Under Stress: Fenwick Layoffs Expose Business Vulnerabilities

A recent article by Bloomberg Law highlights the pressure faced by law firms tied to Silicon Valley as a result of sluggish markets for tech-related IPOs, M&A, and venture capital. Fenwick & West, a 478-lawyer firm, announced layoffs of “just under” 10% of attorneys and staff. Other firms in Silicon Valley have also reduced headcounts over the past 15 months, including Cooley, Goodwin Procter, Gunderson Dettmer, and Wilson Sonsini, which all focus on tech-related mergers and acquisitions, IPOs, and venture capital. The value of venture capital deals in the US fell to lows not seen since 2019, causing less work for law firms. Rising interest rates also dampened desires to provide startup funding. As a result, many newly-hired lawyers were left with nothing to do, and firms found themselves overstaffed. Fenwick chair Richard Dickson stated that the firm did not see the rebound it had hoped for. There are several reasons behind the layoffs, including interest rates affecting venture work, over-hiring in 2021, and recent associate salary raises. Firms that solely provide corporate transactional services may need to contemplate expanding offerings to other industries or combining with another firm. However, some firms may ride out the storm and stay true to their venture identity.