Career planning under Covid-19: if you’re savvy, now is the time to look at which practices law firms are investing in.
We don’t yet know for sure what the jobs market is going to look like as a result of the economic downfall, but it won’t be a surprise if incoming class sizes over the coming years shrink in line with the dip we saw after the 2008 recession. It took the best part of a decade for class sizes to return to the numbers we saw pre-recession.
Don’t despair: the world still needs lawyers, and some practice areas positively thrive in times like these. As firms respond to clients in crisis mode, they’re redirecting their junior lawyers to tech, litigation and bankruptcy practices. Here we’ve compiled the trends we’re noticing across legal practices to help you direct your career research and make the best decisions, whether it’s which classes to take next semester, or what kind of organizations to consider for work experience.
Which practices are busy under Covid-19?
Tech is one of the few transactional sectors that hasn't shown a reduction in headcount – in fact, in 2021 it was the area that saw the greatest headcount growth. “Technology, cybersecurity and privacy have moved beyond being just part of the discussion to being areas that are implicated in almost everything that lawyers do,” says Kim Koopersmith, chairperson of Akin Gump. This was the case pre-Covid – the pandemic has only served to amplify it.
The tech transactional market remains a buoyant sector, as we’re relying on these products to solve all kinds of social distancing obstacles. Companies such as Zoom are thriving, and we’ve even seen autonomous vehicles being used to transport Covid-19 patients to testing labs to limit their contact with others in Jacksonville.
With the stark increase in remote working and a growing reliance on the technology, privacy technology and ways to protect businesses from data security threats have been a huge focus. The use of online cloud data storage has hit an all-time high. As a result, protecting data both inside cloud infrastructures as well as outside cloud parameters has become even more vital – the UN has warned that cybercrime was up a whopping 600% during the pandemic. According to CrowdStrike’s 2020 incident-analysis report, ransomware attacks accounted for 51% of major cyber-attacks in 2020. This indicates that cybercriminals have changed their focus to securing high-figure ransoms from corporations, as opposed to stealing personal information to sell online.
Courts also had to adapt to these changes, including large numbers of trials going virtual and a rise in e-filings, electronic signings and conferences via video.
Tech has overtaken as the practice pulling in the most bodies this year, but bankruptcy is still very busy as vulnerable companies seek out lawyers to manage their liquidity and solvency, recover financial losses, and handle their bankruptcies. Many companies that survived the first year of the pandemic are still in borderline territory and are relying on restructuring expertise to keep afloat. “From airlines to retail, we have seen a huge uptick in clients in need of assistance as they face acute financial distress,” says Tom Kessler, an associate at Cleary Gottlieb.
Bankruptcies in the retail and hospitality industries are common territory for lawyers here. The hit these sectors have taken in the pandemic is well-documented. Retail was suffering from a lackluster economy even pre-pandemic, with an increased number of companies filing for bankruptcy. 23 major US retailers filed for bankruptcy in 2019, including Barneys New York, Diesel, and Forever 21. “Some particular sectors that have been disproportionately impacted by the pandemic have and will see an increased need for our services (retail, transportation, hospitality),” says Luke Barefoot, a partner at Cleary Gottlieb. “But the practice will continue to evolve and stretch to accommodate the current crises of the day.”
Private equity has enjoyed a meteoric rise over the past few years. So far recruitment numbers into this practice have remained stable under Covid-19, reflecting a slow in growth rather than a downturn. Like M&A, the sector took a significant hit during the first half of 2020 but recovered more quickly than some other transactional areas.
Many commentators expect 2021 to be a very strong year for private equity, highlighting the success of the global vaccine rollout, record levels of 'dry powder' (committed but unallocated capital), and strong credit markets.
PE related deals worth $460 billion took place in 2020, around $337 billion of which came from the second half of the year. Unsurprisingly given their general strong showings during the pandemic, the technology, media, and telecoms sectors dominated the scene, accounting for 769 deals worth $217.6 billion. The healthcare, financial services, and industrial goods sectors were similar resilient; collectively, these accounted for 65% of activity.
Covid-19 has had a profound effect on this sector, where we’re seeing an increase in legal activities as businesses reduce staff costs to survive in a recession or adapt to new ways of working. “Our labor and employment team has seen a surge in work from clients seeking advice on responses to the pandemic and remote work,” William Malley, managing partner of Perkins Coie, tells us. Wally Martinez of Hunton Andrews Kurth points out the issues facing this practice are “how we allow workforces to work differently, so they can continue with their operations in a lawful and compliant way.”
Regulations and restrictions on workers have inevitably impeded projects around the world. One major example is the Belt and Road Initiative, which is set to be one of the largest infrastructure projects in history (the aim being to create a modern-day Silk Road connecting Asia with the rest of the world). As governments around the world look to get people back to work, Wally Martinez of Hunton Andrews Kurth sees a rise in the need for public-private infrastructure expertise. “Our infrastructure in the United States is going to have to improve,” he says. “We haven’t seen the investment here like they have seen in Europe and Asia. Because the government has taken on a significant fiscal burden to make sure people have money in this crisis, we’re going to see a lot of public-private contracting. That will justify the investments we’ve made in building a robust public-private infrastructure practice.”
