4 Schulte Roth partners who rep lenders like Cerberus and Sixth Street Partners are moving to Proskauer after a dispute over firm leadership
A number of partners in Schulte Roth & Zabel's finance group including chair Frederic Ragucci are leaving for Proskauer Rose. The partners have represented direct lenders and other non-bank sources of capital that have historically financed middle-market companies, but have more recently extended credit to major companies. Sources told Business Insider that Ragucci had disagreements with firm leaders and stepped down from the firm's executive committee. Schulte Roth said it remains strong and would be adding more finance lawyers to its team. Visit Business Insider's homepage for more stories.
Four partners in the finance practice at Schulte Roth & Zabel — including its chair, Frederic Ragucci — are moving to Proskauer Rose, Business Insider has learned. The four partners also include Michael Mezzacappa, the co-head of the finance group, and Marc Freiss and Ji Hye You, according to three people with knowledge of the move. Two of the people said Ragucci, a longtime partner at the firm, was partly motivated to leave by a dispute with firm leaders. The four lawyers have represented major business lenders including MGG Investment Group, Sixth Street Partners, which recently separated from the private-equity giant TPG Capital, and Cerberus Business Finance, a major middle-market lender, records show. Two of the people estimated that the four lawyers together brought in $15 million to $30 million in business per year. The team notified Schulte in late May that they would be leaving, one of the people said, and plan to start very soon at Proskauer, said another. Their planned move would grow that firm's finance practice, which is known for representing lenders on hundreds of private credit deals. Two people said Ragucci clashed with firm leaders and stepped down from the executive committee months ago. One said he disagreed with the decision to have two partners from Schulte's investment management practices succeed Alan Waldenberg as co-managing partners instead of including a partner from another practice. Ragucci and media representatives for Proskauer declined to comment. Schulte, which the American Lawyer reported had revenue of $465 million last year and made profits that averaged over $3 million for each equity partner, has expressed confidence in its ability to ride out the pandemic and has been hiring partners, including a finance partner in London. The firm is known for its frequent representation of hedge funds and its longstanding relationship with Cerberus Capital Management. In a recent interview with Law.com, the two new managing partners, David Efron and Marc Elovitz, said they hadn't cut compensation or delayed partner draws, as many law firms have, and said they weren't interested in the prospect of merging with another law firm. The firm's headcount has hung steady at about 350 lawyers over the past five years, with around 300 of them in New York. A Schulte spokesman said in a statement that the firm will regrow its finance practice, noting the recent additions of partners Paula-Marie O'Brien and Andrea Mandell. "Schulte Roth & Zabel is a strong firm... with a long history of providing best-in-class counsel to our global clients," the statement said. "We are committee to continuing to grow our finance practice and to adding top-tier attorneys across practice groups to our expanding firm." Proskauer, for its part, has about twice as many lawyers at Schulte and recorded over $1 billion in revenue last year, with profits per equity partner of $2.75 million, according to the American Lawyer. Its private credit lawyers represent 75 direct lenders on some 200 transactions a year, according to its website, and is led by partners Stephen Boyko and Steven Ellis, who is also the firm's chairman. The firm's website records 62 lawyers in the private-credit group, the biggest group of whom are in Boston.Join the conversation about this story » NOW WATCH: How waste is dealt with on the world's largest cruise ship
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An inside look at how Big Law firm Perkins Coie built up a diverse attorney base, winning major clients like Microsoft and Intel
