Kirkland & Ellis Archives - The BTI Consulting Group

How 25 Client Industries are Impacted & 5 Things You Can Do About It Right Now

Michael Rynowecer — Wed, 15 Apr 2020 13:38:31 +0000

Only 15 to 20 industries account for 85% of US legal spending. Of the more than 1500 industries identified by the US Government, a small number will have an enormous impact on law firms. The same proportionality is true for law firm revenue.

The typical law firm with more than 200 attorneys derives about 44% of their revenue from its largest 25 to 30 clients – meaning managing risk, revenue, and keeping clients is downright crucial.

We found 3 major client categories: Beneficiaries, The Squeezed, and The Super Challenged. We realize there may be more, but these 3 constitute the bulk of the potential client base. We discuss each below along with 5 recommendations for immediate action.

Some clients will benefit and end up thriving even though growth will be dulled during the pandemic. Most have cash flow and are essential businesses – some of which are part of the fight against the pandemic. These industries include:

Beneficiaries

Digital Health – will go along for the ride with Home Diagnostics and Telemedicine
E-commerce – even the technology resistors are buying online
Health Care – a new focus on health and disease will turbo charge growth
Home Diagnostics –bursting onto the scene like never before
Life Sciences – the world wants the ability to move at near real-time speed
Logistics – the epicenter of developing new supply chains
SaaS – easier access for remote workers
Streaming – quickly developing into a mainstream service
Technology – the cornerstone of many changes taking place
Technology Enablement – bringing technology to more places and processes
Telecom – the backbone of streaming and remote work
Telemedicine – the CARES Act passed last week by Congress; the FCC plans to spend $200 million to support telehealth programs
Trucking – an often-unsung cog in the supply chain
Work Platforms – more ways to collaborate and share work

The Squeezed

A large number in the middle are being squeezed but will turn out OK. These companies have strong cash flow and are being slowed. They are stretching out payments and pushing off non-essential legal needs. The squeezed industries include:

Banking – burdened with getting money where it needs to be in the crisis and hurting from lower interest rates
Big Pharma – unless pursuing coronavirus projects, supply is squeezed and R&D is slowing
Financial Services – asset managers are dealing with changing asset values and risk averse markets
Food and Agriculture – challenged to produce fast enough for customers who may be slower to pay than usual
Mega Cap Manufacturers – these core brands (Caterpillar, Boeing, Ford, etc.) are experiencing demand dry up but have the resources to get through it

This group includes 5 of the largest legal spending industries in the US. Law firms servicing these clients will need to keep a keen eye on cash flow and focus their efforts on essential needs.

The Super Challenged

These clients are experiencing abrupt supply and demand imbalances and dramatic revenue shortfalls and/or asset devaluation – especially in energy. The larger energy companies will likely be able to refinance or restructure their way out of the problem. The smaller organizations, which are still quite large, are looking at court-supervised reorganizations and a ton of litigation around supply contracts.

Energy including Infrastructure and Services
Oil & Gas

The super challenged also include the following industries where demand has all but disappeared.

Airlines
Hospitality
Restaurants
Retail

Look for these industries to restructure, use government programs, and bankruptcies to find their way out. We expect mergers and business combinations to change these companies’ economics.

BTI research reveals only 48% of law firms really sit down and analyze their client base. These firms know with certainty and precision their year-over-year retention rate, revenue concentration, and risk inherent in those 2 numbers. Another 37% of law firms go-to-market by industry. Both are smart moves and drive business.

Now, What to Do

Assess your client base. Look carefully at your exposure by client and by industry – in this order. The difference between the assessment process now vs. a “standard” ranking process; past financial performance and lifetime value are no longer reliable indicators. Client feedback is more reliable than ever – and clients are still making the time to talk to BTI in the middle of all this.

There Are Still Opportunities – Find Them. Nurture Them. Build Them. Hold Them.

Most opportunities will reside in the beneficiary industries. You will also find opportunity in the squeezed industries if you can manage to their cash flow and find ways to help them navigate their way through the pandemic. Most of these are large-spending, marquee clients but are currently struggling managing for the conservative outcomes. We have reports of law firms jumping into these squeezed clients deeper than ever – while others are pulling back. Now is the time to jump in if you can manage a slower cash flow.

The super challenged clients present the biggest cause for concern for law firms lacking a robust bankruptcy practice. These clients have some serious and acute needs outside of bankruptcy – taking this work on poses credit risk but you will likely forge some strong client relationships.

The 2 Most Important Steps

Asses your top clients. Then actively decide exactly how to allocate your resources. A pandemic demands more strategy than ever. A diffuse approach reduces your chances of keeping clients – never mind building them. The best strategies will play to the firms’ strengths and focus heavily on the beneficiaries and the squeezed. You will find opportunity in the super challenged industries, but the risk reward is different and demands objective criteria to evaluate.

