I read an article with two predictions for 2023:
1. If you believe John Hanke from John Hopkins University, the U.S. has an 80% chance of falling into a recession;
2. If you believe a CNBC survey of economists and fund managers, the U.S. has a 52% chance of falling into a recession.
Without getting into a discussion of the reliability or credibility of these two predictions (although acknowledging that they're vastly different), I think we can probably all agree that for some time, we've been looking into the barrel of a market downturn.
Usually, this is a cue for counter-cyclical practice areas like restructuring, litigation, and bankruptcy to soar while transactional areas come to a halt. However, I'll go out on a limb here and say that I truly think it's going to be a little less black and white this time around.
To understand how to help recession-proof your practice, I'll start with some background that I think is important to understand.
Taking investment banking out of the equation because their model is slightly different from the law firm model, the law firm model has changed a lot since the GFC and even the recent pandemic. Internally within firms, we're starting to see that they now have equity partners more personally invested in the firm rather than relying on external bank debt. Firms have also been strategic in their hiring efforts or have looked to retool or pivot their current lawyers for in-demand areas rather than hire new staff. The effect means a stable operation and an industry that is far less prone to the hiring and firing we see in investment banking.
Externally, what we've also learned about the markets during these recent times and even back to the GFC (which was never really a secret at all) is that poor economic conditions always present an opportunity.
Understanding the above is fundamental to setting you apart as a transactional lawyer in this market and setting you up for success. Ask yourself:
- Do you have experience or knowledge of funds and how the private equity market operates?
- Are you working with some of the biggest or most strategic clients or PE houses with lots of dry powder behind them?
- Do you work on large IPOs in industries that aren't prone to the effects of downturns?
- Do you understand the basic business of law and aren't tied up in just the academics of law?
Whether you're a transactionally focused fund, tax, M&A, PE, or general corporate lawyer, these are all questions you should ask yourself. If you answered ''no'' to any of them, then it's time to get moving. Talk to your partners, talk to your firm, read up on the markets and help yourself to ensure you're getting the most out of these interesting times ahead so that you remain busy, engaged, and continually learning.