The pandemic lockdown has actually created opportunity on the renewables side. Several countries across the world have stopped coal-powered electricity generation altogether while their economies require less energy. In 2020, renewables overtook coal as a source of electricity generation for 153 days compared with 39 the previous year, according to Deloitte’s renewable energy outlook report.
2021 looks set to be another strong year for the alternative energy market, with Biden’s administration likely to mandate the wide deployment of renewables in line with his bold climate ambitions.
The private equity space has sharpened its climate focus in recent years, with the American Investment Council reporting that private equity companies had invested more than $11 billion into renewable energy projects in 2020. Blackstone set out plans to cut emissions by 15% within its first three years of investment in a new portfolio company or asset, while other heavyweights such as Carlyle and Apollo are throwing their weight behind sustainable energy projects.
“The government has been critically involved in the financial and health-related solutions to these current challenges,” says Craig Budner of K&L Gates. Law firms had to be on hand to advise clients navigating regulatory and policy issues. "The coronavirus has created a lot of work for government and regulatory lawyers advising clients on how to access disaster relief funds made available by federal, state and local appropriating bodies," says Jesse Vogtle, a partner at Waller.
Federal contract spending reached $681 billion in 2020, the highest amount on record, according to Bloomberg. Medical, research and development, professional services, and IT areas in particular saw an increase in funding allocation due to the Covid-19 pandemic. Spending on GWACs (government-wide acquisition contracts) reached nearly $21 billion. These kinds of contracts are designed solely for IT acquisitions and can deliver quickly on the acquisition of key telework equipment, such as laptops or tablets, which was especially important in the aftermath of the lockdown measures in place after the outbreak of Covid-19.
Biden’s $2 trillion American Jobs Plan aims to stimulate sustained economic recovery post-pandemic and create millions of jobs for American workers through projects to upgrade infrastructure in the country. Contractors will be required at each stage of infrastructure proposals, keeping attorneys and their firms busy for years ahead as the plan rolls out.
Firms are busy advising healthcare clients on how to navigate the uncertainties and unprecedented challenges connected to the outbreak. Healthcare providers for example may have legal questions as and when they need to change how they usually operate as a direct result of the pandemic. “We believe that the healthcare industry will remain relatively hot despite the likelihood that we will see fewer transactions in the short-term as everyone shakes off the effects of shutting down,” says Katie Stenberg of Waller.
President Biden has signed the American Rescue Plan Act 2021, an additional $1.9 trillion economic stimulus bill. The Act includes provisions to help hospitals and healthcare systems provide care to patients and communities, as well as measures to increase access to health insurance.
To minimize contact, healthcare has become and will continue to become increasingly digitized. “The acceleration of telehealth and virtual visits has been huge,” says Ira Coleman, managing partner of McDermott, Will & Emery. “Nobody expected this kind of development and adoption for at least another ten years, but the crisis has pulled the future forward by five years at least – maybe more. We have seen providers go from two telehealth appointments a day, to 5,000 a week.” With apps such as Doctor On Demand, Teladoc, and Heal, patients are now able to frequently chat with their doctors via video call or chat and have 24/7 access to other healthcare resources. Although these apps were on the market pre-pandemic, their usage has accelerated over the past year and will likely continue to be an asset in the post-Covid world. Alongside the obvious benefits to telehealth, we’re likely to see significant legal challenges around data privacy, indemnity, and professional insurance.
Over the past year, with major pharmaceutical giants like Pfizer, Johnson and Johnson, Moderna and AstraZeneca becoming synonymous with vaccines. The growing visibility of life sciences means that there has been a lot of investor interest in the sector in 2021, with PwC reporting that the volume of M&A deals was up 25% in the second half of the year compared to the first half. The Asia-Pacific region accounted for much of that.
Deal value was also higher in the second half of 2020 according to PwC, with five mega deals accounting for nearly $100 billion combined: AstraZeneca’s acquisition of Alexion Pharmaceuticals, Gilead’s acquisition of Immunomedics, Siemens Healthineers’ acquisition of Varian Medical Systems, Bristol Myers Squibb’s acquisition of MyoKardia, and Johnson & Johnson’s acquisition of Momenta Pharmaceuticals.
Covid-19 and litigation
Litigation became the biggest entry-level practice group in 2021, but this is less to do with growth and more to do with juniors being redirected out of large generalist corporate teams and into practices like tech and bankruptcy. We’ve seen appellate headcount grow as bankruptcy litigation cases have developed, we’ve seen growth in appellate work too.
When a recession hits, law firms go into battle mode and shift their focus from transactional to contentious, as clients' concerns become less expansionist and more survivalist. “Firms need to get ready for an uptick in litigation six months to a year after the pandemic ends,” says Craig Budner of K&L Gates. “Inevitably, people and companies will look for ways to pin responsibility on other companies for a variety of business risk and damage.” Jami McKeon, Morgan Lewis firm chair, tells us “our multidisciplinary crisis management team, which handles investigations, enforcement actions, and litigation, also is responding to higher demand.”