Perform This Analysis At the Practice Level and Firmwide

Act quickly with strategic focus and intent. Smart strategy, client selection, and management is more crucial now than ever.

Thank you to my friend and internationally recognized consultant, Patrick J. McKenna, for help, insight, and collaboration on this.

Be safe and be well.

MBR

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Kirkland Crushes $4 billion, What They Do and How They Do It

Michael Rynowecer — Wed, 08 Apr 2020 15:04:58 +0000

“I don’t know what their (Kirkland & Ellis) system is, but every partner I meet falls all over themselves to outdo the other in client service and make things happen for us. It’s kind of amazing. I love it.”

Managing Director, Large Private Equity Fund

Think of the implications, a demanding client who believes partners from their outside counsel compete to over deliver. Even as COVID-19 is making law firms take pause, Kirkland is out there bringing in laterals and going after the restructuring business. These are 2 small reasons Kirkland smashed through $4 billion in revenue. We see only a small part of the Kirkland & Ellis strategy – so much of it is behind the curtain. Here are 11 key aspects of their approach driving success:

Outdo Each Other In Client Service, But Still Deliver as a Team

Think of it as competing for client attention, while adding to the client experience. Clients see a team and firm all working in one direction. Partners are always looking for ways to add to and improve the client experience where it counts – client interaction. And, clients say it’s a continuing process – this is their modus operandi.

Embrace Aggressive Business Development

Kirkland is one of the few firms truly embracing the ideas of rainmakers. They want, support, and reward big books of business. Kirkland has mastered the art of creating a rainmaker system built around serving clients.

All-in on Clients and Growth

“We will tolerate a lot of things – but don’t ever piss off a client we think is important or want to keep” says an influential Kirkland partner. This partner’s goal is to hyper-focus on understanding and meeting client objectives – and exceed them. The firm expects attorneys to be all-in on every matter and everything associated with their clients. There are no minor clients or matters – it’s all or nothing.

Watches After Clients Even When They Can’t Work On the Matter

Kirkland routinely refers matters to other firms due to conflicts and matters being too small for the firm’s economics. But the firm still seriously cares. Kirkland takes active steps to ensure the law firms receiving the referrals deliver excellent client service. “They are all over us to take care of their client” says the practice leader of a midsize firm enjoying Kirkland referrals.

Take No Prisoners Approach

Kirkland plays to win. The culture is more like a high-tech company than a law firm with their sense of market domination. The firm sees no boundaries in clients, matters, laterals, associates, or tradition in staking their claim. They do what they need to win.

Focus On the Client Personalities Where They Can Be Most Successful

Clients have distinct personalities. Kirkland is skilled and well-positioned to attract the 2 types of clients who pay the highest premiums in return for the ultimate in client commitment and certainty. These clients are the hardest to find and issue fewer RFPs than all other clients. They are considered the most demanding but are most likely to stick with their law firms for the long term – if they keep performing.

Create Robust, Inbound Lead Flow

The clients where Kirkland & Ellis performs well – they perform exceptionally well. They earn high praise and the honor of being one of the most recommended law firms despite focusing on a much narrower client base than most firms. Clients’ peer-to-peer recommendations are the single largest driver of inbound leads. This is especially powerful. Combine this inbound lead flow with their aggressive business development and winner takes all approach – and you have serious growth.

Find Great Landing Spots for People Who Leave the Firm

The associates and selected partners who leave the firm get help. The firm wants future alumni to land good jobs where the firm will have a friend. This under-utilized approach is a long-used tool for the Big 4, major strategy consultancies, and investment banks. There is a lesson for all law firms here.

Lateral Strength and Savvy

Kirkland knows how to recruit, integrate, and otherwise leverage laterals. They have no qualms about convincing some of the best rainmakers in the business to join their ship. Once they are on board – the firm is skilled at making use of their contacts, skills, and ability to make things happen.

Creating Future Brand – Highly Recommended by Associates – Even Those Who Don’t Work There

Associates have a high opinion of Kirkland – even when they don’t work there. Soon to be published BTI research shows Kirkland is one of the top law firms associates recommend to other associates. This gives Kirkland a chance to start branding with future clients well ahead of many other firms. This makes it easier to create the valued inbound if, and when, these associates become decision makers.

They Know They Are Not For Everyone, and It’s the Plan

Kirkland & Ellis is confident in knowing exactly who they are and where they perform best. They are client savvy and use their intuitive sense of investing in the clients where they can be highly successful. This sixth sense makes it easier to understand a client’s culture. The ability to attract, pick, and pursue the right types of clients for Kirkland is a marquee strength.

