Spain focus: A review of the Partner legal search market
The big question is what does 2016 look like for the legal search and recruitment sector in Spain? As a legal search consultancy, this winter has already been one of the most interesting and active in recent years. We can reflect upon improvements in the legal recruitment market, albeit with considerable caution, due to the restructuring of a number of law firms and corporates as well as a more favourable economic climate.
Generally speaking, the improvements observed by us in the Spanish legal market over the last few months do not automatically imply that this restructuring has come to an end. Some law firms are managing to improve their profitability by reducing personnel costs, office costs and other services, rather than just increasing revenues. Partners who are not able to generate business will depart and there will be more of a drive to recruit competent and competitive partners (across all practice areas) who can demonstrate their technical and commercial abilities. It is not enough to just promise this; a proven track record is what law firms want to see.
As to how this situation affects the hiring of associates, this will depend on the type of firm (national or international), size and type of clientele as well as the types of matters the firm deals with. We are currently seeing demand for associates with 3-6 years’ PQE, but less so for more senior lawyers (i.e. just below the partner level), so as not to discourage these mid-level lawyers from continuing their career with natural hopes for promotion. We are also seeing some instances of large salary increases; however generally these have remained the same, except in the case of international firms. Law firms are still taking on trainees and junior lawyers, but the increase has previously been modest until now, except in some of the Big Four accountancy firms.
Which levels of experience and practice areas are currently experiencing higher recruitment demand? Mid- level associates and partners with their own book of business, especially those with transactional experience are in particular demand. In addition, with the increase in fund investments in Spain, lawyers with experience in the financial sector, private equity, the energy sector, infrastructure and property are back in demand.
In the search for lawyers, the battle to hire the very best legal talent led to a new situation last summer where associates had several offers simultaneously; rendering decision making difficult. In September, as is the case every year, many young lawyers joined law firms to embark on careers with longer waiting times before they can hope to become senior associates or partners, and the most probable outcome is that the majority of them will never reach that position.
The salaries which candidates receive when they join some of the international firms are more modest as many firms do not want candidates to move firms just for economic factors. We have though seen a significant increase in talented lawyers receiving a large pay increase in order to prevent them from moving to another firm with better pay (within international firms in general). To provide some context outside Spain, in London it is notable that despite significant salary increases over the last two decades for associates within UK firms, such firms continue to see a significant outflow of junior and mid-ranking talent to US law firms. This is becoming an increasingly serious problem for the UK firms when it comes to retaining their associate level talent pool.
The most relevant issue at the senior level is the retention of partners with the most significant business and client base. On the other hand there are ever more partners who are not able to generate and preserve business, and they are being invited to leave their firms. This tendency towards improving the profitability of law firms and moving towards a more stable level of sustainability is widespread.
In general, it is clear that the number of partners being promoted to equity partnership at major law firms in the near future will slow, as has been the case over the last few years. Promotions to partnership (and not just equity partnership) have decreased across many firms, and this will continue to be the case. Many lawyers with a lot of years of experience, and salaried partners will have to leave their firms if they want a career in the long term, while those who are only looking for promotion and who are not able to bring in and generate clients will definitely see their career aspirations in tatters.
With regards to firms which will be hiring more in the future (out of the large national Spanish firms, international firms, medium-sized Spanish firms, medium sized international firms, Big Four accountancy firm, and boutiques), we predict that the Big Four will take on the most lawyers, and not just at the junior level. With regards to international law firms, many of them are already mature enough in Spain to increase their numbers, and they will continue doing so in order to remain at the top and avoid losing their competitiveness. This is despite the fact that some managing partners have been reluctant to take on lateral partners (equity partners), which is very rare in the five largest national firms, and will have to change when these firms see a number of top level partners move to international firms, seriously damaging their revenues.