As the chances of recession increase, so does the likelihood of company bankruptcies. That relationship is leading several big law firms to add cadres of restructuring lawyers to build up their bankruptcy practices. One firm, Chicago-based Sidley Austin, wants to be a top choice for large companies facing bankruptcy.
In early July, Sidley hired Kirkland & Ellis partner Stephen Hessler as their new Global Chair of Restructuring. Hessler led Kirkland’s 2020 representation of bankrupt telecom Frontier Communications, a case that brought Kirkland more than $30 million in fees.
Breaking into big law’s bankruptcy practice is an enormous project, however, in a highly concentrated landscape where just three firms have represented the lion’s share of major company-side bankruptcy work for more than three decades. “It takes a long time, but it can be done,” said Sharon Garb, a managing director at recruiting firm Major, Lindsey & Africa. “The first step is getting a credible group leader.”
Sidley Austin has telegraphed its plans by taking that first step and bringing on Hessler to lead the 50 lawyers who already make up the core of its restructuring practice. Paul Hastings is also on a restructuring hiring spree, having added upwards of 40 lawyers from Stroock & Stroock & Lavan.
A database compiled by UCLA and law Professor Lynn LoPucki shows the dominance in the arena by three prominent firms: Kirkland & Ellis; Weil, Gotshal & Manges; and Skadden, Arps, Slate, Meagher & Flom. In addition to having a credible group leader, Garb said a firm needs a significant private equity practice combined with large teams of litigators, tax lawyers, and strong relationships with board members.
Other firms have tried a similar strategy in the past, including Cravath, Swaine & Moore, Latham & Watkins, and Paul, Weiss. It remains to be seen whether Sidley Austin’s gambit will be successful.