On top of the firm’s strategy and skill, so much of Kirkland’s success is based on cultural factors. They drive behaviors, communication, client management style, and approach. And this may just be the key point – everyone at Kirkland understands how they are expected to interact with clients and within the firm. This understanding focuses all their energy on clients and success.

Kirkland shows few signs of abatement as the pandemic hits. Business may slow as the economy is on lockdown – but Kirkland invests on. They are going after restructuring business while saving the deals their private equity clients want to save. And they are advising clients on what this all means, before clients ask.

Any and every law firm can start working on setting uniform expectations for client interactions and business development today. Your firm will see results much faster than you can imagine. You are closer reaching this goal than you think. Call or email to talk about how.

Be well. Be safe.

MBR

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The Lost Secrets Behind Latham and Kirkland’s Success

Michael Rynowecer — Wed, 13 Mar 2019 20:00:00 +0000

There is more to this story than meets the eye.

Latham’s largest clients use an average of 21 of the firm’s offices. This doesn’t happen by accident. Kirkland didn’t close almost 10 deals a week last year through luck. The success of these firms is based on foundational skills, strong core building blocks—and well thought out strategies.

Their blocking and tackling skills serve as the underpinning of success. Here are the key (but unsung) parts of their outsized growth and profits:

Highly Selective in Targeting Clients

A select group of coveted clients have needs requiring law firms to deliver across multiple offices, drawing on numerous practices. Latham targets and goes after these clients with a vengeance. Their BD goals and efforts focus on getting and growing these clients. Kirkland puts their emphasis on private equity firms, starting with the largest.

Both firms also target the biggest spenders in largest spending industries where clients have ongoing needs. Latham and Kirkland draw on this strategy and use it to their advantage by targeting very specific clients who will drive their success.

Go-to-Market by Industry-Facing Groups

Becoming known in an industry requires more than a change in marketing—it requires investment. Kirkland began their biggest investment in the private equity market beginning in 1984 when the industry was in its infancy. Over the years, their Private Equity Ski Conference has placed them at the epicenter of the US private equity market.

Latham has made large scale investments in their industry facing programs. They use this to communicate their business understanding—the single biggest differentiator in the market.

Strategic Discipline

Kirkland and Latham stick to their plans. They monitor and adjust, but they give their efforts enough time to succeed. If interim results aren’t on target, they change the plan—not the goal.

They Know How to Make Lateral Partners Work

Both firms routinely pick off lateral partners and are among the small number of firms where laterals are successful. Both firms know how to bring laterals into their cultures. These firms know how to leverage each lateral’s book. And they do more due diligence in their laterals than most other firms combined.

Fewer but Bigger Investments

Each firm targets fewer clients, markets, and practices than other firms. They invest more capital and their best people. More money invested in fewer places yields a higher strategic ROI.

Client Teams

Latham’s client team program is more than a decade old. They are honed, have budgets, and are supported by money, people, tools, training, metrics, and infrastructure to make them work.

Culture of Strategy

The strategies at Latham and Kirkland are clear and concise. These firms articulate their strategies with energy and passion—engendering enthusiasm at the firm. They have few naysayers. The attorneys who don’t agree with the firm’s strategic direction, don’t usually stick around.

Focus on Existing Clients, but….

Near-term future success lies in developing existing clients. These market-leading firms are intensely focused on developing existing clients. It’s not only part of their strategy—it’s part of their culture and BD system. But these firms target new clients as well—often by name—to add to their stable. As we discuss above, each firm targets the clients who best fit their strategy and approach—and are the biggest legal spenders out there.

Invest in Business Development and Support

It takes a village, or at least a robust business development staff, to support these highly driven partners. We estimate each firm has 1 BD person for every 4 equity partners. This compares to 1 BD person for every 4.6 partners at the largest 3 law firms—and 1 BD person for every 6.2 equity partners for the typical Am Law 200 firm.

Share the Credit

Business development is usually a team effort—and an effort many firms don’t acknowledge. Latham shares credit for origination, support, or even a referral. You don’t have to close the sale to get credit. All the key players are recognized for their collective effort. This incentivizes all attorneys to do their part to win new work for the firm.

Talk to Clients—Directly and Indirectly

Kirkland and Latham base their growth strategies and tactics on many factors, including client feedback. Their approach is informed by client thinking. They know law firms can’t be successful without learning from and responding to client thinking.

Any and every law firm can adopt the tactics and strategies embraced by Latham and Kirkland. All firms can target the best clients (not the most prestigious—but the clients most likely to drive success). Every law firm can set up client teams, get client feedback, and with some work—change their business development credit system.

Some firms have embraced these tactics with a limited number of clients or opt-in programs. But, firms embracing this approach to the market across their major client base can expect to see results in as little as 14 months from any single change.

Kirkland and Latham have been at it for years—and offer proof of concept. Now, who will be next?

MBR

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