The forecast is bleak – recession ahead – and everyone is scrambling for safety. But what does it mean for the legal profession?

Some experts believe that the legal profession is recession-proof; through thick and thin, there is always a need for lawyers. But others say that the demand for legal services is already declining and could fall further in a recession.

However, most agree that law firms have learned from past mistakes and are now better equipped than ever to handle an economic downturn.

“The legal industry is more recession-resistant than most,” says Peter Zeughhauser, founder of management consulting firm Zeughhauser Group. “Clients will have legal needs in down times and they will have legal needs in up times – they may be different needs, but they will. As a service business, the legal industry is generally recession-proof.”

Practice areas likely to remain healthy even in a downturn are litigation, intellectual property, restructuring and bankruptcy, Zeughauser says. The ones likely to slow down are transactional areas such as mergers and acquisitions and private equity work.

Zeughauser’s view is shared by many: litigation will remain strong, while major transactions will be criminalized. But a newly released report concludes that a confluence of economic factors could challenge that conventional wisdom.

January 2008 customer advice issued jointly by Hildebrandt International and Citi Private Bank concludes that the current economic downturn is hurting the legal industry in all practice areas.

“In a sense, the current recession so far has been a ‘perfect storm’ in which finance, transaction and litigation work has trended down at the same time, with no offsetting increase in economic downturn-related work in yes,” said the advisory bonds.

Still, that downward trend is likely to increase as the recession deepens, at least for litigation, says one of the notice’s authors, Danilo S. DiPietro, director of the Law Firm Group at Citi Private Bank in New York. York. “There is already some evidence that high-level litigation and investigative work is picking up.”

The reason litigation remains strong during a recession is not surprising. Even when the economy is down, companies still want to sue each other, says John A. Jordak Jr., a partner at Alston & Bird in Atlanta. “In fact, companies might be more inclined to sue if the economy is down.”

In his focus area of ​​securities litigation, that’s also true, Jordak says. “Class-class lawsuits are typically filed when a company’s stock price plummets. If the market is unstable, more of those cases will be filed. So a recession can often mean an increase in our work.”

BETTER PREPARED COMPANIES

Industry observers agree that most large law firms learned valuable lessons from the economic downturn a decade ago and are better prepared than ever to weather whatever economic storms come their way.

Ward Bower, director of legal consulting firm Altman Weil Inc., suggests that the key to being prepared is for a firm to diversify into countercyclical practice areas and be prepared to downsize when necessary. Additionally, firms must train attorneys in areas such as corporate law and real estate to handle matters on both sides of the cycle.

Jordak believes this is why larger companies like his are better equipped to withstand the vagaries of the economy. “For a firm like Alston with a broad base, if one area goes down, others go up, so it evens out over time.”

Still, some companies are tempted to cower in the face of a recession. That may be a mistake, Bower warns, because they may be missing opportunities presented by the recession to expand through mergers and lateral hires. “Companies that are adequately capitalized can find the recession an opportunity for growth.”

It’s also important for law firms to be flexible in their staffing, advises Jordak. “Companies must have the flexibility to assign associates from an area that is shrinking to a more active area.”

Others suggest trimming may be in order. “Pay close attention to the quality of your lawyers,” recommends Donald A. Loft, a partner at Morris, Manning & Martin in Atlanta. “Go ahead and market the company more. Incentivize your good marketers to come out.”

Citi’s DiPietro is even more blunt: “Companies are recession resistant, not recession proof. This is an opportunity to weed out unproductive lawyers through rigorous performance reviews.”

LISTEN TO YOUR CUSTOMERS

Whatever happens, don’t forget about your clients, several professionals insist.

“One thing that’s important is that lawyers really listen to their clients and try to get ahead of concerns that are particular to their sector of the economy,” says Jordak. “By doing that, you can better position yourself to help your clients get through their recession woes.”

Donald Loft agrees: “Be more creative with your fee arrangements. Put greater emphasis on efficiency and service. It’s a privilege to represent your clients, not the other way around; act like a business partner and be sensitive to their needs.” .

While larger companies that are diverse in their practice areas and geography may have an advantage in weathering a downturn, smaller companies have an advantage in their flexibility.

“Smaller businesses with flexibility can pick up some customers,” says Loft. “I would expect corporations to shop around. I would expect rate increases to slow down and demand for fixed-price services to increase.”

If all this makes you nervous, you are not alone. “Every law firm is always nervous about their work and their clients,” observes Zeughhauser. “Normal anxiety rises at a time like this. There are few companies that don’t worry about losing their job.”

But even if storm clouds are approaching, there may be a silver lining within them.

“The legal profession is extremely resilient, and the demand for legal services will undoubtedly continue to grow, perhaps at a slightly slower pace,” says Hildebrant/Citi Client Advisory. “But, with careful and sensitive management and with a focus on ‘people issues,’ we believe most companies will have a relatively good year, even if overall annual revenue and earnings growth is lower than in the immediate past.”

For Donald Loft, tough times offer opportunities. “When times get tough, that’s when you have to use it as an opportunity to examine how you can compete more effectively. If you do that, it will serve you not only in tough times, but also when things change.”