http://www.bloomberg.com/news/2012-04-27/dewey-leboeuf-approaches-deadline-on-75-million-bank-debt.html
From the get-go, distressed law firm Dewey & LeBoeuf turned inward, locked inside itself. Constituencies, ranging from the media to employees, noticed that when the then one-person head Steven Davis wrote and distributed a ham-handed memo announcing among other things a reduction in force (RIF). That set off a firestorm of negative publicity and speculation about how bad was the firm's troubles.
Dewey & LeBoeuf Approaches Deadline on $75 Million Bank Debt
By Linda Sandler and Sophia Pearson - Apr 27, 2012 12:00 AM ET
Dewey & LeBoeuf LLP, the No. 3 law firm adviser to banks handling merger deals, is nearing an April 30 deadline to show bank lenders it has a survival plan, possibly including absorption by another firm or cost-cutting.
Dewey, based in New York, has lost about 72 partners in recent months amid complaints about pay and a plan to restructure the firm. It has drawn about $75 million of a $100 million credit line from banks including JPMorgan Chase & Co. and Citigroup Inc. (C), according to a person familiar with the firm’s finances. The banks extended an initial April 16 deadline to come up with a plan, according to another person familiar with a merger proposal Dewey has presented to other law firms.
Neighboring buildings are reflected in 125 W. 55th Street, home to the offices of Dewey & LeBoeuf LLP, in New York. Photographer: Daniel Acker/Bloomberg
Last month, as defections mounted, Dewey restructured its chairman’s office to include the heads of four practice groups in addition to Chairman Steven Davis. The group includes Martin Bienenstock, who runs the firm’s restructuring group; Rich Shutran, head of the corporate department; Jeffrey Kessler, head of litigation; and Charles Landgraf, who runs the Washington office and the legislative and public policy group.
The firm said last week that it was considering “various paths including continuing to operate as an independent global law firm and a strategic combination with another leading law firm.” A possible partner is Greenberg Traurig LLP, which has held “preliminary discussions relating to lawyers at Dewey” and was making no commitments, Greenberg spokeswoman Jill Perry said.
Bonds Sold
In addition to the bank deadline, the firm also has $125 million in bonds sold to insurance companies in 2010 to refinance previous bank loans.
The bonds, placed by JPMorgan, come due between next year and 2020, Dewey said at the time. The firm’s revenue last year was $782 million, compared with about $760 million in 2010, according to the American Lawyer, which tracks law firm results. The publication lowered its numbers for Dewey this month after getting “newly obtained information,” it said.
Angelo Kakolyris, a Dewey spokesman, had no immediate comment on the April 30 deadline.
A team led by partners Bienenstock and Bruce Bennett was weighing a so-called pre-packaged bankruptcy, a person familiar with the matter said. They hoped a bankruptcy plan approved in advance by creditors could lead to a merger with another U.S. firm, said the person, who didn’t want to be identified because he wasn’t authorized to discuss the plans publicly.
Money Back
The team also explored what might happen if the firm shut down, the person said. Closing Dewey would make it much more difficult for members of the firm’s limited liability partnership and creditors to get any money back, he said.
Bienenstock, whose restructuring team represented Los Angeles Dodgers LLC in its sale to a group including former professional basketball player Magic Johnson, didn’t respond to calls and e-mails seeking comment on plans for Dewey.
Dewey ranked third among legal advisers to investment banks advising companies on mergers this year, according to data compiled by Bloomberg. The firm placed 28th in American Lawyer’s ranking of the largest 100 law firms, with 190 partners and 2011 revenue of $782 million.
Most large law firms that fail don’t come out of bankruptcy, said Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll LLP in Louisville, Kentucky. Instead, they liquidate, Bowles said, citing New York-based Finley Kumble, which went bankrupt in 1988. The firm had almost 200 partners, according to the American Lawyer.
Cherry-Picking
Dewey might struggle to find a merger partner because many rivals prefer to select only the partners they want, Bowles said. The serial defections suffered by Dewey were “a form of cherry picking with groups of partners leaving,” he said.
