So I'm going to talk about the effects #coronavirus have on
the legal industry for a bit in a thread.

1/ Tune in if you're into that sort of thing. Here we go. https://twitter.com/Scot_Blog/status/1245373099383676929

2/ Before we get started on the NOW, let’s jump back to the 2008 financial crisis for some perspective. Certainly people are familiar with a number of law firm closures, layoffs, and consolidations that occurred in the wake of the financial crisis.

3/ But something that many people aren’t aware of is what happened to the banking industry. At the beginning of 2008, there were roughly 15,000 small, independent banks in the USA. 18 months after the crisis, there were roughly 5,000. Small town banks were decimated.

4/ Now, you might say “Those banks were directly connected to the crisis! They over extended themselves in loans! And they should have done their due diligence on the garbage mortgage backed securities they were buying from Wall Street!” (See: The Big Short)

5/ Leaving aside the deep, deep rabbit hole of all the problems around the 2008 crisis so we can move forwards, you should be asking “What does that situation have to do with law firms right now?”

6/ Law firms, lawyers in general, are an adjacent/support industry.

We don’t actually, inherently create much of value. Lawyers draft contracts, sue people, structure businesses for OTHER people & businesses.

7/ Largely speaking, lawyers don't actually create products or services for people to customers/clients independently. Clients don’t come to a law firm unless they need a problem solved in their life.

8/ And while the world is full of problems at the moment…the number of legal problems to solve are going to diminish drastically. Depending on length of the lockdown, stimulus support, etc, we are likely looking at a significant number of small businesses closing.

9/ Which means less contracts, less incorporations, less transactions. (although yes, there will be more bankruptcies, divorces, etc)

10/ There are also less people in businesses and the road. That means there are less people getting injured on premises, less worker’s comp, less MVAs. This affects PI & InsDef firms.

11/ All that’s to say, while the looming crisis facing the legal industry isn’t directly analogous to the banking crisis of 2008, it’s definitely fair to make the comparison given that when clients suffer/close-up, law firms suffer.

12/ Further, from listening to conversations across the industry the past month or so, most firms do not have operating capital to last more than 3-4 months. Firms are already laying off staff, and cutting salaries of associates & partners to try and make it through this time.

13/ If the lockdown and/or limited mobility extend past August, I would expect a significant number of law firms shutting their doors, largely due to them being out of money and new clients slowing to a trickle.

14/ We’re looking at 5-10 years of change being foisted on the industry in the space of 6-12 months. The firms that make it through this are going to be nimble, technology-equipped, and proactive in responding to the changing environment.

15/FIN Those that don’t, well…

cc: #lawtwitter etc above.

More news backing up my predictions above, M&A cratering: https://news.bloomberglaw.com/business-and-practice/wake-up-call-m-a-deal-volume-plunges-arent-fox-slashes-pay

Again, the second and third order effects of this are going to slam the legal industry in the next few months. https://twitter.com/CNBCnow/status/1245690256147480576

From a DM an attorney sent me a bit ago.

Smart lawyers are adapting and adopting technology *quickly*.