Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
Last summer the century-old law firm of Oppenheimer Wolff & Donnelly came one partner vote away from folding, after an expensive expansion to the Silicon Valley turned sour. The firm had to close offices, pay for space in places where no one was working, and trim down to about 125 attorneys — activities that torpedoed profits for the partners as offers poured in from competing firms.
Bruce Machmeier, partner at the Minneapolis firm who serves on the management committee, tells how the loosely tied attorneys who make up any law firm became stronger as they banded together to get through the crisis.
“I wouldn’t call it a crisis. I’d call it a series of seemingly insurmountable challenges.
Being a manager of a law firm is a funny thing. We’re owners, partners, but primarily we practice law. Most of us don’t have experience to deal with a set of challenges outside the practice of law.
To frame it, Oppenheimer had expanded in the late ’60s. We followed a client, then Control Data, to Brussels. That was the beginning of our international expansion. We added a small office in Washington, D.C., and New York.
The bulk of our growth came in the ’90s. The strategy was to grow along with the tech boom. We opened three offices in California, with 75 lawyers total. We had 220 attorneys overall. Our strategy was to add intellectual property, business and corporate lawyers, and rely on our core office and cross-sell our services. Many law firms have expanded that way.
Ultimately the tech boom busted, and in 2003 we needed to close our offices in California and ultimately in New York. We sold the offices in Paris and Brussels. The strategy did not pan out; we were faced with this reality.
I was aware that law firms are very fragile. Partners aren’t bound to their firms. The lack of non-competes arises from ethical reasons. Clients wouldn’t be free to go to any lawyer they want if those lawyers had non-competes.
I work with high-tech clients. They always do these three things: confidentiality, assigning inventions and non-competes. Law firms lack those.
When you face a situation like this, we knew there would be significant costs associated with the closings. The parties who bear that are the partners. They took a significant hit, each and every one.
You ask, how will my other partners react? What will people do? They have to think of themselves and their families. They have to think of their clients.
What led to this situation? The tech boom busting. We had not been able to achieve critical mass in those offices. Then there’s a culture here in Minneapolis that we couldn’t duplicate there.
One of the things we learned, it tested that culture. It’s not how much money we make. People said there’s something special about this place.
There’s a high level of trust. We work together very well. If I need help, I’ll pick up the telephone and the person will say yes. We have confidence we can out-lawyer anyone in town. We have strong chemistry. We demonstrated that through this situation.
As for turning points, in some ways everything was a turning point. Our partners voted every day with their feet by staying here. They dealt with the uncertainty. Our staff, the associates, there was incredible uncertainty. They stayed. Many partners were talked to by many firms.
The culmination of things was our meeting in June 2003. In June we knew what the new situation would be. We gave a Power Point presentation, then let people think about it for a couple of days. We knew a mere majority vote wasn’t going to swing it. They also had to believe in the plan or it’s not going to work.
It was a long meeting. Ultimately it was positive. We said we have to be for it, or then we’ll look at what alternatives we have. A lot of people spoke. People talked about people not in the room, associates and staff who they were concerned about. Some wondered whether a trimmed-down firm would be competitive. Many spoke of the strength of lawyers, the strong bonds.
At the end of the meeting we voted. It was virtually unanimous to go forward. Only a handful of partners left in 2003. It’s remarkable. It’s remarkable.
I was very gratified. I wasn’t surprised, because I believed in the plan too. But getting to that point demonstrated what I hoped and believed was the case.
Communication and listening were very important. We work a lot and talk a lot with each other on a daily basis.
What I’ve learned is you have to go back to living the way you lived before the changes, and we did that. The best thing we did was just get back to work.
We had a half-day retreat in November, and said, ‘Let’s talk about our markets, focus on the future. How can we take what we have and turn it into our strengths?’
We were profitable. We’ve never been unprofitable, if you allow me to set aside 2003. We all made money. But the issue is, did the partners make as much as they would have? No. The house of cards could have fallen but it didn’t.
We’ll be wildly profitable this year and even more wildly profitable in the year to come. This is a great life.
It was such a remarkable experience, what we went through. Large parts of it you have no control over. The part that we could control, we were very gratified how it turned out.”
— interview by Beth Ewen
Partner at Oppenheimer Wolff & Donnelly in
Minneapolis: 612.607.7267
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