In an interview with Bloomberg Law, Davis Polk Chair and Managing Partner Neil Barr discussed the evolving lateral partner market, how that activity is impacting law firms, how Davis Polk approaches lateral hiring and what the firm expects on that front going forward.

Neil told the publication that he expects to see significant moves across the lateral partner market over the next 18 months as firms continue to modernize and improve at taking and managing risks.

“Consolidation is customarily used to describe a merger, but I think we may look back and conclude this is a time of industry consolidation that’s occurring through lateral activity rather than mergers,” Barr said. “You’re seeing partner movements gravitate toward a handful or two handfuls of firms, and in that respect I think that’s very much going to shape the industry.”

He explained, “While we have not always prioritized the lateral market, this is a tremendous opportunity for us. So we will be leaning into the market to try and advance our strategic objectives.”

Neil identified areas including London, Northern California and asset management as ripe for expansion. Just last week, Davis Polk announced that prominent leveraged finance practitioner Luke McDougall will join the firm as a partner in London.

“In each of these practices and offices, we very clearly have internal candidates we are going to promote to partner,” Neil said. “None of them will be done exclusively in the lateral market. But in each of these practices or offices we are subscale compared to what we’d like to achieve. So, we will be able to accelerate our strategy by engaging in the lateral market.”

He added, “As we increasingly look at ourselves as businesses, the thesis for going out into a market of talent and finding talented partners that can augment your firm just becomes self-evident.”

Bloomberg Law noted that under Neil’s leadership, the firm has maintained its position as one of the most profitable law firms, even as other firms have been more active in the lateral hiring market. In the piece, Neil also shared that the firm will be making tweaks to its current compensation model for partners in the coming months. But any changes, he said, will stay within the firm’s current framework, which allocates shares to partners based on their total contributions to the firm, does not pay bonuses or guarantees, and has no “credit” system for originating work.

“We want all partners to be aligned on growing the pie for the firm over a long period of time—that is our overarching compensation philosophy,” Neil explained. “It’s a modern compensation philosophy for us that interweaves well with our institutional value system.”

“Davis Polk Leaps Into Lateral Hiring Seen as Re-Shaping Industry,” Bloomberg Law (May 6, 2024) (subscription)

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