Douglas Bacon, Partner, Kirkland & Ellis LLP
Douglas Bacon, partner at Kirkland & Ellis LLP, sat down with Invest: to discuss the firm’s rapid growth across Texas, particularly in Houston, and its strategic focus on energy, infrastructure, and emerging technologies. “Houston has a deep legal market, a sophisticated client base, and attracts smart law students from prestigious schools. It is a perfect market to grow, and we have found that to be the case,” Bacon said.
How would you characterize the firm’s continued growth and strategic focus in the region today?
Kirkland & Ellis opened its Houston office in April 2014 and has seen rapid growth, not only in Houston but all across Texas. We have 500 lawyers across Texas, with offices in Dallas and Austin as well. The principal focuses of our business are sophisticated corporate transactions and major litigation. Since the beginning, we have been focused on the energy market, given that Houston is the energy hub of the United States. That focus has also spread into adjacent markets, such as infrastructure. This now includes digital infrastructure, data centers, AI, and power generation development. We have a diverse practice; however, our core focus remains energy and infrastructure.
What makes Houston an ideal location for your practice, and how does it support the firm’s long-term goals?
Houston has a deep legal market, a sophisticated client base, and attracts smart law students from prestigious schools. It is a perfect market to grow, and we have found that to be the case. It is an excellent market for legal talent.
Houston has been the energy capital for a long time, and much of the capital raising, mergers and acquisitions, litigation, and debt finance activity associated with energy has been headquartered here. It creates an excellent and advantageous legal market from a personal and professional balance standpoint. Houston also has a more desirable lifestyle than many other markets, which is attractive to law students and young attorneys. It is a great place for these individuals to grow their practices and their families.
How are you adapting your approach to continue to attract top legal professionals as competition intensifies across the Texas legal market?
As we have grown and the legal market has continued to grow and develop in Houston, it has become one of the biggest and most attractive markets for legal talent across the country. I grew up in Houston, and as I was looking at law firms 25 years ago, most of the people working in Houston law firms were from Texas or the Southeast. Now the talent is increasingly coming from around the country and the world. The success of the marketplace in Houston has attracted great people and has enabled this market to stay robust and grow over time. Houston is a competitive legal market, but that competition has created a great environment for lawyers to move here to begin their careers or transition to the market.
How are major transactions influencing competition in the power and clean energy industries?
Much of the infrastructure activity we see these days is around the space referred to as digital infrastructure, which includes data centers and other infrastructure that fuels AI development. That is closely linked with power. As an example, Constellation Energy is buying Calpine, an independent power company. The combined company will hold and develop more assets that can drive U.S. power generation for data centers, including supporting the AI revolution we are currently in the midst of. These opportunities around data and digital are fueling a lot of activity.
Many of the biggest energy companies in the world, which happen to be headquartered in Houston, are publicly pursuing this thesis of powering the AI infrastructure story. We don’t create the investment thesis for our clients; we just follow and help them succeed to the greatest extent they can in executing on those ideas.
How is Kirkland & Ellis incorporating AI and the evolution of technology to enhance its legal services and drive operational efficiency?
AI is something that we look hard at on a practice-by-practice basis. I foresee it creating many opportunities for improvement in the legal industry. It will change certain ways that we practice, but it will also enable us to deliver products to our clients in a faster, more efficient way, as well as help us gain market share by leveraging these technologies. We are going to be well-positioned through the AI revolution to take advantage of the technologies and continue to provide excellent service to our clients.
How are elevated interest rates and inflation impacting deal activity, and how are you guiding your clients in response to these economic conditions?
Mergers and acquisitions are directly impacted by macroeconomic factors in the economy. Having higher interest rates makes it more difficult for companies to buy other assets at attractive prices for sellers who purchased the assets in a lower interest rate environment. Inflationary environments can cause concern because they introduce greater uncertainty to markets. M&A markets tend not to react as well when the environment is unpredictable. However, even though there has been a lot of volatility in the marketplace with many geopolitical factors affecting it, we have remained quite busy and gained market share over the past three years. In general, M&A transactions have been down in recent years. However, the energy and infrastructure M&A market has proven to be countercyclical because the tailwinds for those developments are so powerful. Many of those are driven by some macroeconomic factors.
What are your firm’s top strategic priorities for the next two to three years, and how would you describe its overall outlook?
My general outlook is positive. At Kirkland, specifically, I would like us to continue to be the market-leading firm for the transaction and litigation work that is the most important to our client base. I am looking for us to expand our client base. More broadly, for the Houston market, I want it to continue being a hub for energy, infrastructure, transactional activity, litigation, and top-tier legal advice. I am a huge believer that this is one of the top legal markets in the world and will continue to be successful.
