"Dislocation" Big Law Watchword 2025 in the wake of AI (CRE/RATES/DEMAND DEPRESSION)
Freezes, Stealth Layoffs, Mergers, and downright Closures
Market forces, cre, rate environment, monetary policy, depressed demand AND AI bring a SLO-MO BIG SMASH to Big Law.
“BIGGER THAN BROBECK PHLEGER IN 2001” -AIC “much”
“Dislocation” is the watchword of Big Law in 2025 as an uncertain multi-market gives rise to certainty in American government yet Revolution in technology wrought by AI.
Big firms still yet have large commerical real estate and associated debt overhangs, and investors and economists understand that many of these debt facilities come in for resets throughout 2025. We are in year two of an escalating four year cre maturity wall — 950B in debt just last year alone.
The runaway rate environment continues after the beginning of the drunken sailor “Roaring Spendies” (2021-2024) with only pin pricks by the Fed, helping something minimally.
We all know major law always has meant (before the sudden corona intervention) (a) major metro major real estate, and (b) major debt (because their brand and forward fees (hourly projections, stable for years previous) made them “good for it).
And so Big Law remains in the big bind. I’ve seen it - rising hourly rates (!) if one can believe it, for lower service offerings with the new bias for virtualization. Our major metros, their basically-part-of-brand “headquarters” on top floors, are trashed.
It is hard to sell smaller law by a Big Law with smaller means and demand will continue to depress on an inverst corrolary with rise of AI adoption by Law and law-adjacent (accounting, and major enterprises, and also joe schmos).
BLOOD IN THE WATER BIG LAW 2025
And so as I have said before, cascades, “ghost mergers” (secret collabs between large firms sharing resources and more frequently LETTERHEAD even…seen in several high ticket AI copyright cases). A “two for one” special.
I predict a bubbling up to the visible surface and 2025 major closures, mergers, consolidations, and positively-branded “new” collabs.
We will know when we hear the Screaming Of the Associates in May.
Some data:
At least six combinations of Am Law 100 law firms became effective in January 2025, reshaping the global legal landscape
Notable:
Troutman Pepper Hamilton Sanders and Locke Lord (!)
Womble Bond Dickinson and Lewis Roca (creating a 1,300-lawyer firm spanning the US and UK)
Ballard Spahr and Lane Powell (-AIC one of their most famous cases was a giant 1995 malpractice case involving themselves!)
Bloomberg Law reports that about two-thirds of the 18 largest mergers within the past 15 years saw combined firms increase profits per partner and revenue per lawyer AT A SLOWER RATE than competitors after their tie-ups
NEARLY HALF (45%) of U.S. firm managers predict they will have 2025 LAYOFFS, citing economic struggles, industry-specific challenges, automation, and AI
Many firms are conducting "stealth layoffs," framing cuts as performance-related to avoid negative publicity (-AIC We heard the Scream Of The Associates last summer…………..hey, add GOVERNMENT LAWYERS not likely to be hired this year due to major government reform)
ONE-THIRD NEARLY (31%) surveyed already have HIRING FREEZES in place, with 13% ADDITION WHICH ARE LIKELY to implement in 2025…bringing to nearly half.
Not quite apocalypse, and yet also it could be.
BOTTOM LINE: No new jobs in Big Law except/or if one cracks code in Law as AI.
THIS IS THE FLIPSIDE OF THE BOTTOM LINE, THAT WE ARE IN A TIME OF UNPRECEDENTED OPPORTUNITY IN THE PRACTICE OF LAW WITH AI.
And many are going for it, just look at me. AI will not take your lawyer job. A lawyer with AI will take your lawyer job.
Epilogue, Personal
I was never a Big Law guy. For almost 23yrs, with some in-house stints in between, I have always and only been an independent private attorney. I did do some interviews at Big Law in my 3L of law school to see.
One w a very famous senior Partner of a very august Big Law went like this:
“Cyrus, I see you have some Bs and Cs. That will not do here, unfortunately. We take only top grades.”
‘Sir, do you mind if I ask about your grades in law school?”
“Well, I had some Bs and Cs also.”
[Silence, purposefully uncomfortable.]
“Well, it was a DIFFERENT ERA THEN.”