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Law firms poised to bounce back with economy in 2011

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An improving economy gives local companies a better outlook for 2011, which is good news for law firms in San Diego.

An influx of cash in the credit market likely will increase mergers and acquisitions work in the coming year, while several other practice areas are poised for growth, according to industry watchers.

“I think activity will pick up, certainly in the first quarter,” said San Diego’s Larry Watanabe, a partner with the legal consulting firm Watanabe Nason. “Whether it’s sustainable for 2011 or whether it’ll flatten out (remains to be seen).”

The law firm Cooley has already felt a surge in transactions. In the second half of 2010, the firm’s San Diego office completed one initial public offering and filed four additional ones. The firm also has completed six secondary offerings.

“Now that’s a meaningful pickup in activity,” said Fred Muto, a partner in Cooley’s business department. “Still, there’s the fragility we hear about in the European Union, but it feels very much like we’re busy.

“We have lot of M&A transactions going on and people are being aggressive. If you’re just projecting it out, we could be facing a very busy 2011.”

Intellectual property litigation, corporate and securities litigation and white-collar work are becoming practice areas in demand as well.

Madeline Cahill-Boley, a shareholder with Sullivan Hill Lewin Rez & Engel and chair of the firm’s executive committee, said probate and estate practices likely will grow in 2011 as the early baby boomers transition into retirement.

“Bankruptcy, construction litigation and employment disputes will continue on the rise even as the economy starts to recover,” she added.

Steve Strauss, a litigation partner with Cooley, said a lot of firms retrenched in 2010 but it was better than the previous year. As the San Diego economy starts to come back, local firms will be helped more, but practice area diversity is the key to success, he said.

Another trend to watch involves alternative fee arrangements. Sullivan Hill’s Cahill-Boley said they will gain increasing popularity, with clients continuing to focus on the value of services they’re receiving.

“Mid-sized firms like ours remain poised to capture larger institutional clients as corporate budget pressure continues to require alternatives to ‘big law’ and their pricing structure,” she said.

Additionally, corporate legal departments will look to get their legal needs met by a variety of firms, rather than just contract with one firm.

“There’s now a trend for highlighting and marketing a firm’s prominent or ‘gem’ practice areas,” Cahill-Boley said. “Firms will also need to have increased access to competent international law talent, as clients, even smaller clients, become global in their reach.”

Law firm budgets, meanwhile, have begun to thaw, which should lead to an increase in partner movement during the next few years, according to Watanabe, the legal consultant. But the number of law firms with offices in San Diego could see a decrease.

“A lot of these larger national and international firms will have to assess the necessity of having an office in San Diego,” Watanabe said. “A lot of firms in town just don’t have a foothold in the market. They all perceived they’d hook into life sciences, but it’s cornered by a small handful of firms.”

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