(Reuters) - The decision by at least two large U.S. law firms to postpone starting dates for some first-year lawyers underscores the weakened demand for some corporate legal work but also signals an expectation that the cooled M&A market will warm back up, legal industry observers said.

Palo Alto-founded Cooley on Wednesday said it is giving some incoming corporate associates the option of delaying their start dates by a year in exchange for a $100,000 stipend. Otherwise, they will start in January but may be assigned to a different practice group.

Fenwick & West last week said its incoming corporate and technology transactions associates will not start until January, while entry-level litigation and tax associates will start as planned in October. The associates who start in January will receive a $15,000 stipend.

Both Cooley and Fenwick & West were founded in Silicon Valley, with a client base that tilts heavily toward the technology sector. U.S. tech companies have slashed thousands of jobs after aggressively hiring during the pandemic, as the industry braces for an economic downturn.

Cooley cited "market conditions" in a statement on its associate start dates. The firm in November said it was laying off 150 U.S. employees, including 78 lawyers, amid a drop in client demand for the firm and the broader U.S. legal industry.

Honoring new associate job offers while deferring start dates was first widely adopted in 2009 during the financial crisis, when many law firms also turned to major layoffs.

The absence of widespread layoffs now, and firms opting to defer rather than rescind offers, shows law firm leaders are banking that deal-making work will kick up again, legal recruiters said.

"They’re kicking the can," said Dan Binstock, a partner at legal recruiting firm Garrison & Sisson. "They don’t want to be caught understaffed but also recognize the reality of the current market conditions."

When corporate deal-making exploded in 2021, many major law firms went on a hiring spree, leading to scattered layoffs when the M&A tide receded.

"The reason we haven’t seen as many firms come out with very large-scale layoffs is that deal work can come back very quickly, and it’s hard to find those people again," said Stephanie Biderman, a partner at legal recruiting firm Major, Lindsey & Africa's associate practice.

Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, another Silicon Valley firm, said in April that incoming associates who graduate from law school this spring may have start dates deferred on a case-by-case basis. A spokesperson for the firm did not immediately respond to a request for comment on Wednesday.

Other law firms, including Baker Hostetler, Goodwin Procter, Morrison Foerster, Reed Smith, Vinson & Elkins and Wilson Sonsini Goodrich & Rosati, told Reuters within the past week that their incoming associate classes are expected to start in the fall.

Many law firms are still in a holding pattern in terms of their workforces, but that can only hold for so long, Biderman said.

"For the most part, firms are in that wait-and-see pattern, but when does that wait-and-see end?" Biderman said.

(Additional reporting by Sara Merken.)

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