9 Lateral Partner Movement

 

In 2025, the legal industry saw a significant surge in lateral partner movement, reaching a five-year high. According to available market data, there were more than 3,000 lateral partner hires registered in the United States alone[1], representing a 10% increase over 2024. This growth was largely driven by firms seeking rainmakers with portable books of business to bolster revenue amidst a more cautious environment for junior associate hiring.

 

The picture looks different in Latin America. Buying a book of business is rarely the point. Client relationships in the region are deeply personal and tied to founders and long-serving partners, which means portability is limited: the client tends to follow the individual, not the firm logo. The typical lateral hire in the Latam top tier is an expertise acquisition, not a revenue acquisition. Firms like Marval in Argentina and Mattos Filho in Brazil have been explicit about this: they do not expect incoming laterals to bring clients. The proposition to the lateral is that the firm’s platform will generate work for them once their capabilities are in place. That bet has paid off well for the leading firms. The profile of these laterals varies: sometimes they are talented lawyers who were not growing at their current firm; sometimes they are practitioners from the judiciary, government or in-house roles who bring deep specialist knowledge and have reached a compensation ceiling. What they share is that they are hired for what they know, not for who they invoice.

 

The US market remained the primary engine for lateral activity, with New York recording the highest number of partner hires of any single city, fuelled by intense competition in litigation and transactional practices. Washington DC followed, with a notable pipeline of partners moving from federal agencies into private practice.

 

In London, Edwards Gibson recorded 668 partner moves announced in 2025, the highest number since its records began and 21% higher than the previous record, which had been set in 2024.[2] Continental Europe shows strong percentage increases in key hubs, Paris, Brussels, Milan and Munich, driven by office openings and demand in private equity, restructuring and finance, though absolute move totals city by city remain well below London. Asia-Pacific activity was concentrated in Hong Kong and Singapore, with a notable trend of partners moving from major international firms to prominent Chinese firms or local boutiques.

 

The trend is clear: lateral partner movement is significant and will continue to grow. Gone are the days when a partner would remain at the same firm for the entirety of a thirty or forty-year career. A handful of exceptions still exist. Slaughter and May in the UK and Wachtell in the US have built cultures of unusual stability. But even these strongholds are not immune. Slaughter and May has recently seen the departure of partners to Paul Hastings and Simmons and Simmons.

 

Scott Barshay's 2016 move from Cravath to Paul Weiss remains the most cited symbol of this shift. He was not just any lateral: contemporaneous coverage described him as one of Wall Street's top deal makers, credited with leading on approximately $292 billion of M&A transactions in the prior year. Coming from Cravath, a firm famous for its tight culture and historically minimal lateral partner movement, his departure drew far more attention than a typical lateral move. Reporting at the time estimated his compensation at Cravath as roughly $4 to $4.5 million; at Paul Weiss, subsequent reporting suggested it approached $10 million.[3] The move crystallised a broader shift: even the most tradition-bound firms could lose star partners if they did not adapt their pay structures to lateral-market realities.

 

The episode fed into a longer arc of change at Cravath itself. In the years after Barshay's departure, the firm made a rare lateral partner hire and then announced it was abandoning strict lockstep and moving to a modified lockstep model, explicitly framed as a way to compete more effectively in a hot lateral market and to reward extraordinary contributors. Barshay's move was not the sole cause, but it was a vivid early marker of the end of the old rigid Wall Street lockstep era.

 

 

Hiring strategy

Big Law firms navigate lateral partner negotiations through a spectrum of approaches, with the more aggressive firms chasing rapid revenue via high guarantees and others prioritising sustainable integration and long-term profitability. The aggressive end of the market offers multimillion-dollar packages and headhunter incentives up to 30% of first-year pay. The evidence suggests this approach frequently backfires: a significant proportion of lateral hires exit within five years and a majority underdeliver on the portable business they projected at the time of hire.

 

Firms that handle lateral hiring more effectively tend to slow the pace for rigorous vetting, separating recruiting conversations from compensation negotiations and assigning dedicated integration support in the early months. The central question in any lateral hire, whether a partner's book of business will actually move with them or belongs to their previous firm's brand, is now being subjected to systematic data analysis rather than optimistic projection. Platforms that aggregate movement data and recruitment intelligence have given firms a more honest picture of what a candidate's practice is actually worth in a new environment. The data can sharpen the analysis. It cannot guarantee the outcome.

