Lawyers who have been in transactional practices over the last several decades have seen many changes in the practice of law. Many of these changes have been widely remarked upon and indeed in some cases are so long established that for younger lawyers a transactional landscape without them is beyond the realm of imagination. Without dwelling on them at any length before turning to the main subject matter of this article–the future–certainly among these one would count the breakdown of institutional affiliations between clients and law firms. This affiliation was nowhere more noticeable than between banks and law firms. Whether in a major money center such as New York City where I have practiced for the past quarter century or in any regional city such as the one where I began my legal career before that, one could name each major law firm and the bank with which it was affiliated, often to the point of almost mutual exclusivity. The breakdown of these affiliations occurred for many reasons, and disentangling cause and effect is not always easy. The mobility of individuals both at law firms and at clients, the rise of the role of in-house counsel, the need for ever more specialized advice, and price competition are certainly among them. These changes may on the whole be positive developments, but it is difficult to imagine a world as it was formerly, even with attempts at many institutions to concentrate on "panel" firms. Of course, technological change is another such change. Many tasks performed by junior transactional lawyers (one thinks of legal research, document production, and due diligence) have been made more efficient, or been replaced altogether, by technology. To the extent that the economy provides more deals for junior lawyers to do, the ability to concentrate their time to its highest value use is a win for all, particularly if–as suggested below–some new higher value roles are emerging. Of course, if such additional activity does not emerge (whether in the form of more deals or new roles), then it stands to reason that fewer transactional lawyers will be needed as a result of such technological change.
The purpose of this note is to explore challenges and opportunities for transactional lawyers in the future. To some extent, good transactional lawyers have always taken advantage of the opportunities noted below, but recent changes in the banking industry in particular will separate successful transactional lawyers who add new types of value for their clients from others more sharply than before.
The first of these changes predated the financial crisis that began in 2007-2008. Earlier in that decade, high profile investigations of alleged conflicts of interest at investment banks in particular by New York Attorney General Elliott Spitzer resulted in a higher and thicker wall between research and investment banking. While intended to address certain perceived abuses arising from the inherent tensions that exist in any institution that performs various market intermediation functions, the separation also had unintended consequences in depriving investment banking of the input of research staff who were often the most knowledgeable people in the institution about a company, industry or region. The disassociation of research staff at banks from transaction teams did nothing to enhance transactional diligence, and often quite the opposite.
A second noticeable change at banks came after the onset of the financial crisis of 2007-2008, with the thinning of many transactional teams, for cost reasons both in light of existing liabilities banks had to manage and/or due to diminished transaction volume in certain areas. At the junior end, this sometimes meant that bankers who did models, charts and heavy diligence were no longer present, or present in lower numbers or with lesser experience, and at the senior end meant that institutional knowledge of certain product history and skill sets was lost.
Of course, transactional lawyers have always had to be knowledgeable about clients and counterparties, whether to have context on how a covenant should operate, to draft an offering document accurately, or to be able to deliver a meaningful "negative assurances" letter in a securities offering. However, in all the cases described above–the loss of research resources, the loss of junior and senior bankers–good transactional lawyers found themselves having to do more than that and collaborate with banking clients to help fill in these gaps. With pricing pressures always present, this has not always been easy, and some lawyers have reacted adversely to these trends by viewing the changes as requiring more work without proportionate compensation increases. Nonetheless, the best transactional lawyers have always viewed every change as an opportunity. In these cases, reimagining how bankers and lawyers collaborate in the future will reward lawyers and law firms who field teams with active involvement of experienced lawyers, and who are creative and efficient. It will penalize those who want a narrowly circumscribed legal role answering legal questions and drafting what they have been told to draft. It will also reward lawyers who think not just in practice terms but who cross-affiliate themselves in their firms by client, industry, and geographic affinities. They will not only have greater context in which to advise their clients in their areas of practice but can develop or evaluate "ideas that will travel" to other clients, industries and regions.
On the product side, every lawyer wants to, and should, explore the next new thing. The adherents of the blockchain future have almost convinced me that distributed ledger technology will cut my grass and brush my teeth, However, senior lawyers can also be the institutional memory that has been lost at some finance clients following the great disruption of the financial crisis and the ensuing low growth decade. To choose a couple of parochial examples from my own emerging markets finance practice, in the last couple of years we have done five securitizations backed by future flows of credit card merchant voucher receivables, and have discussed with a number of clients the utility of secured exports notes in the capital markets, products previously commonly done in the period between 1992-2003. With a couple of notable exceptions, none of the people we have discussed such products with were around the first time around.