Covid-19 and transactional practices
When the pandemic hit, we saw companies tighten the purse strings in what had previously been a buoyant global transactions market, with particular growth in private equity. Now though, activity is rebounding once again.
If M&A activity is up, it follows that antitrust is busy too. 2020 marked the busiest year for the FTC since FY2001. It saw 28 merger enforcement actions in the fiscal year: ten settlements accepted for public comment; seven complaints voted out by the Commission; and 11 transactions abandoned or restructured.
Given the buzz of the tech sector right now, we’re seeing interesting overlaps, as Winston & Strawn’s chairman Tom Fitzgerald explains:“What you’re seeing is that tech firms are becoming positioned in aspects of their practice and business in a way that means they’re butting up against antitrust laws. They’re using their market positions in ways that may not be copacetic with antitrust rules. This isn’t an area where antitrust has historically been important, but it’s becoming a bigger factor in the tech space.”
Data from Decipher – a company performing due diligence for law firm hires – found that between November 2020 and January 2021, antitrust lateral moves have increased 80% compared to the average across the same period from the three years prior. This hasn’t been reflected so much at the junior end, with headcount in this practice area slightly down in 2021.
In a recession, capital markets feels the hit more strongly than most practice groups, surviving as it does on investor confidence. We're seeing headcount shift away from capital markets as law firms prepare for a contracting market. In March 2020, the US Federal Reserve slashed interest rates to a range of 1% to 1.25% - a move unprecedented since the financial crash in '08. Rates changes can have a ripple effect on capital markets, as borrowing money becomes more expensive. The glimmer of hope is that economists are foreseeing a swift recovery once the virus is under control. Wally Martinez of Hunton Andrews Kurth also expects to see “acceleration in what I’d call more esoteric capital markets work. How do we find a way to create a flow of capital to businesses in the current environment? We’ll see a lot of asset-backed securities and interesting things even for traditional players.”
The global pandemic is slowing economic activity and the increased risk will restrain companies' freedom to access finance. We're seeing a slowdown in finance transactions, while companies take fewer risks to safeguard cashflow. I Deloitte predicts for that the global economy could shrink by $9.3 trillion in 2021. Industry experts are confident that the impact of the pandemic is unlikely to damage the economy to the same extent that the 2008 financial crisis did, but the US banking industry still faces $318 billion in net loan losses. In law firms we're seeing a shift of resources from banking teams to bankruptcy teams.
What else is happening?
Environment: So far we've seen a certain resilience in this practice group to the pandemic-derived recession. This is because environment is predominantly regulatory rather than transactional, so less finance-dependent and more likely to involve the state. If it is affected by a recession, this will be felt later on, and nowhere near as significantly as financial and transactional practice groups. The most heavily affected areas are B2B.
Cannabis law: "The pandemic’s impact has been bittersweet," says Seth Goldberg, who leads Duane Morris' Cannabis Industry Group. "Bitter because cannabis companies have been largely deprived of the Payroll Protection Program loans, and traditional avenues for capital are not available to the cannabis space. Sweet because medical marijuana dispensaries have been deemed 'essential' in states where it is legal and thus those businesses and their employees have been hard at work during the pandemic."
Insurance: Health insurer clients will also be very busy as a surge in signups for health insurance under Obamacare and Medicaid is expected, with rising unemployment leaving millions without employer health benefits. Under the wider insurance market, there is almost too much to say on the impact of Covid-19. In brief, commercial and personal claims and reinsurance will be contentious topics for several years to come. Globally, certain states will underwrite part of the financial risk. We expect a headcount increase in this sector while the world settles the financial losses from the pandemic.
Intellectual property: During the pandemic, the USPTO closed its doors, leaving many IP cases tabled until further notice. 2021 is a busy time for IP lawyers dealing with all those backlogged matters. “On the patent litigation side, we have seen an increase in litigation since Covid hit which we expect to continue through 2021,” says John Adkisson, CEO and president at Fish & Richardson. “Our patent counseling and prosecution work has accelerated this year and we expect it to continue to grow in 2021.”
Media & entertainment: After a momentary pause as the pandemic took hold, film and television production companies returned to a whole host of new production guidelines. Mandated new protocols differ between states, but most productions have introduced Covid Compliance Officers to maintain and establish safety guidelines, with many TV productions being forced to re-write and reconsider conventional shooting techniques in order to maintain social distancing. There’s also skepticism and reluctance from insurance companies to underwrite ambitious new projects as the potential for production delays is far riskier than usual.
But what about space law? Yes, the crisis isn’t just global – it’s intergalactic. In the booming business of space tourism, Virgin Galactic was planning on taking its first tourist ship out in 2020 but decided to delay the program to put their resources toward make breathing apparatus for Covid-19 patients.