 

Firms also use these tools defensively, to identify partners in their own roster who may be at risk of being approached. Patterns such as a sudden reduction in long-term project commitments or a wind-down of involvement in multi-year matters can signal a partner who is clearing the decks to make their practice more portable. Firms that monitor these signals can address grievances early, before a competitor makes a formal approach. The most durable retention strategy, however, is not surveillance. It is ensuring the platform is strong enough that the partner has no reason to look elsewhere.

 

 

Financial handcuffs

To maintain control over their top performers, law firms have moved beyond loyalty arguments and implemented a range of financial structures that make leaving both difficult and expensive. These measures are designed to impose a significant exit cost on any partner who moves to a competitor.

 

Notice periods at elite firms now commonly range from 60 to 180 days. During this time many firms exercise garden leave provisions, where the departing partner remains on the payroll but away from the office and away from client contact. This serves two purposes: it allows remaining partners to shore up client relationships before the departure is public, and it makes the new firm wait for a partner they want to start generating revenue immediately.

 

Capital contributions create a second handcuff. Partners are commonly required to contribute between 15% and 35% of their annual earnings as working capital when they join a firm. Many partnership agreements now state that this capital will not be returned in a lump sum on resignation but paid back in instalments over two to five years. A partner leaving mid-tenure effectively has hundreds of thousands or millions of dollars tied up that they cannot access at the moment they most need liquidity to fund a new capital contribution at their next firm.

 

Back-loaded pay cycles compound this. Many firms hold back 30% to 70% of a partner's total compensation until the end of the fiscal year or into the first quarter of the following year. A partner who leaves mid-year may forfeit their entire accrued share of that year's profit, creating a very narrow annual window in which departure is financially rational.

 

Partnership agreements increasingly contain bad leaver clauses that can be triggered if a partner moves to a direct competitor or attempts to take a team with them. Being designated a bad leaver can result in forfeiture of undistributed profits, a reduction in the value of the capital account, or the loss of retirement benefits. This is the legal deterrent against the group move, where a lead partner tries to transplant an entire practice to a new firm.

 

 

Forgivable loan

Forgivable loans have become the instrument of choice for attracting star lateral talent. They offer the firm a significant accounting advantage: rather than taking a large bonus payment as an immediate expense against distributable profit, the firm records the loan as an asset on the balance sheet. Each year, as a portion of the loan is forgiven, only that portion is recorded as a compensation cost. This amortisation of the talent cost keeps the firm's profit metrics stable during periods of aggressive hiring, which matters because PEP rankings are the primary tool firms use to attract further lateral partners.

 

For the incoming partner, the forgivable loan provides a tax timing advantage. A $2 million bonus received today attracts tax on the full amount at the highest marginal rate in the current year. With a forgivable loan, the partner pays tax only on the portion forgiven each year, spreading the liability over five years.

 

The mechanics work as follows. Consider a partner lured to a new firm with $1.5 million structured as a five-year forgivable loan at a 5% annual interest rate.

 

Year 1: The partner receives $1.5 million in cash. On the first anniversary, the firm forgives 20% of the principal ($300,000) plus accrued interest. The partner reports $300,000 as income and pays the associated taxes.

 

Year 3 departure: If the partner leaves at the end of Year 3, $900,000 of principal has been forgiven. The remaining $600,000 plus outstanding interest becomes an immediate debt. The new firm must offer breakage compensation of at least $600,000 plus any outstanding accrued interest just to clear the partner's debt to the old firm, effectively raising the partner's buyout price considerably.

 

The forgivable loan also functions as a self-executing clawback. When a partner joins, the firm lends them the money for their capital contribution, recording the loan as a note receivable and a credit to the capital account. If the partner leaves before full forgiveness, the firm nets the unforgiven balance against the capital account. No lawsuit is necessary. The firm simply repays itself.

 

The secrecy surrounding these arrangements is considerable and creates its own risks. Details of a lateral's forgivable loan are typically known only to the managing partner, the CFO and a small compensation committee. Legacy partners see a line item for amortised recruitment costs in year-end financials but rarely a partner-by-partner breakdown. When the detail eventually surfaces, as it often does, the discovery that a new partner is receiving a $5 million forgivable loan while the firm is cutting associate bonuses or delaying capital returns creates a serious crisis of trust. It has led some firms to introduce transparency mandates requiring full disclosure of all compensation arrangements to the equity partnership. In the Big Law world, however, the trend remains toward opacity.

 

When a firm has too many forgivable loans on its books, it becomes financially fragile. If several partners leave simultaneously, the unamortised portions of their loans must be written off as immediate losses, which can wipe out the firm's net income for the quarter and trigger covenant defaults with the firm's lenders. This is precisely the dynamic that accelerated the collapse of Dewey and LeBoeuf in 2012. The cautionary tale is well-known. The lessons from it, as cautionary tales tend to go, are regularly forgotten when a great opportunity arises.

