thedeal: Analysis: Lack of IPOs drives layoffs at Wilson Sonsini and other Silicon Valley law firms

"Silicon Valley's tech companies aren't the only ones trimming staff. Times are also tough on the region's law firms. Cooley Godward Kronish laid off 52 lawyers and 62 staffers last week, and its rival Wilson Sonsini Goodrich & Rosati PC announced Monday that it would cut 45 associates and 68 staffers. The moves were driven by the economy, of course, but behind them lie an array of long-term forces that threaten the law firms themselves.

The most obvious of those is the decline of the IPO. The frenzy of the late 1990s has never recurred, not only because investors were badly burned but also because the passage of the Sarbanes-Oxley Act in 2002 made going public much less appealing. At the time, lawyers estimated that SOX meant that to be viable, a public company needed to have a market capitalization of about $250 million, double what would have previously been required. VCs adjusted their ambitions accordingly and started to put more emphasis on funding companies from which investors could successfully exit via a sale instead of an IPO."