While a pre-packaged bankruptcy “in theory could work,” Dewey’s challenge would be to keep control of the firm’s assets, which are mainly its partners, Bowles said. “The money is in the books of business of the productive partners.”
Dewey’s defections began in March with the departure of a group of 12 insurance and regulatory lawyers for Willkie Farr & Gallagher LLP. The firm has since lost lawyers to DLA Piper LLP, Reed Smith LLP, Patton Boggs LLP, Hunton & Williams LLP and Pillsbury Winthrop Shaw Pittman LLP.
In Dewey’s international network, the 42-lawyer Moscow outpost was recently assessing its options after approaches from firms including King & Spalding LLP, said a person familiar with negotiations. The Russian office focuses on energy and corporate law.
Dechert in Dubai
In April, Dechert LLP took a five-partner corporate and securities team from Dewey’s Dubai office to open in the city.
Dewey’s Rome office head, Stefano Speroni, has said the Italian business wasn’t negotiating with anyone to leave.
Revenue for the first two months of this year rose 28 percent from a year earlier, and so-called billable value increased 13 percent, according to a letter to the partners obtained by Bloomberg News last month. Revenue for the 12 months through Feb. 29 grew 6 percent with an increase in billable value of 9.7 percent, according to the letter.
and.....
http://lawandmore.typepad.com/law_and_more/2012/04/dewey-leboeuf-a-distressed-firm-turned-inward.html
Dewey & LeBoeuf: A distressed firm turned inward
The firm seems to continue to remain in a bunker mentality. As Sara Randazzo reports in the THE AMERICAN LAWYER, firm leadership is not communicating with employees about where the firm is financially and in its options for survival and an eventual turnaround. That's puzzling - and so 20th century. Given the volatility in just about every aspect of business, the field of employee communications has become a high-profile, well funded mission in organizations. Increasingly, leadership is investing resources, including its own time, in connecting with employees in person through diverse channels, be they town meetings or intranets.
The good news, says Randazzo, is that search firms are contacting paralegals about other jobs. Hopefully, among those contacted is the paralegal who sent his lament toAbovethelaw.com.
In itself, turning inward is a sign of trouble. In the late 1980s, IBM did just that. The distress was so massive and systemic that it had to reach to an outsider to reset the brand and operations.
and it's not just Dewey & LeBoeuf , the problem is endemic in Big Law today
http://dealbook.nytimes.com/2012/04/25/dewey-leboeuf-crisis-mirrors-the-legal-industrys-woes/
The crisis confronting the law firm Dewey & LeBoeuf has stunned the legal profession. About 70 of Dewey’s 300 partners have left since January after their salaries were slashed because of the firm’s weak financial performance.
Dewey’s woes hardly surprise Michael H. Trotter, a partner at Taylor English Duma in Atlanta who, in addition to a five-decade career as a corporate lawyer, has written two
books about the economics and management of law firms.
books about the economics and management of law firms.
* * * *
In an interview, Mr. Trotter, 75, discussed the Dewey case and the broader problems facing many of the country’s largest law firms.
Q.
The publication of “Declining Prospects” comes at a moment when Dewey faces the risk of collapse. The turmoil at the firm appears to be a manifestation of a lot of the issues that you discuss in your book.
A.
I don’t think Dewey’s problems are just a matter of a management mistake here or there but instead reflect a change in the fundamental competitive environment in the legal services industry. Many of the larger firms that serve major business clients are caught up in these changes. We’ve already seen several go under, and I think we’ll see quite a few more over the next few years.
* * * *
One reason for Dewey’s trouble is that it poached lawyers from rival firms by offering them multiyear, multimillion-dollar guaranteed contracts.
A.
That’s a very risky strategy. For one thing, people don’t always produce what they promise; often not all the clients that they currently have move with them, so to give anyone a guaranteed contract based on their past success is basically a mistake. Imagine the environment where profits are dropping and there are some partners getting the full amount they were guaranteed and you’re getting half of what you expected. It generates a lot of hard feelings.
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