 

 

Paying breakage

In the modern lateral market, the hiring firm commonly pays the incoming partner's breakage: the income, equity and bonuses they forfeit by leaving their previous firm mid-year. Because partnership agreements have become more aggressive about withholding distributions and imposing bad leaver penalties, a partner moving mid-year can easily leave behind a seven-figure sum. The hiring firm that wants the partner has to make them whole.

 

These payments are rarely unconditional. Most breakage arrangements now come with clawback clauses or are paid in instalments tied to the actual realisation of fees from the partner's client base. This shifts some of the risk back onto the partner, ensuring the breakage paid by the firm translates into a tangible return rather than an expensive gift to someone whose clients did not follow them.

 

 

Regulatory restrictions

While firms have developed a range of financial handcuffs, they operate within a complex legal framework where professional ethics rules often override contract law. The core tension is the principle that clients, not firms, own the right to choose their counsel, which makes the legal industry's restrictive covenants far more fragile than those in other corporate sectors.

 

In the United States, ABA Model Rule 5.6 prohibits any agreement that restricts a lawyer's right to practise after leaving a firm. Courts have consistently interpreted this to mean that firms cannot impose financial disincentives that make it prohibitively expensive to compete. If a firm attempts to forfeit a partner's earned but unpaid profits simply because they joined a rival, US courts typically strike that provision down as a violation of public policy.

 

In Germany, post-contractual non-competes are only valid if the firm pays waiting money, Karenzentschädigung, typically at least 50% of the partner's previous earnings for the duration of the restriction. In France, non-compete clauses must be accompanied by a significant financial indemnity; if a firm fails to pay this during the non-compete period, the partner is usually free to ignore the restriction. The United Kingdom relies on the Restraint of Trade doctrine, with courts consistently sceptical of non-competes but willing to enforce narrowly tailored non-solicitation covenants. Garden leave is the most effective UK tool, but requires an express contractual right; otherwise a partner can claim a right to work and force an earlier exit.

 

In all jurisdictions, the client's right to choose their counsel overrides the firm's contractual arrangements. A firm cannot legally prevent a client from following a departing partner. Ethics rules in most jurisdictions also require that a departing partner be permitted to notify their clients of the move. Attempts to block that notification risk a professional conduct grievance. The firm can make leaving expensive. It cannot own the client relationship.

 

 

Why do partners move?

Our research has shown that money is rarely the primary driver when a partner decides to move to another firm. We also found that most laterals move away from their current firm rather than toward a specific destination, meaning the first step is a dissatisfaction with where they are, not an attraction to somewhere else. At this stage the partner is not focused on a particular destination and will likely consider several options. It is far less common that a partner has set their eyes on a specific firm and takes the initiative to pursue it.

 

So why do partners move if not primarily for money? The main reason is that a partner has started to lose faith in the platform. It might be that the partner feels the firm does not have the right strategy. If partner compensation is perceived as lagging behind the competition, the strategy is usually to blame. It could also be that the partner feels surrounded by weak colleagues and that the firm will never achieve greatness.

 

Another facet of losing faith in the platform is limited growth potential for the partner's team. Assume a partner in their early fifties who has two exceptional associates with genuine partner potential. If the presence of existing partners would undermine the business case for promoting them, because a firm can only have so many partners in a practice area before they start cannibalising each other's work, this frustration can trigger the partner to move with their team.

 

A third reason lies in interpersonal relationships. Sometimes a partner simply does not get along with some colleagues. If this happens within the practice group or with a member of firm management, it may become reason enough to start looking elsewhere.

 

If we can establish that partners start considering their options when they are losing faith in the platform, we can also state that in most cases increasing compensation will not, in the end, keep that partner with the firm. It addresses the symptom rather than the cause.

 

Finally, it is worth remembering that not only unhappy strong partners switch firms. Do not underestimate the number of partners who are pushed out and have no alternative but to find a new home. These might be underperforming partners or partners who have reached their retirement age.

 

 

Being a lateral can be risky

Our research also showed that partners who move often keep moving. Retention rates for lateral partners are generally estimated at around 85% in available market data, though figures vary by firm type and geography. Some partners never find what they were looking for and, despite the reasons for which they left, miss the warmth and familiarity of their original firm. Lateral partners also typically feel considerable pressure to perform from their first day at the new firm.

