Mergers squeeze mid-size firms

2022 was a year in which the major trends in the legal services market moved up a gear. There were large mergers, and the competition for high quality people grew fiercer. At the same time, the generational change in the law firms’ managing partners which has been taking place in recent years continued. The survey by "Globes" and Statista that ranks the 100 best law firms in Israel sheds new light on the trends shaping the Israeli legal services market today. These are the results.

The mergers: Is size an advantage?

In the past few years we have seen mergers of small and medium-size firms into large firms, partners switching firms, and whole departments leaving a firm and joining a larger one. Many believe that their business future necessitates change and joining firms that provide a one stop shop, a full range of services for clients. In the past year the trend has strengthened, with the biggest merger taking place between Goldfarb-Seligman & Co. and Gross & Co. to form the largest firm in the country, with 520 lawyers. The previous year saw the merger between veteran firm Yigal Arnon & Co. and Tadmor Levy.

In the "Globes"-Statista survey carried out among more than 2,300 lawyers and clients, the respondents were asked whether they preferred a boutique firm or a large, international firm. Only 21% replied that they would prefer a large firm, while 36% said they would prefer a boutique firm. Most of the respondents, 41%, attached no importance at all to the size of the firm.

Nevertheless, a glance at the ranking itself shows that there is an advantage to size. The big firms stood out for recommendations by their colleagues and by clients over a broad range of areas. Last year, we interviewed Adv. Gil White, managing partner at Herzog Fox & Neeman. He was actually unimpressed by the idea of the advantage of size. "Size as such is not a value. There are small firms that are of higher quality and more profitable than a large firm. Size in itself means nothing. When you grow organically, the growth is more solidly based. It also prevents friction, disputes, and ultimately splits as well," White said.

Adv. Barak Tal, managing partner and head of litigation at Yigal Arnon, thinks differently. In an interview with "Globes" earlier this year, he said, "We understood that there would be no place for mid-size firms in the market. We understood that there would be big firms and boutique firms, and that you have to choose. The merger is a move in a competitive market. My strategic thinking for a merger has three heads: clients, employees, and innovation. The desire to be attractive to employees is one of the considerations."

Adv. Amir Chen, managing partner at Fischer (FBC & Co.) told "Globes" last year: "The legal services sector is becoming polarized. On the one hand, we are seeing huge firms that are growing, and on the other hand, boutique firms that focus on one specialty. The middle layer of firms is steadily shrinking, and I see the polarization trend becoming stronger."

Generational change: Young lawyers becoming managing partners

In recent years we have witnessed a generational transition in the legal services market. In 2021, at age 47, Adv. Gil White was appointed managing partner at Herzog Fox & Neeman in place of Adv. Meir Linzen, who became chairperson of the firm. In that year, two senior partners at the firm, Ad. Ehud (Udi) Sol and Adv. Ilanit Landesman Yogev, who ran the Corporate and Securities Department, left to set up a venture providing crisis management services and management consultancy, and to advise on deals and investment banking.

This year, veteran firm S. Horowitz & Co. decided to appoint three new managing partners, Adv. Benjamin (Benny) Sheffer, Adv. Amit Steinman, and Adv. Eran Bezalel. After two decades in which the firm was run by the three dominant partners, Adv. Yehoshua (Shuki) Horesh, Adv. Alex Hertman, and Adv. Tal Band - the last serving as managing partner for over a decade - the reins were handed over to the next generation, three partners who started out as interns at the firm in the 1990s.

At Agmon & Co. Rosenberg Hachohen & Co., headed by founder Zvi Agmon, a new generation of managing partners has been appointed within the past few years: Adv. Moran Aumann and Adv. Avi Porten, who heads the real estate practice.

Conditions: Salaries soar, then halt

The lawyers were asked, "Would you recommend your son or daughter to follow in your footsteps and become a lawyer?" Most, 53%, answered in the negative. 47% answered positively.

The respondents were also asked to amplify their answers. Most of those who gave negative responses talked about how the market was flooded, and especially about the compensation and the long working hours. In January 2022, lawyers salaries rose significantly and their employment conditions and work environment improved, as many of them switched to technological professions, and demand for lawyers peaked. But then came the second half of 2022.

Winds of recession started to blow in the global economy, inflation rates shot up, and central bank interest rates rose accordingly. The macro-economic changes hit the local and global technology sectors almost immediately. Fund raising rounds dried up, flotations were postponed, and layoffs were not slow in coming. The uncertainty halted the trend of lawyers leaving the law for high-tech, which offset the demand. The across-the-board salary rises that characterized the early months of 2022 almost completely stopped. In January 2023, the large, prestigious firms raised salaries by about 7% on average. Interns’ salaries were unchanged, at about NIS 11,500 gross monthly. At the mid-size and small firms there were no salary rises at all. Even some of the big firms did not update their salary scales. Goldfarb-Seligman, which in 2022 raised salaries twice, left them unchanged this year for junior lawyers.

Still, despite the sense that the market is flooded, when respondents were asked to name the developments that would affect their firms in the coming years, a large majority, 62%, replied that "a shortage of new skilled employees" would be the decisive development. 23% named training of existing employees, a further 23% (respondents could choose more than one response) mentioned changing legislation and regulation, and 35% crowned digitization as the development that would have the most impact on their firms in the near future.

Methodology

Survey and sample

The list of "Israel’s Best Law Firms 2023" is based on recommendations made by lawyers working in law firms (peer-to-peer survey) and clients (especially in-house lawyers in corporate legal departments) in 29 different fields of law.

More than 9,000 lawyers and clients working in Israel were invited to take part in the survey. The sample was collected via research conducted by Statista using websites and publicly available sources. Invitations were sent by e-mail with a personalized link that could only be used once.

In addition, legal experts could participate in the survey by registering online. These participants had to validate themselves by providing a personal company e-mail address before their answers were included in the evaluation. The link to the self-registration site was made available online on the Globes website.

The survey was conducted online between July 19 and September 30, 2022. A total of 2,317 participants took part. Self-recommendations (recommendation of one’s own law firm) were prohibited and not included in the evaluation.

The participants were also asked to answer some optional editorial questions. There was also an opportunity to answer questions on developments in the legal profession in Israel.

Best law firms listing

The top 100 law firms in Israel were identified on the basis of the number of recommendations each received. They are sorted in alphabetical order. Each of the ranked law firms received an above-average number of recommendations. The list also shows whether firms were especially recommended within a specific field of law. In addition, the top ten firms and the top five in each field of law are indicated. The websites of these law firms and their offices in Israel were researched and recorded.

The "Israel’s Best Law Firms 2023" list was compiled through an elaborate process, but this does not imply an objective and complete assessment of quality.

About Statista

Statista publishes worldwide rankings and company listings with high profile media partners. This research and analysis service is based on the success of statista.com, a leading data and business intelligence portal that provides statistics, business relevant data, and various market and consumer studies/surveys.

Published by Globes, Israel business news - en.globes.co.il - on February 23, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.