Wall Street lawyers are now in such demand that bidding wars between firms for their services can resemble the frenzy among teams to recruit star athletes.
Eight-figure salaries, rare a decade ago, are becoming increasingly common for top corporate lawyers. their game, and many of these new heavyweights have one thing in common: private equity.
In recent years, highly profitable private equity giants like Apollo, Blackstone and KKR have expanded beyond corporate buyouts to real estate, private lending, insurance and other sectors, amassing trillions of dollars in assets. As demand for legal services has exploded, they have become major sources of revenue for law firms.
This is driving up lawyer salaries across the industry, including at some of Wall Street’s most prestigious firms, such as Kirkland & Ellis, Simpson Thacher & Bartlett, Davis Polk, Latham & Watkins and Paul, Weiss, Rifkind, Wharton & Garrison. Lawyers with close ties to private equity are increasingly enjoying pay and prestige similar to the star lawyers who represent America’s largest corporations and advise them on mergers, takeover battles and high-profile litigation.
Many compared the system to a star-driven system like the NBA, but others worried that the ever-increasing salaries had gotten out of control and could put a strain on law firms forced to stretch their budgets to keep talent from leaving.
“Twenty million dollars is the new $10 million,” said Sabina Lippman, a partner and co-founder of the legal recruiting firm Lippman Jungers. In recent years, at least 10 law firms have spent — or acknowledged to Ms. Lippman that they have to spend — about $20 million a year or more to attract top lawyers.
A law firm recruiting partner said that $20 million pay packages were typically reserved for those who could generate more than $100 million in annual revenue for a firm.
Last year, six Kirkland partners, including some hired during the year, each earned at least $25 million, according to people familiar with the deals who were not authorized to discuss their compensation publicly. Several other partners in the London office earned about $20 million.
A law firm partner said the salaries of top lawyers have nearly tripled in the past five years.
The take-home pay of some top lawyers is now approaching that of the heads of major banks. Jamie Dimon of JPMorgan Chase, the nation’s largest bank, earned about $36 million last year. David Solomon of Goldman Sachs earned about $31 million over the same period.
At the heart of the action is Kirkland, a 115-year-old Chicago law firm that quickly established itself among private-equity clients at a time when few of its competitors saw them as big moneymakers. About a decade ago, Kirkland began recruiting heavyweights from rival law firms—many of them based in New York—that had longstanding relationships with the biggest players in private equity.
This situation has led to fierce competition among major law firms, including Simpson, Latham, Davis Polk and Paul, Weiss. Some have changed their compensation structures or increased their budgets to keep stars from leaving. Others have retaliated by raiding Kirkland to form their own private equity firms.
“Companies need to be more than just defensive about their talent,” said Scott Yaccarino, co-founder of legal recruiting firm Empire Search Partners. “They need to be offensive as well.”
Lawyers have been drawing multimillion-dollar salaries for more than a decade. When Scott A. Barshay, one of the industry’s most prominent mergers and acquisitions lawyers, left Cravath, Swaine & Moore to join Paul, Weiss in 2016, his $9.5 million salary caused a stir in the industry. (Mr. Barshay’s compensation has increased significantly since then, two people familiar with the deal said.)
But the recent pay hike has come at a dizzying pace and for many more lawyers. Combined with relentless poaching, it is rapidly reshaping the economics of big law firms. Kirkland has even guaranteed some of its employees fixed stakes in the firm for several years, according to several people familiar with the deals. In some cases, it has provided zero-interest loans as a reward.
Last year, Kirkland hired Alvaro Membrillera, a prominent private equity lawyer in London who counts KKR among his top clients, from Paul, Weiss for about $14 million and a multi-year guarantee, according to two people familiar with the deal.
White & Case recently hired O. Keith Hallam III, a Cravath partner who works in private equity, for about $14 million a year, according to a person familiar with the deal. The firm also hired Taurie M. Zeitzer, a private equity lawyer at Paul, Weiss, for about the same amount, another person familiar with the deal said.
