Why the CEO of an elite law firm sees AI driving more deals

Earlier this month, Hogan Lovells completed what it called the legal industry’s largest-ever merger: a combination with Cadwalader, Wickersham & Taft that created a top-five global law firm with 3,000 lawyers and $3.6 billion in annual revenue.

The architect of that deal was Hogan Lovells CEO Miguel Zaldivar. He’d been looking to fill a critical gap in New York for his firm, which had itself been created by a merger (between the regulation-focused Washington firm Hogan & Hartson and Lovells, which has served the City of London since the 1890s).

Zaldivar sees his acquisition of Cadwalader as part of a trend. Scale is becoming more important to the law firms that serve the world’s largest companies, he says, as AI transforms the talent-heavy industry and demands ever more resources.

Here’s how he describes the rationale behind his own deal, and why he thinks there is more law firm consolidation to come.

This interview has been edited for clarity and length.

Andrew Edgecliffe-Johnson: What does the Cadwalader deal bring you? What is the new firm that the old firm was not?

Miguel Zaldivar: The new firm is something that doesn’t really exist in the market. Combining the oldest firm in Washington with a City of London powerhouse 16 years ago was visionary, but everybody knew that there was something missing, and that was New York. In my interview [for the CEO position] in 2019, I said to the board, “We have to live in New York, and you cannot just build [a New York practice].” Look how many national firms from the US and so-called magic circle British firms have strived to get this done, and it’s hard. So I think we have to persuade a first-tier firm to combine with us.

It’s public knowledge that I first targeted Shearman & Sterling, and they ended up doing a merger with Allen & Overy. Then I pivoted immediately and called Pat Quinn, the managing partner of Cadwalader, because that’s the oldest firm on Wall Street. I always looked up to them, and I had read everything that had been written about Pat Quinn, including his desire not to ever merge the firm. I surprised him with a merger proposal at that meeting in 2024, so he immediately rejected it, but I said, “Take my materials, study them with your strategy team, and I think at some point you’re going to realize that you’re better off in a global platform.”

Were the AI-driven changes your industry is going through meaningful in your calculation that you needed to be larger?

Sure. As soon as I got this job, in 2020, I became obsessed with AI. I’m not a tech expert, but I started to read about it, and I said: This is going to change the profession. We have to get ready. I said [to Quinn]: When you have an AI challenge coming your way, you know it’s going to be costly. Your cost structure in this business is people first, real estate second, tech third, operations fourth. Tech is going to move to second or first place, and it might displace people. So how are you going to cope with that if you’re a $600 million firm? [Hogan] was almost a $3 billion firm, and I don’t think I have the resources to deal with that. AI is going to revolutionize our industry, and I think you’re going to see firms that are $1.2 billion and below thinking about what’s next for them, because they have wonderful lawyers, and they have the right regional coverage, but they don’t have the resources to protect their people and get the best technology to compete with. When Kirkland & Ellis announced that they’re going to invest $500 million in AI, you have to think about it and say, “If I don’t build my own resources to fight this war, I cannot with bazookas beat somebody who has missiles.”

Is there work that you used to do for clients that they’re now going to be doing in-house with readily accessible AI tools?

That’s why I said to my global partners meeting in 2023: We are not going to be a global firm, we’re going to be a global elite firm. If you go to the market trying to do things that are not too sophisticated, you’re right, [clients are] going to do it in-house. But [you can retain their business] if you are able to keep that elite proposition and become more efficient than their in-house legal departments, because you have more data. We are going to look at one issue 10 times, they’re going to look at the issue once.

I’ve heard people describe the future shape of the law firm changing from a pyramid to maybe a cylinder, maybe a torpedo with very few junior lawyers at the bottom. What shape do you envision, and how is that changing your hiring practices?

Honestly, I don’t know. You see some of our top competitors hiring their biggest classes in history. I think you’re going to see segmentation: Those firms that are very efficient and that get these young classes properly trained are going to get more work, and those that are not able to cut it are going to be displaced. So it’s a race, but I cannot tell you today if it’s going to be [a pyramid, a cylinder, or an inverted pyramid]. I’m having a record year, and my troops of lawyers continue to grow. [You might ask], why aren’t you hiring like everybody else? Because my culture is different from the competition. I am ambitious, but I’m quite supportive. When we were hit by the Lehman crisis, we didn’t let anybody go. I was super impressed that the management of our firm found solutions for all these very young professionals. Some went in-house, some we sent home, but we didn’t fire anybody, and I have to morally continue that legacy. So I’m going to continue hiring in consistent ways with what I have observed before. I’m not going to, as long as I have this job, fire all those young professionals.