Summary List Placement Law firms, like much of corporate America, are under renewed pressure to increase...Summary List Placement Law firms, like much of corporate America, are under renewed pressure to increase diversity among their ranks. Just 20% of equity partners at large US law firms are women, and only 7.6% are people of color, found a 2019 report by the National Association for Law Placement. Recent developments are signaling steps toward greater inclusion in an industry that's been largely dominated by white males. Hogan Lovells, for example, announced new diversity goals to increase the percentage of minority and LGBTQ+ partners, and Fenwick & West recently elected its most diverse class of partners, where over half are women. Large corporate clients are taking notice of these efforts, and are more actively setting diversity standards for counsel they work with — and rewarding those that meet them. In October, Perkins Coie, an Am Law 100 firm, was recognized as the top performing firm by Microsoft as part of its 2020 Law Firm Diversity Program. According to Microsoft, nearly 44% of Perkins Coie's partners are women, ethnic minorities, LGBTQ+, or have disabilities, representing an approximately 10% growth from 34% five years ago. Read more: 2 key steps law firms must take to boost diversity — and how being inclusive can help land major clients like Microsoft The program incentivizes firms that increase their diversity among attorneys working on Microsoft matters, the firms' partners, and executive committees, rewarding them with a bonus of up to 2% of their annual fees by meeting these targets. Perkins Coie also won top honors as Intel's most diverse outside legal team in September. The global software company also announced the Intel Rule, under which only law firms that have at least 21% female equity partners and 10% equity partners of underrepresented minorities will be eligible to work for Intel. Business Insider spoke with two of Perkins Coie's members spearheading its inclusion initiatives on how it's built up a diverse firm, and the importance of effective partnerships with clients in doing so. Perkins Coie's recognition as one of the most diverse law firms is a result of years-long intentionality toward new hires and leadership opportunities Perkins Coie has cultivated a network of initiatives and programs — from recruitment and retention to promotions and business development — that support its broader strategy of fostering diversity and inclusion at the firm, explained Genhi Givings Bailey, its chief diversity and inclusion officer. The firm, for instance, has looked into expanding its 1L diversity program, through which around 20 to 30 first-year law students a year are given a $15,000 fellowship and the opportunity to work with other summer associates. And, among lateral hires in 2020, 75% were diverse, with 44% of them people of color. Bailey said that ensuring that there are opportunities for leadership among minority attorneys is another key to diversity at the firm. 63% of newly promoted partners were diverse this year, and Perkins Coie's executive committee is 65% diverse: 11 out of the 17 members are women, people of color, have disabilities, or are LGBTQ+. Read more: Female partners in Big Law make $332,000 less than male partners on average. But 1 change has been shown to increase women's salaries by more than 40% — and boost their happiness as well. "There has to be input from a broad group of people to ensure that there is diversity of thought among key policymakers at the firm," said Bailey. Even before this summer, when the murder of George Floyd sparked renewed calls for social justice, Perkins Coie had been having "bold," and sometimes difficult, conversations about race with the firm's leaders and wider diversity community of lawyers, said Bailey, who's been at the firm for two years. "In a word, it's intentionality," she said. "It's critically important that everyone in the firm across all levels be engaged and involved in the work." The firm hired its first full-time diversity professional in 2008, though its commitment to diversity extends back several years, said Bailey. Its first resource group dedicated to minorities at the firm, the Women's Forum, was created in 2007. The partnership with Microsoft is a key factor in ensuring equitable distribution of high-value legal work among diverse attorneys But it's not just the headcount of diverse lawyers that matters, but also their utilization, stressed both Bailey and Judy Jennison, partner at Perkins Coie and its lead client relationship attorney for Microsoft. When diverse lawyers are given the opportunity to take on more substantive, high-value legal work, like taking depositions and leading M&A projects, they're able to not only develop important legal skills, but also gain exposure that makes their "upward trajectory" toward advancement a little smoother, said Bailey. Perkins Coie's partnership with Microsoft is one "absolutely important" way to do this. "Microsoft is very demanding when it comes to making sure they have diverse lawyers working for them," explained Jennison. "It's a great marriage between their work and giving our lawyers the opportunity to shine, develop, and grow." Perkins Coie has what Jennison calls a "portfolio arrangement" partnership with Microsoft. The firm builds teams, called "pods," comprised of diverse attorneys that work with a particular workstream or set of