Stroock & Stroock & Lavan, a prominent law firm founded in 1876, finds itself in the midst of merger discussions and partner departures, which pose potential risks and opportunities for the firm’s future. Notably, over 40 lawyers from Stroock’s restructuring practice departed for Paul Hastings more than a year ago, signaling the beginning of a challenging period for the firm. Recent exits from practices such as intellectual property, private wealth, and consumer financial services class-action further compounded the situation.
While Stroock has not officially confirmed any specific merger talks, The American Lawyer recently reported that the firm plans to merge with Nixon Peabody in the coming months. Although sources familiar with the situation acknowledged discussions between the two firms, they clarified that no agreement has been reached yet. Stroock and Nixon Peabody and other firms have declined to comment on these discussions but have acknowledged their general exploration of growth opportunities.
In their pursuit of strategic combinations, Stroock has also engaged in merger talks with Steptoe & Johnson, McGuireWoods, and Squire Patton Boggs, according to insider sources. However, these discussions remain unconfirmed as the firms chose not to comment on them.
The departure of prominent partners stands as a significant risk factor for any law firm involved in merger discussions. In the case of Stroock, more departures, particularly from their esteemed real estate practice, could potentially deter potential suitors. Law firms face limited options to prevent partner departures once merger negotiations become public, and a “snowball” effect of departures can ultimately lead to firm instability and potential collapse.
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James Jones, a senior fellow at the Center for the Study of the Legal Profession at Georgetown University Law Center, advises firm leaders to transparently communicate with key partners, emphasizing the benefits of staying and negotiating a deal for the institution as a whole. Managing partner experience at Arnold & Porter for nearly a decade, Jones recognizes the challenging nature of such endeavors.
Founded on the pillars of restructuring and real estate, Stroock has witnessed a decline in headcount by over 20% since 2010, with 238 lawyers in 2021, according to AmLaw data. The firm’s gross revenue in 2021 reached $274 million, positioning Stroock as the 128th largest firm in the country.
Stroock’s restructuring practice faced significant setbacks when the group of 40 lawyers departed for Paul Hastings in March of the previous year. This exodus, which included Kris Hansen, the head of Stroock’s restructuring practice, accounted for over a quarter of the firm’s 2021 revenue. Hansen subsequently secured a lucrative position advising the creditor’s committee in the bankruptcy of FTX Ltd., generating substantial fees for his new firm.
In contrast, Stroock’s real estate practice has remained largely intact, led by Jeff Keitelman and Brian Diamond. Noteworthy achievements include their involvement in major commercial real estate transactions such as the World Trade Center redevelopment project, representing The Port Authority of New York and New Jersey.
Recent weeks have seen departures from other practice areas at Stroock, including 10 consumer financial services class action and regulatory attorneys joining Morgan, Lewis & Bockius, and three private client lawyers departing for McDermott Will & Emery. Additionally, Schulte Roth & Zabel recently hired a group of five Stroock intellectual property litigators.
Stroock affirms that growth remains their top priority and recognizes the importance of scale in the legal industry. As discussions surrounding potential mergers continue, the firm strives to address partner departures and position itself for future success.