One of the most prolific merger suitors of recent years – Orrick Herrington & Sutcliffe – is at it again with the top 30 US practice close to securing a merger with the 600-lawyer practice Pillsbury Winthrop Shaw Pittman.
The discussions, which were confirmed on Friday (25 October), could see Orrick sign a letter of intent as early as this week to recommend a combination with Pillsbury to its partners. A deal would create a 1,800-lawyer practice with revenues of around $1.4bn, putting it in the top 15 law firms in the world by fee income.
Pillsbury chairman James Rishwain and Orrick chairman Mitch Zuklie issued a joint statement to the US media stating: ‘Our firms are in exploratory discussions about a possible combination. These talks are serving to confirm the great respect our firms have for each other.’
The deal would likely be an effective takeover with the San Francisco-based Orrick being the larger of the two and also enjoying a stronger position financially. Orrick generated revenues of $866m in 2012, up 2% annually and a rise of 12% over the last five years. Its profits per equity partner (PEP) were up 10% annually to $1.63m, though the firm’s profitability is flattered by high leverage, with only 124 of its 1,128 lawyers last year holding equity status.
Pillsbury saw revenues up 7% in 2012 to $561m, though its fee income has fallen 5% over the previous five-year period. The firm’s 164 equity partners earned an average of $1.09m in 2012, a relatively low figure for a top 100 US practice.
Both firms have previously sought merger partners in recent years without success. Orrick had entertained and publicly pulled out of talks with Dewey Ballantine in 2006, a move that saw the New York firm instead merge with LeBoeuf Lamb Greene & MacRae, creating the ill-fated Dewey & LeBoeuf.
Orrick has also previously held discussions with UK firms Bird & Bird and in 2010 with SJ Berwin.
A union would create a huge practice on the West Coast of America but arguably leave both firms relatively under-weight in New York and Europe. Neither Orrick or Pillsbury has had sustained success in London, though Orrick has a large Paris practice. Major clients of Orrick include Apple and Oracle, which it has acted for in a patent dispute with Google. Pillsbury’s clients include Chevron and BNY Mellon.
The deal comes amid challenging trading conditions in the US economy, though the legal market has generally out-performed Europe on the back of high levels of disputes and regulatory work. Despite the focus among advisers on major technology clients, California’s wider economy has remained subdued over the last five years in part due to locally-based bluechips and banks focusing their efforts nationally.
The talks come amid a run of recent discussions among major US practices. Aside from the union agreed last year between Fulbright & Jaworski and Norton Rose, Dentons is currently in discussions with McKenna Long. Reuters reported on Sunday (27 October) that Washington DC’s Patton Boggs is in discussions with the Dallas-based Locke Lord.
Whether such deals can improve the fortunes of the combining law firms will remain open to debate as many of these institutions have struggled to sustain momentum in recent years. Orrick is generally regarded to have squandered much of the international profile it had built up a decade ago, while the leadership of Ralph Baxter – who stood down as chief executive in March this year after 23 years at Orrick’s helm – drew increasing criticism in the latter years of his term.
alex.novarese@legalease.co.uk