 

Laterals take a considerable risk. They are likely to lose part of their book of business. Some clients will prefer to stay with their former firm. Some clients who intend to follow the partner will be unable to do so because of conflicts of interest with the new firm's existing client base. Laterals also find themselves unfamiliar with the internal workings of their new firm, which creates inefficiencies in running what is essentially a top-level practice where flaws are not well tolerated.

 

Much depends on the quality of the onboarding and how quickly the integration is managed. There is a considerable risk for both the lateral and the new firm that things will not live up to the promise. Rainmakers are fully aware of such risks and firms have for years offered guaranteed incomes to new partners to bridge the uncertainty. Sometimes to their own demise.

 

Some firms are known to have a system whereby a new partner receives a strong guaranteed income over the first few years but will, by contractual agreement, be asked to leave if performance targets are not met at the end of the period. This offers some protection against buying a lemon, though it requires the firm to have the courage to follow through when the numbers disappoint.

 

 

Keeping rainmakers on board

Law firms are always fearful their top rainmakers might leave. As outlined in my 2015 book Death of a Law Firm, such departures could even trigger the firm's collapse, and history shows this has happened. The departure of one or more major rainmakers undermines morale, erodes confidence, can easily trigger an internal crisis and push other partners to start looking elsewhere, not to mention the direct impact on revenue and profitability.

 

It is also worth noting that it is not only rainmakers whose departure creates a crisis. The loss of a competition team or a tax team, which for most firms are not the primary revenue generators, can cause a major problem because core practices like M&A depend heavily on their input. Partners in support practices are in some ways more likely to leave, because their marginalised position makes them an attractive acquisition target for a competitor wanting to instantly boost a specific capability. Law firms would be wise not to focus their retention efforts on rainmakers alone. A winning team needs more than strikers.

 

When it comes to monetary retention, there is only so much a firm can do. When firms start competing on compensation packages for top performers, there will always be a competitor prepared to offer more. If today you earn $20 million, they offer $25 million plus a signing bonus and a guarantee. There is no end to this race. Firms have come to realise that an extravagant compensation package does not provide the protection against defection they are looking for, which is partly why they have turned to punitive measures instead.

 

There is a real flipside to this trend of tying partners with golden chains. Raising barriers to departure makes a firm less attractive to potential laterals and possibly also to homegrown talent. Lawyers, more than most professionals, are fiercely attached to their independence. Taking away an essential part of that independence will likely backfire. Withholding a sum as security for unpaid invoices and work in progress makes sense as a standard business precaution. Imposing genuinely punitive financial penalties for departure is a different matter.

 

 

Homegrown talent versus laterals

The balance between lateral hiring and the development of homegrown talent is one of the most delicate questions in law firm management. Lateral hiring gives a firm immediate revenue, geographic reach and practice-area capability that would take years to build internally. But a heavy reliance on external recruitment sends a message to the associates and junior partners who have spent years building the firm from the inside: the path to leadership is reserved for those who have proved themselves elsewhere.

 

When a firm consistently fills senior roles with outside hires, its most promising internal talent often draws the obvious conclusion. The path to partnership begins to look not like a ladder but like a funnel with a cap on it. The most ambitious among them, precisely those the firm most wants to keep, will start thinking about their own portable book of business and when they might use it. The firm has trained them and absorbed the cost of their development, only to hand the return on that investment to a competitor when they eventually leave.

 

The most successful firms treat lateral hiring as a supplement to an internal pipeline, not a substitute for it. They communicate clearly what the criteria for partnership are and ensure they do not shift every time a new lateral enters the building. When a lateral hire is made, it is explicitly tied to a growth rationale that creates new opportunities for the existing team rather than displacing them. Involving senior internal associates in the due diligence process for a lateral hire is one practical way to transform the new partner from a perceived threat into a potential source of work.

 

 

Culture and strategy

Back to the beginning: why are partners tempted to leave in the first place? Not only because of money, but because confidence in the platform has been eroded. As long as a partner remains genuinely confident that the firm is on the right track and offers everything they need to grow and do great work, there is little reason to consider moving. The risk of the unfamiliar is real. There is much to lose and relatively little to gain by moving when the current platform is strong.

 

For law firms, this suggests that the highest-return retention investment is not in compensation packages but in strategy and culture. The surprising thing is that so few firms make this the priority. Part of the problem may be that culture and strategy are intangible and hard to move quickly. Numbers are easier to deal with. But no amount of money will keep the top performers at a firm with a weak strategy and a poor culture. Except, perhaps, when they are close to retirement.