clients within the company for a fixed fee. Though the size of the pods varies depending on the work, it averages around three to six lawyers, and most are 70 to 80% diverse, according to Jennison. "They become an extension of the internal legal team, which allows them to get greater exposure and more knowledge than getting discrete assignments through a partner who's the interface between the firm and Microsoft," said Jennison of the benefits of this system. "They're getting direct client contact and a much better understanding of how their legal work translates to business execution." Read more: The lawyer who sued Proskauer for $50 million over gender discrimination just launched her own firm. She lays out her vision for shaking up the legal industry by abolishing billable hour targets and hiring mainly women and minorities. The firm also collects data about the work done through this portfolio arrangement, allowing them to run reports across pods on how much each individual attorney is getting strategic, complex work. "The data allows us to be more thoughtful about assignments, and determine whether it's just happenstance that someone's getting less strategic work, or whether there's something systemic that we need to address," said Jennison. A moment that struck Jennison as especially meaningful was when Microsoft, learning that a diverse senior associate was up for partner at Perkins Coie, put together a memo with endorsements in support of the lawyer. He would've made partner anyway, she said, but it showed her just how seriously they understood the then-associate's career trajectory. "It's truly an interactive partnership, where we make sure that everybody is getting what they need on both sides," Jennison said. "It's a different way to practice law. And it is exceptionally rewarding for everybody involved."SEE ALSO: 2 key steps law firms must take to boost diversity — and how being inclusive can help land major clients like Microsoft SEE ALSO: Female partners in Big Law make $332,000 less than male partners on average. But 1 change has been shown to increase women's salaries by more than 40% — and boost their happiness as well. SEE ALSO: The lawyer who sued Proskauer for $50 million over gender discrimination just launched her own firm. She lays out her vision for shaking up the legal industry by abolishing billable hour targets and hiring mainly women and minorities. Join the conversation about this story » NOW WATCH: Why hurricanes hardly ever hit Europe
Baker McKenzie just teamed up with an AI platform to help clients make better business decisions. A partner lays out how the tech will help the firm 'make meaning out of the volatility'.
Summary List Placement Baker McKenzie is teaming up with SparkBeyond, a problem-solving platform that uses artificial intelligence,...Summary List Placement Baker McKenzie is teaming up with SparkBeyond, a problem-solving platform that uses artificial intelligence, to better predict client needs and redefine innovation in the legal industry. The partnership marks the launch of the law firm's new global innovation arm, Reinvent, led by Ben Allgrove, technology partner at Baker McKenzie and global head of its research and development (R&D) department. Reinvent's goal is to boost what tech is already being used in the legal industry: "We want to bolster what we have to become a proper SWAT team, with the proper tools and data to implement real change," said Allgrove. The firm's new innovation arm is dedicated to several projects, including the one with SparkBeyond, as well as an internal fellowship program, where senior associates will be assigned specific projects and allow them to "practice evolution." "The word 'innovation' is overused, over-hyped, and increasingly becoming meaningless. People are becoming cynical with the term," Allgrove told Business Insider in an exclusive interview. "Reinvent is the retelling of the story of something that was already happening." The legal industry, historically seen as a slow adopter relative to others, has recently seen a sea change in its adoption of technology. By collaborating with Baker McKenzie, SparkBeyond, which has also partnered with Fortune 500 companies like Microsoft and consulting firms like McKinsey, hopes to expand its predictive technology to the legal industry, said Amir Haramaty, the platform's chief commercial officer. "The industry is ripe for disruption," Haramaty said. "But it's not just the rightness of the opportunity, but also the rightness of the partner. I don't know how many law firms have a practicing partner that is also the head of R&D." The "glassbox" approach: using artificial intelligence to overcome bias and one-dimensionality in data Through its AI technology, SparkBeyond seeks to address the issues inherent in the sheer amount of data that businesses have to sift through during their