JENKENS & GILCHRIST: THE RISE AND FALL OF A MODERN LAW FIRM By Cheryl L. Mullin
It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change ~ Charles Darwin. I.
Jenkens & Gilchrist was a Dallas-based law firm that grew rapidly in the 1990s, primarily through mergers, acquisitions, and lateral hires. But when it was formed in 1951, the partners had no national aspirations. Its only purpose, in fact, was to serve the needs of legendary oilman Clint Murchison, Sr. and his family in connection with the acquisition and management of the family’s extensive corporate, oil and gas, and real estate holdings. As the Murchison family’s holdings flourished, so did Jenkens’ practice, primarily in the areas of oil and gas and real estate, where Jenkens’ lawyers’ had gained particular experience through their representation of the Murchison family. As time passed, the firm began to take on non-Murchison work to support the growing practice. Because of its expertise, oil and gas and real estate were the natural areas of expansion. In the early 1980s, a drop in oil prices, real estate overdevelopment and other factors created a financial “perfect storm” that devastated businesses throughout the metropolitan areas of Texas. During the fallout, Jenkens lost not only its core Murchison and Murchison-related business (which at that time still constituted about half of the firm’s business), but also much of non-Murchison oil and gas and real estate work. By the late 1980s, therefore, Jenkens was fighting for its survival. It needed to shed its dead weight and to diversify and grow – quickly and contemporaneously – or the firm would die through shareholder attrition and firm raiding. Thus began a period of rapid and uncontrolled expansion, which included opening offices in strategic markets and a push to increase “profits per partner” to entice shareholders with their own practices to stay with the firm and to attract new practice groups. This was the climate when Paul Daugerdas approached Jenkens in the summer of 1989 about his joining the firm with two partners, Erwin Mayer and Donna Guerin. Daugerdas, at that time, was head of the tax department at the Chicago law firm Altheimer & Gray and had been a longtime tax partner at Arthur Anderson. Acquisition of the Chicago-based tax practices group was enticing for two reasons: one, it offered the opportunity to establish a Chicago office, which would be a strategic move for the firm, and two, it had potential to dramatically increase firm profitability, which would strengthen the firm’s ability to retain and attract top talent. Despite initial concerns and skepticism, all but one of the firm’s shareholders ultimately voted in favor of the Daugerdas group. By the end of 1989, the tax shelter team generated approximately $28 million in revenue; in 1999, it generated almost $40 million in revenue, about 20% of the firm’s total. When I joined Jenkens the following year, I was a sixth year associate, having graduated from Widener University School of Law in 1995, somewhere in the middle of my class. I didn’t have the big law firm pedigree. If it wasn’t for my industry connections with the firm’s franchise practice group leader and had lateral hires not been an important part of Jenkens’ growth plan, I never would have been considered for a position. If Wall Street had not set the bar so high on associate compensation, and had Jenkens not been under so much pressure to offer super competitive salaries in order to attract and retain top talent, my salary wouldn’t have more than doubled with the move. But this was the tail end of the 1990s. From everything I was reading in the legal journals, it appeared that all of the top firms were merging, and first year associates were making well above six figures. By that time, I was a sixth year associate, I had published a few articles, was somewhat known in the...
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