Joe Macrae (Photo: Courtesy photo.)

When legal recruiter Joe Macrae founded Mlegal 19 years ago as a two-recruiter shop in Palo Alto, branding was something of an afterthought.

He had recently sold his prior outfit ZMB.

"Z, very sadly, died, B retired for a while. And so my wife and I thought: 'Well it's just the M left, so why not Mlegal?'" said Macrae in the run-up to the firm's official rebranding Thursday as simply 'Macrae."

A lot has changed since 2001. The firm now has 12 recruiters and a total of 20 staff spread across offices in London, New York, Washington, and Northern California. But the focus remains on helping firms find senior partner talent and make hires from the upper levels of government.

"There was some brand confusion with at least one of our competitors, and we felt this was a cleaner, newer look that just refreshed our message to the market at this time," Macrae said. 

That one competitor, although Macrae didn't explicitly say so, is Major, Lindsey & Africa, commonly referred to in the market as MLA. Macrae has brought over a number of recruiters from MLA including Jane Sullivan Roberts, whose husband is the chief justice of the U.S. Supreme Court, and fellow D.C. recruiter Lauren Drake, whose move led to a lawsuit from MLA against Drake and Mlegal which has since settled.

Ahead of Thursday's rebranding, Macrae spoke with The Recorder about the current legal recruiting market, how the pandemic has changed firm's hiring practices, and what the continued economic stresses might mean for lateral hires in the near future.

Answers have been edited for length and clarity.

What's been going on since mid-March in the market? Who's in acquisition mode and who has a target on their back? 

In terms of our business, when the Bay Area lockdown started in March we had a board meeting to discuss contingencies, and we decided to look at what would happen if we didn't close a single deal through the end of 2020. How are the revenues? Would we need to do any sort of reduction in staff? And we decided pretty early on that even if we didn't close another deal this year that we would be fine—that we wanted to keep the team together.

As it happens, we have had an incredibly busy few months. We just surpassed our total revenues for 2019. When you take a look at what happened, we saw a portion of our clients, roughly half the firms we work with, saying "We've just got to slow down or take a time out unless you come across some group that's instantly accretive. Otherwise, don't call us. We'll call you."

Then we've had other clients who've said either "We have a very specific need" or "We need to open in a marketplace where we have clients where we don't currently have an office" since no one can travel.

Thirdly, we've seen groups and senior partners saying "we're interested in exploring what's out there" but for various reasons.

Are there things about this everybody-sheltering-in-place and videoconference away environment that have made making a move now easier?

I was thinking about this. We've both read the articles that say "Gosh, it's making it easier for people to move." Part of it is that lots of firms have complicated multi-step processes for making senior-level partner hires. Candidates need to meet with between 8 and 50 partners. In a normal environment, senior partners in firms are pulled in a lot of different directions. They spend a lot of time on business development, at lunch meetings, at dinner meetings, and more than anything travel. If you take out the face-to-face business functions and all the travel, I just wonder if people are getting four hours a day back.

The process right now is much easier for the candidate. The fact that we can get a partner to meet 12 partners in the span of a day with three of four multiparty Zoom meetings really just accelerates the process.

I'd say 8 to 12 weeks ago people were saying, "Oh gosh, we couldn't make a hire without meeting with someone in person. We need to sit in the same room and see the whites of their eyes." More recently, that's changed.

Are there particular practice areas or geographies that are especially competitive at the moment? Or are most of the moves now strategic with firms plotting their own courses?

A bit of both. Certainly, one of the reasons I set up the business in the Bay Area 20 years ago as opposed to elsewhere was a sense that technology would play a central role in the economy.

Fast-forward to today and look at the value of the FANG stocks [Facebook, Amazon , Netflix, and Alphabet] and the slew of articles saying how central technology companies will be to any potential recovery, that all points to why the law firms are super-focused on doubling or tripling down on the Bay Area.

We've seen a lot of activity in D.C. and New York and a quieter period in London and attribute that to a combination of the market still working through Brexit and the combination of COVID issues.

After the last recession, many firms revamped their capital structures to make partners put more skin in the game. Is that something that might be slowing down what might otherwise be an even greater volume of movement at this moment? And do you anticipate departed firms taking any longer than usual to return capital contributions to departing partners in our current cash-strapped environment?

I think the short answer to the first question is 'no' that's not what would be holding up partners thinking about a move. Even if firms increased from say 10% to say north of 20% of the expected annual draw that partners are supposed to contribute in capital, the reality is that the firm to which people move will generally allow for some kind of accommodation. That could be a three-year build up in capital contribution to allow for the return of capital from the prior firm or, in many cases, the firm will help facilitate some kind of interest-rate friendly loan.

On the second question, it's a very interesting point where we're only starting to get data. One thing we have a sense of is that there are a number of firms who have provisions where theoretically they can pay capital out in installments over a longer period of time. It used to be that if you were a good leaver, they paid it more quickly. My guess is that those clauses will be enforced more rigorously as firms think about their own cash flows.

You as a company have been the subject of some lateral hiring-focused litigation brought by a larger competitor in the MLA suit that settled last year? What have you learned from that experience and does it inform, in any way, how you advise your clients about their own moves?

I think that's a great question. What I would say is in our advice to clients and in how we conduct our business we will say to people first of all you need to be sure of the local rules and regulations that apply to you and your move. There's a big variation from state to state. You need to be aware of best practices in terms of data privacy and how non-competes work in your jurisdiction.

What do you see on the horizon in the market?

I think the next couple of months are going to be particularly interesting. Broadly speaking, during March and April firms were busy executing on the pre-existing pipeline of deals that were in the works pre-COVID. You then got into late May and June and it's been much more choppy. The landscape is much more confused. There was a period where the level of new private equity deals was way off but the last two or three weeks we've seen that coming back. The amount of public M&A: I'm not yet hearing strong messages that that has picked up. Litigation is challenging particularly since the courts are operating on a much-reduced basis. I think if we see a slow July and a slow August and then firms having weaker collections in September, we could see more people exploring options in Q4 with a view to a move early in 2021

If partners in the firms start to see a tranche of firms that are outperforming the average, you could see an additional wave of partner moves. In a bull market where all firms are doing well and all boats are rising, it is arguably hard to see a reason to move. I think if there is a slower July and August and we see some firms come in on budget or even above budget and other firms saying we're 10, 15, 20% down on revenue that could fuel uncertainty in those firms.