decision-making process. "The amount of data is just growing," explained Haramty. "The best tool in the legal industry is the human brain, but the brain comes with so many limitations, what we can call one-dimensionality — there's only so much we can see and so much we can process." Technology can help overcome this one-dimensionality and the biases it can create. SparkBeyond uses a "glassbox" approach, where its machine learning will generate millions of hypotheses, assigning each scenario a score, and selecting the strongest ones through its algorithm. "As lawyers, we have to be able to show our working," said Allgrove. "We're able to test the hypotheses at scale, and also justify our proposed strategies." These hypotheses center around questions that are at the crux of a law firms' business: What drives client demand? Is there a signal in the data that suggests that a certain client is likely to run into a disruptive event, like an unforeseen regulatory investigation? Machine learning ultimately enables businesses like Baker McKenzie to predict and better identify what clients need. "It allows us to make meaning out of the volatility," said Allgrove. Baker McKenzie plans to start feeding SparkBeyond's glassbox its own data, before expanding to clients Allgrove explained that the first step of Baker McKenzie's partnership with SparkBeyond is to use the firm's own data to build an "internal understanding" of its business. This is so as not to "guinea pig" the clients. The internal Baker McKenzie data that will be used will include financial information, client feedback, attorney teams, and market intelligence. Allgrove said that it will not include client-owned documents or advice provided by its clients. By combining this existing firm data with external data sets from sources like news feeds and licensed data sources, as well as the data that SparkBeyond has, and then feeding it into the "glassbox" machine for analysis, Baker McKenzie can determine the needs of its current clients. After testing the technology internally, the firm then plans to build the platform out to a client-facing second step. "We can go to our clients, tell them we have this approach that we've tested on ourselves, and ask them for their data," said Allgrove. The additional data fed into SparkBeyond's machine would boost the algorithm's accuracy, and help the lawyers provide better strategic advice to their clients. "The real power for clients is going to be combining their data, Baker McKenzie's brain, and SparkBeyond's engine," he explained. Bringing about a "real transformation" that can also have a social impact To Allgrove, however, it's not just about boosting business and making money. In addition to enhancing Baker McKenzie's understanding of its own business and of its clients needs, Allgrove hopes to bring about real social impact through the partnership. "When I flew to Israel in January for the first time to meet with SparkBeyond, we spent a lot of time talking about diversity and access to justice," he said. Baker McKenzie aims to leverage the capabilities of AI and apply it to other projects, Allgrove explained. He described how, within "30 seconds" of finishing his presentation at the annual partner meeting on Thursday, the firm's pro bono director pinged him at 2 a.m. with a project idea for SparkBeyond. This comes at a time when access to justice is more crucial than before, added Haramaty. "We have big visions for this," said Allgrove. "And we're going to have some fun as well."SEE ALSO: 'This is adapt or die time': Tech-savvy law firms make nearly 40% more in revenue than old-school ones — here's how new tools are helping lawyers get ahead SEE ALSO: These are 8 of the hottest Silicon Valley law firms to work at if you want to enter the booming tech market SEE ALSO: How Dentons, the world's largest law firm, is using tech to boost its pro-bono caseload by nearly 40% Join the conversation about this story » NOW WATCH: Why it's okay to eat the brown part of an avocado
Law firms' partners are making more money a new survey shows, but gaps in compensation when gender, ethnicity, and equity status are factored in are widening