For some, the changing legal landscape means a more meritocratic system in which partners can expect compensation based on talent rather than seniority. Cravath, a 205-year-old firm, long followed the so-called “lock-step” system tied to seniority, but changed it in 2021. Debevoise & Plimpton is one of the few remaining firms that continues to follow the lock-step model.
“Law firms have taken a much more commercial approach to the way they operate,” said Neil Barr, chairman and managing partner of Davis Polk. “Firms now operate like businesses rather than old-fashioned partnerships, which has led to more rational business behavior.”
Kirkland’s early bet on private equity has paid off handsomely. Globally, private equity firms will manage $8.7 trillion in assets in 2023, more than five times what they oversaw at the start of the financial crisis in 2007, according to data provider Preqin. Blackstone alone manages more than $1 trillion in assets, and other firms including Apollo, Ares, KKR and Brookfield collectively oversee trillions more.
As the private equity industry grew, Kirkland’s clients began sending it hundreds of millions of dollars in revenue each year. In 2023, Kirkland generated more than $7 billion in gross revenue, according to The American Lawyer’s annual ranking, making it the most profitable law firm in the world.
A single firm like Blackstone or KKR can generate legal work from the constellation of corporations, banks and other entities in its universe. For example, while Blackstone’s primary law firm is Simpson, it paid Kirkland — one of its secondary firms — $41.6 million in 2023, according to a regulatory filing.
“These private equity firms’ clients are making money,” said Mark Rosen, managing director and president of legal recruiting firm Mark Bruce International.
Simpson, a storied Wall Street firm with roots in the Gilded Age and one of the largest private equity firms, has been singled out for criticism by Kirkland. One person familiar with the feud called Kirkland a “farm team.” Kirkland spokeswoman Kate Slaasted said in an email: “As a firm, we hold Simpson Thacher in the highest regard.”
At least seven of Simpson’s top partners, including Andrew Calder and Peter Martelli, have joined Kirkland in the past decade. Kirkland also recruited Jennifer S. Perkins, a star Latham lawyer who represented KKR on some of its deals, to join its private equity department.
Mr. Calder and Jon A. Ballis, Kirkland’s chairman, are among the partners who earned at least $25 million last year, according to three people familiar with the compensation details. Mr. Calder and Melissa D. Kalka, also a partner at Kirkland, work closely with Global Infrastructure Partners, the private-equity firm that recently announced a deal to sell it to BlackRock for $12.5 billion.
In 2023, Paul, Weiss, which counts Apollo Global Management among its top clients and is actively expanding its private equity practice, hired several Kirkland lawyers to expand its London office. The firm also hired Eric J. Wedel, whose clients include Bain Capital, KKR and Warburg Pincus, from Kirkland, and Jim Langston, another private equity lawyer, from Cleary Gottlieb Steen & Hamilton.
Simpson has changed its compensation structure over the past year to become more competitive with Kirkland and other competitors. “We made a conscious decision to adjust our compensation structure to attract and retain top talent in areas of strategic importance across our global platform,” Alden Millard, chairman of Simpson’s executive committee, wrote in an email.
One sign of the frenetic nature of recruiting: the use of multi-year compensation guarantees to attract lawyers. Those guarantees fell out of favor after Dewey & LeBoeuf filed for bankruptcy in 2012, unable to pay millions of dollars in fixed payments and bonuses promised to partners. Now, another type of guaranteed payment has become popular.
Some companies grant new hires a certain number of shares in the company for a specified period, usually two to five years. These offers are attractive because they guarantee a specific share of the company’s profits, regardless of its annual results.
The frenzy has meant that even lawyers with no ties to private equity have seen their salaries rise. Freshfields, a large British firm building a U.S. beachhead, has hired lawyers for between $10 million and $15 million and offered additional compensation guarantees to some, according to three people with direct knowledge of the compensation details.
“Law firms are looking for people who are culturally motivated,” said Ms. Lippman, the recruiter. “But at some point, if you see such a difference between firms, each has a price.”