Coronavirus, credit: shutterstock.com

As fears over the spread of COVID-19 mount across the globe, law firms are under pressure to reassess how they approach deal work, with coronavirus concerns now topping the list of priorities in a range of transactions.

For the past month, law firms have been introducing measures in a bid to stem the outbreak and protect staff. But as the virus continues to take hold, partners at major law firms have told Law.com International that growing caution among clients is changing how they deliver advice. The potential impact of the virus is now eclipsing routine commercial advice, delaying deals and bill payments, and leading law firms to channel resources towards damage limitation.

Changing client attitudes

As of March 12, there have been over 126,000 confirmed cases of coronavirus across 125 countries, more than 4,500 of whom have died, according to the latest data published by the World Health Organization.

With the numbers climbing each day, one partner observes how client attitudes to transactions have changed starkly since the outbreak started in January.

Whereas two months ago clients "were conscious but not too worried", the partner says that they are now "taking it seriously" and have been "asking for much more contingency planning and guidance" from their legal advisers.

Client calls previously scheduled for advice about the intricacies of deals have "now turned into contingency planning calls" as transactions are either put on hold, or falling through entirely due to market volatility.

The partner added that, once the situation stabilises, clients will "expect lawyers to do damage control" for them, such as preparing to raise capital in a bid to repair their balance sheets, or preparing for potential insolvencies.

A private equity partner at another firm suggested that, while most of his China-based clients have postponed deals due to the outbreak, there was a "genuine belief that they can control the virus" and therefore are regaining confidence and will continue pursuing investment opportunities.

However, in contrast, the partner said American clients' attitudes have heightened. He added that one of his clients, an American private equity house, asked his team to "certify in writing" that none of the lawyers on his team had travelled to country at risk in the past couple of weeks.

Though the virus has forced a physical distance between lawyers and their clients, some partners are sympathetic to client worries, with one calling them "common sense".

One partner however lacked sympathy for the worsening pandemic, claiming: "It's just a cold, people should just get over it."

Stunted earnings

Partners also warned of the long term impact the virus could have on law firms' financials and lawyers' earnings in view of a curbed deal flow.

As the virus causes significant volatility in the market, one partner says some clients are "thinking harder" and "more cautiously" about their business decisions, which is in turn causing transactions to "take longer" to go through and, consequently, longer for lawyers to get paid.

A partner and head of energy at a U.K. law firm added: "The virus will render the most financially vulnerable law firms even more vulnerable because clients will take longer to pay the bills."

He added that the most vulnerable might have to "rely on their cash balances" to get through the economic difficulty brought about by the outbreak.

But not everyone expects to lose out. The restructuring and litigation markets expect to see an up-tick in work, with lawyers in those areas likely to bill more as a result.

The recent anxieties come as law firms impose preemptive measures to halt the risk of exposing their lawyers, staff and clients to the virus. Some firms, including Baker McKenzie in London, closed their offices temporarily, while others cancelled events - including annual partners' conferences – and restricted travel.

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