder whether everyone else is about to leave. Every departure makes the next one a little more rational, and the partners who can move most easily, those with portable clients, move first.
In Chapter 9 of my recent book Law Firm Partner Compensation, I look at why partners move. Money is rarely the main reason. Most laterals move away from their firm rather than towards a particular destination, and what sets them in motion is a loss of faith in the platform: doubts about the strategy, about the calibre of the colleagues, about whether the firm will ever achieve greatness. When partners feel their pay lags the competition, the strategy is usually to blame. Which is why paying a wavering partner more rarely keeps them. It treats the symptom, not the cause. The firms most exposed are the personality-driven ones, where the departure of one or two key individuals triggers a talent cascade that the compensation system has no mechanism to arrest.
So would a merger stop the run? I do not see how.
Weil is too large and too profitable to be rescued by a combination. It earned roughly $2 billion last year and $5.6 million per equity partner, twentieth in the Am Law 100. Compare that with the two firms that did go down this road. In the last year it reported as an independent firm, Shearman & Sterling took in $907 million and $2.5 million per equity partner, both down sharply on the year before. Cadwalader, in its final year of independence, took in $616 million and $3.5 million per equity partner, also lower than a year earlier. Weil is more than twice the size of either and far more profitable. Those firms needed a merger. Weil would have to go looking for one, and almost any plausible partner would dilute the income of exactly the people it can least afford to lose, the ones Paul Weiss and Simpson Thacher are already calling. As I wrote in my book, US partners in a high-margin practice do not leave a transatlantic merger for more money. They leave because they refuse to subsidise a global infrastructure that does nothing for their practice.
The recent precedents are not encouraging. Shearman & Sterling went into its merger with Allen & Overy with falling revenue, falling profits and a partnership that had shrunk by 40% in ten years. After the deal the combined firm cut a tenth of its partners and closed offices to lift profitability. By October last year more than 170 legacy partners of the two firms had left or retired. Two years on, profit per equity partner is back where Allen & Overy stood before the merger. Not ahead of it. Back.
Cadwalader lost about 30 partners before it agreed to join Hogan Lovells, and at least 17 more in the two months after the deal was announced, many of them litigators conflicted out by Hogan Lovells clients. Conflicts are never optional in a merger. Somebody always has to go.
Nor is there much evidence that the combined firm does better later. Bloomberg Law looked at the 18 largest US law firm mergers of the past fifteen years. Two thirds of the merged firms grew profit per partner and revenue per lawyer more slowly than their competitors afterwards. A merger buys size. Weil already has size.
What Weil lacks is a reason for its best partners to stay.
It could be leadership. The firm is in the middle of a handover, with Ramona Nee taking over from Barry Wolf in January, and the committee built to manage that handover has just lost its chair. But I think the deeper cause is structural. Weil is stuck in the middle. It is too big to behave like Wachtell or Cravath, which have chosen to stay small and charge for scarcity. And it is not profitable enough to pay what Kirkland ($11.1 million per equity partner), Paul Weiss ($8.6 million) or Simpson Thacher ($8.6 million) pay, which are precisely the firms bidding for its people. Plenty of large firms earn less per partner than Weil. Few of them compete for the same clients and the same rainmakers against rivals paying half as much again.
As I wrote in Requiem for a Lockstep, a compensation system only holds as long as the trust and shared ambition beneath it are renewed. Once partners start doing the arithmetic on the offers their neighbours are getting, no formula survives for long.
Can it be fixed? Yes, though if it were easy everyone would do it. Paul Weiss is a classic example that shows what it takes. In 2009 it was a firm best known for litigation, with revenue under $700 million. Chairman Brad Karp decided it needed private equity, public M&A and restructuring work. It built on its relationship with Apollo, brought in seven private equity partners from O’Melveny & Myers in 2011 and, in 2016, lured Scott Barshay from Cravath with pay his old firm would not match. In 2024 it broke its modified lockstep and added a non-equity tier. Last year it took $3.26 billion in revenue and $8.6 million per equity partner.
It took the best part of fifteen years. I am not holding Paul Weiss up as a model of culture. I am holding it up as proof that a deliberate strategy can change a firm’s economics. There is an irony in it too. The firm now hiring Weil’s private equity partners might be the one showing Weil the way out.
Weil was right about one thing. Cravath is a smaller platform. The trouble is that partners do not choose platforms by size.
This article is part of a series drawing on the themes of Law Firm Partner Compensation by Jaap Bosman and Jaime Fernández Madero. If you would like to know more about this topic, read the book.
Our book Law Firm Partner Compensation is available worldwide on Amazon, national online book sellers, and can be ordered at your favorite bookstore
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