More Firms Look into Mergers By Jennifer Smith October 27, 2013 Merger talks between major law

firms are heating up this fall, as firms seek strength in numbers to help improve their position in a tough legal market. Last week Orrick Herrington & Sutcliffe LLP and Pillsbury Winthrop Shaw Pittman LLPtwo law firms with San Francisco roots confirmed discussions about a potential merger that, if completed, would produce a roughly 1,700-lawyer firm with more than $1.4 billion in estimated combined revenue. The news set tongues wagging in U.S. legal circles after what has been a relatively slow year for big law firm combinations. While a number of splashy cross-border tie-ups were announced last year, recent U.S. law firm combinations have mostly involved bigger or midsize firms acquiring much smaller groups. Things may be picking up. Last month global firm Dentons and McKenna Long & Aldridge LLP said they were in talks, a combination that could boost their head count to more than 3,000 lawyers world-wide. And word of another possible merger, between Patton Boggs LLP and Locke Lord LLP, emerged this weekend, though those talks aren't yet at an advanced stage, according to a person with knowledge of the discussions. Still, there is no guarantee any of the talks will result in a union much less one that improves the fortunes of both sides. Law firm mergers can be risky, particularly if the firms have different cultures or one is less profitable than the other. Partners may defect if they don't approve of the match; others could find themselves pushed out if their practices aren't a good fit with the new firm's larger strategy. If preliminary discussions between law firm leaders go well, firms then share financial information with the other side, a step that typically entails signing a letter of intent. Paula Alvary, a principal at the legal consulting firm Hoffman Alvary & Company LLC who is working on the Orrick-Pillsbury transaction, said the two sides had been talking for months and were "very enthused" about a potential match, but that some matters were still being considered. "They're prepared to go forward, but it's not completely clear if they can," said Ms. Alvary, who has been authorized by both sides to discuss the matter. "The next stage would be a letter of intent."

Legal experts say unpleasant surprises, such as finding out that one firm has significant unfunded pension obligations, can tank a law firm union. Client lists must also be vetted to check for conflicts that could take a potential partner out of the running, Ms. Alvary said, and mergers also require buy -in from the larger partnership. Other factors can play into the ultimate decision. For example, in the case of Orrick and Pillsbury, a merger could involve potentially costly negotiations around real estate leases, as both firms already have offices in San Francisco, Silicon Valley, New York and Washington, D.C. But that duplication could actually end up being a strength should the merger go through, said legal consultant Peter Zeughauser, who isn't involved with the discussions. Adding hundreds of lawyers in major markets would raise the combined firm's profile, making it more alluring to clients, Mr. Zeughauser said. "The more breadth and depth you have in any market, the better known your brand," he said. "You can't get hired if people don't know you." Geography could also play a role in merger talks between Patton Boggs, known for its lobbying and government expertise and Locke Lord, which has a major presence in Texas and offices in Chicago, Los Angeles, London and other major cities. Both firms have lawyers in Washington, D.C., New York and Texas; a union would give Patton Boggs nationwide reach and offer Locke Lord access to its offices in the Middle East. Reuters first reported those discussions. A spokeswoman for Locke Lord declined to comment.