At first glance, Greenberg Traurig’s $24 million capital call, announced in August, might seem unusual, given that bank interest rates are at historic lows. The firm, which called the move a hedge against economic uncertainty, said that it hadn’t issued such a call in more than a decade. In recent years large law firms have more commonly financed their long-term capital needs with bank debt. But the increasing need for long-term investment, coupled with the limits firms have placed on the growth of equity partnerships, are making capital calls an increasingly attractive option, both financially and culturally. Equity partners are owners in their firms, and a true owner mentality is composed of two critical aspects: a tangible financial commitment that includes capital investment and an emotional or cultural commitment. Both are necessary for a firm to operate as something more enduring than a collection of solo practitioners.
There’s no question that firms’ operational and strategic needs for increased capital are growing. The money goes to fund such things as strategic growth initiatives, acquisition of talent, and operational investments in business development and technology.