Summary List Placement Lawyers are making 38% more than they were 10 years ago, but the...Summary List Placement Lawyers are making 38% more than they were 10 years ago, but the disparity between compensations of male and female, white and non-white, and equity and non-equity partners are widening, according to a new report by legal recruiting firm Major, Lindsey & Africa. The firm's report, published Tuesday, also found that attorneys who made lateral moves earn more than their non-lateral counterparts. This comes as partner compensation continues to be a hot-button issue in the industry. Firms are increasing pay for equity partners even as they're laying off workers amid the ongoing pandemic. And, Davis Polk recently announced that it's abandoning its strict lockstep system as the battle for top legal talent becomes increasingly competitive. Average partner compensation has grown 38%, from an average of $640,000 in 2010 to $885,000 in 2018, according to the report, which surveyed thousands of partners at law firms ranked in the Am Law 200, NLJ 350, or Global 100 on the salaries they paid from 2010 to 2018. The key driver behind this increase is a commensurate 40% rise in originations, which is based on how much revenue is generated by clients that a partner brings to the firm. Survey respondents said that originations were the most important factor in determining partner compensation. Despite an overall rise in compensation, partners of color see mixed results However, the increase in pay is not universal when broken down by partners' ethnicity. While reported average compensation of white, Asian Pacific, and Hispanic partners all rose in the past decade, that of Black partners actually fell from $565,000 in 2010 to $539,000 in 2018 — a 4.5% decrease. By comparison, average compensation for white partners in 2018 was $864,000. Lowe footnoted this trend with the caveat that it's difficult to draw meaningful statistical conclusions from this data, since there are so few partners of color to begin with. He does think, from a bigger perspective, that there's been a marked improvement in diversity in law firms from 20 or 30 years ago, when firms didn't acknowledge that there was a diversity issue. Read more: 2 key steps law firms must take to boost diversity — and how being inclusive can help land major clients like Microsoft The topic of diversity has especially been sparking discussion in recent months as the country undergoes a racial reckoning. Law firms, which are traditionally seen as dominated by white males, are no exception. Despite efforts to increase diversity and inclusion, some firms may not know how to implement meaningful changes. "What hamstrings them now is that they're not quite sure how to fix it," Lowe said. "Continuing to make sure that everyone's given a seat at the table is really important." Gender pay disparity may be widening, especially among non-equity female partners, but lateral moves might help Along similar lines, the report found that while the proportion of partners who identify as female has increased from 15% to 24% in the last eight years, female partners earned an average of 35% less than male partners in 2018 — down 11 percentage points from the gap in 2010. Average compensation for male partners in 2018 clocked in at $959,000, whereas that for female partners was just $627,000. Male partners' compensation levels are increasing at a substantially faster rate than female partners', thus leading to this widening gap, per the MLA report. This difference is only exacerbated when you factor in the gap between how much equity partners make versus non-equity partners. Equity partners, who own a share of the firm, reported 67% higher average pay than non-equity partners, and their compensation is growing nearly four times faster than that of their non-equity counterparts. Read more: Davis Polk just abandoned its strict lockstep pay model. 4 recruiters lay out why competitors will have to follow to retain rainmaking lawyers. "The degree to which the gap between equity and non-equity partners has been widening has been incredible," said Lowe. "It hits home more than ever that if you're going to be doing this, you really want to be an equity partner." The report also confirmed something that Lowe had only heard anecdotally: that partners who have made a lateral move at some point in their careers consistently earn 20% to 30% more than those partners who have never moved. The effect is even more pronounced with female partners, who reported 40% higher median compensation than non-lateral female partners. On top of this, they reported greater satisfaction with their compensation — and overall satisfaction with their life as an attorney — as well. The aim of surveys, started in 2010, is to identify trends in partner compensation across the industry. "We're firm believers that more data is better data," said Lowe. The firm will collect 2019 data for its 2020 survey later this year. "It's something that can help firms "set expectations for their partners and make better decisions going forward," Lowe added.SEE ALSO: Being the top lawyer at a corporate company can mean big salaries. Here's a breakdown of which industries pay general counsel the most. SEE ALSO: 2 key steps law firms must take to boost diversity — and how being inclusive can help land major clients like Microsoft SEE ALSO: Davis Polk just abandoned its strict lockstep pay model. 4 recruiters lay out why competitors will have to follow to retain rainmaking lawyers. 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