Weil Gotshal & Manges has advised many of America’s largest companies as they teetered on the edge of collapse. Now, the white shoe firm is trying to save itself as it struggles to compete in the rapidly changing world of Big Law.
Weil has in recent weeks hired advisers from the law firm Davis Polk & Wardwell to help it with a range of options, which this week began to include discussions about the possibility of winding down the firm.
Once one of the most sought after firms for top lawyers, Weil Gotshal has been rocked by an exodus of partners, including the chair of its global corporate practice. It has also been roiled by a failed succession plan for the firm’s next leader and a scuttled deal to merge with its rival Willkie Farr & Gallagher.
While other options remain on the table, including a possible rescue deal, the situation has become increasingly urgent as more lawyers continue to prepare to leave, according to two people with knowledge of internal discussions.
Weil’s struggles reflect the broader changes sweeping through Big Law in recent years, in which the largest firms are sucking up talent and business. While firms once functioned as true partnership centered on loyalty, they are now run more like sprawling businesses, trying to maximize profits by dominating every corner of the legal business from deal-making and private capital to litigation.
Founded nearly a century ago, Weil Gotshal had once been the marquee for bankrtupcy advice but has more recently had difficulty competing with giant law firms that can poach talent with lavish pay packages.
Amid these pressures, Weil has also struggled to determine the firm’s future leadership. Ramona Nee, its co-head of private equity, had been expected to take over as the firm’s leader from Barry Wolf, who is preparing to retire. But in August, Ms. Nee told the firm’s management that she was declining the top role, the two people said. Many partners learned of Ms. Nee’s decision this week.
The uncertainty is weighing on the law firm’s 2,000 employees, including its roughly 1,200 lawyers, many of whom have been sending out a deluge of resumes over the past few days, according to three people with knowledge of the firm’s internal workings. At law firms, whose primary assets are its employees, downward spirals can happen fast: Once key partners lose confidence and start leaving, it can be near impossible to convince them and other lawyers to stay.
Rivals are already circling, looking for lawyers they can pick up in the frenzy, two people familiar with the matter said.
Similar spirals have befallen major law firms before. At their worst, they have driven them into bankruptcy, as was the case with Dewey & LeBoeuf in 2012.
Weil had been trying to solidify a path forward through merger talks with the law firm Willkie Farr & Gallagher, which would have given it combined might to compete against larger peers, the people said. But those talks recently fell through, igniting a series of meetings among the firm’s management committee to find another solution. Those meetings continued into Wednesday.
Spokespeople for Weil and Willkie did not immediately respond to a request for comment. A spokeswoman for Davis Polk confirmed that Weil had hired Neil Barr, its chair who advises on mergers, and Brian Resnick, a partner in its restructuring practice.
The Financial Times earlier reported its hiring of restructuring advisers.
Weil Gotshal was founded in 1931 by Frank L. Weil, Sylvan Gotshal and Horace S. Manges. Three decades later, Harvey Miller helped the firm climb the ranks to the uppermost echelons for firms by focusing on bankruptcy and restructuring, practices that rivals had historically shunned.
The bet proved lucrative as the firm went to on advise on the collapses of Drexel Burnham Lambert, Texaco and Macy’s department store chain with hard-nose tactics that earned it the nickname “We’ll Getcha & Mangle Ya.” The firm rode those expertise through the financial crisis, notching more than a billion fees in 2009, advising the likes of Lehman Brothers and General Motors.
But as the country emerged from the depths of the recession, Weil Gotshal’s restructuring prowess alone was no longer enough to keep it competitive. The Chicago law firm Kirkland & Ellis led the way in running a firm like a big business. Kirkland and others that followed in its footsteps, including Latham & Watkins and Simpson Thacher & Bartlett, poached star partners promising big paychecks and the ability to create their own mini kingdoms within their firms.
“They just were sort of treading water,” Bruce MacEwen, a lawyer and consultant to law firms, said of Weil.
Some smaller firms responded to the emergence of these giants by prioritizing niche specialties. But specialization, Mr. MacEwen said, also frequently requires significant layoffs, a path that longtime firm leaders, like Weil’s Mr. Wolf, are not often keen to do.
That left Weil vulnerable to poaching. Among the top partners the firm has lost over the past several years: Ray Schrock, who was the co-chair of its bankruptcy practice; Michael Aiello, the chair of its global corporate practice; and Christopher Machera, the co-head of Weil’s U.S. Private Equity practice.
Sarah Kessler and Noam Scheiber contributed reporting
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