 

Transatlantic mergers make this dynamic visible in a particularly acute way. The strategic logic, expanding geographic reach, building a one-stop shop for global clients, is often sound on paper. The execution fails because it underestimates the friction between legacy cultures and economic models. US partners operating in a high-billing-rate market with strong profit margins will experience a merger that introduces a modified lockstep system as a direct compression of their earnings. They are not leaving for more money. They are leaving because they refuse to subsidise a global infrastructure that does not benefit their practice. The A&O Shearman combination, where according to market reporting nearly one in six partners departed since the union went live[4] with the exits concentrated in the US finance and corporate groups, illustrates this with precision. So does the market response to the Ashurst and Perkins Coie combination, which was immediately questioned on grounds of strategic coherence between a West Coast technology-focused firm and a City of London banking practice.

 

The firms that win the lateral market long-term are not those that pay the most, though pay that is materially below market is a problem. They are the firms whose partners do not want to leave because the strategy is right, the colleagues are strong, the platform provides what the partner needs to do their best work, and the culture makes the institution worth being part of. Compensation is the mechanism. The goal, as everywhere in this book, is something larger.

 

The main reason lateral moves and mergers fail is not compensation design. It is the absence of genuine cultural integration. Firms close the deal and then move on to the next topic, treating the integration as complete when the ink is dry. It is not. Three failure modes recur consistently. The first is treating the hire as a transaction rather than a process. Partners want to shake hands and get back to billing. The incoming lawyer is left to find their own way into a tribe that has its own rules, its own loyalties, and no structural reason to make room. The second is underinvestment in relationships. Integration requires the firm’s existing partners to spend quality time with the new arrival, not just a welcome dinner and a practice group introduction. Without that investment, the new partner disengages and starts to feel excluded from the project they joined. The third is the failure to keep building trust. Differences and doubts surface constantly when lawyers from different backgrounds work together. Trust is the only thing that makes those differences navigable rather than divisive. Firms that remember this and design for it perform better on integration than those that assume goodwill will fill the gap.

 

 

How important is partner compensation?

Partner compensation definitely is a tool to keep partners on board. At the same time its importance must not be overstated. In general, partners will only be open to moving when they have started doubting the platform one way or another. In order to prevent unwanted defections, law firms must focus on their strategy and culture. If the strategy is weak and the culture poor, no amount of money will keep the top performers on board.

 

In the end, financial rewards such as a higher compensation package or a performance bonus will only have a temporary effect. The higher reward soon becomes the new normal and dissatisfaction returns. If the firm has a strong strategy, there will likely not be a significant negative compensation gap compared to its closest competitors. A top performer would earn roughly the same at another firm, especially when comparing after-tax income. Realistically, earning more would not bring most partners into an entirely different financial lifestyle. At the top level, money is not the great differentiator.

 

The legal industry often views lateral partner movement as a purely financial transaction: a simple matter of who offers the highest price. The reality is more nuanced. Elite talent will not stay with a firm they have stopped believing in, regardless of the size of the cheque. Compensation is a prerequisite for the conversation. Platform quality and shared ambition are what close the deal. The firms best positioned to attract and retain lateral talent are those that have institutionalised: merit-based systems, collaborative cultures, decentralised governance. The firms most vulnerable are those that remain personality-driven, where the departure of one or two key individuals triggers a talent cascade that the compensation system has no mechanism to arrest.

 

[1] Leopard Solutions, Annual Lateral Partner Movement Report 2025; also Law360 Pulse lateral market data. Edwards Gibson, Law Firm Partner Moves in London, Issue No. 90, January 2026.

[2] Edwards Gibson, Law Firm Partner Moves in London, Issue No. 90 (January 2026). Edwards Gibson records date from 2007. The previous annual record of 551 moves was set in 2024.

[3] Scott Barshay’s $292 billion M&A transaction volume in 2015: The American Lawyer / Law.com, ‘Top Cravath Deal Lawyer Scott Barshay Jumps to Paul Weiss’, 3 April 2016. Compensation figures: Above the Law, ‘A Deeper Dive Into Scott Barshay’s Move From Cravath To Paul Weiss’, 4 April 2016: Cravath compensation ‘roughly ⁄4 to ⁄4.5 million’; Paul Weiss compensation ‘shy of ⁄10 million -though not by much’.

[4] The Lawyer, Legal Business and Law.com reporting on A&O Shearman partner departures, 2024–2025. Following the completion of the Allen & Overy and Shearman & Sterling merger in May 2024, multiple reports tracked significant partner attrition at the combined firm.