Orrick, Pillsbury Confirm Merger Talks
Am Law 100 firms Orrick, Herrington & Sutcliffe and Pillsbury Winthrop Shaw Pittman confirmed Friday that they are in merger talks that, if successful, would create one of the world's 20 largest firms in terms of attorney head count.
“Our firms are in exploratory discussions about a possible combination,” Pillsbury chair James Rishwain and Orrick chair Mitchell Zuklie said in a joint statement issued to The Am Law Daily. “These talks are serving to confirm the great respect our firms have for each other." Neither Rishwain nor Zuklie returned calls seeking comment Friday, and the statement ended by saying, "We have nothing further to report at this time."
The potential merger between Orrick and Pillsbury, news of which was first reported by Reuters Friday afternoon, is the latest example of the ongoing trend toward consolidation in the nation's high-end legal market. It comes as Dentons and McKenna Long & Aldridge continue their talks about a possible tie-up—a vote on that matter originally set for October 28 was recently pushed back, according to sibling publication the Daily Report—and on the heels of the announcement that Cooley will essentially absorb Washington, D.C.–based Dow Lohnes in another large-scale combination.
Both Orrick and Pillsbury trace their roots to Gold Rush–era California, and both have seen their share of merger discussions through the years.
Pillsbury, which currently has 670 lawyers spread across 15 offices in the U.S., Asia, London, and Abu Dhabi, is the product of a series of combinations over the past 15 years. Originally a San Francisco–based shop known as Pillsbury, Madison & Sutro, it picked up Los Angeles–based Lillick & McHose in 1990 and Washington, D.C.’s Cushman Darby & Cushman in 1996. In 2001, Pillsbury absorbed New York’s Winthrop, Stimson, Putnam & Roberts before rounding out its present incarnation four years later by completing a merger with D.C.-based Shaw Pittman.
Orrick, meanwhile, has considered joining forces with multiple potential partners over the years, only to stop short of striking a deal. Under the stewardship of longtime former chairman Ralph Baxter, the firm—which currently boasts an attorney head count of nearly 1,100 in 25 offices around the world—pursued a merger with Silicon Valley firm Cooley Godward Kronish in 2003, but abandoned discussions in July of the year. Around the same time, it considered acquiring Venture Law Group, a firm geared toward representing Silicon Valley start-ups that went on to combine with now-defunct Heller Ehrman (VLG kept its name after the merger).
Orrick also famously held high-level discussions with Dewey Ballantine that collapsed in early 2007. The failure of that near-merger led the latter firm to enter into what ultimately proved to be its disastrous tie-up with LeBoeuf, Lamb, Greene & MacRae later that year. In September 2010, Orrick and Akin Gump Strauss Hauer & Feld confirmed that they were in “preliminary” negotiations related to a potential merger. Less than a week later, they said the talks were over.
Like a predator circling wounded prey, Orrick has often poached partners from firms fighting to survive. In 1998, for instance, the firm took on 40 litigators from Donovan, Leisure, Newton & Irvine after holding merger talks with the New York firm, which subsequently dissolved.
Seven years later, in May 2005, Orrick hired 11 partners in London and Moscow from Coudert Brothers. The struggling New York–based firm, which had entered into its own merger talks with Orrick, dissolved its partnership just three months later. The firm's bankruptcy estate later sued Orrick, claiming the 11 defections dealt a death blow to the firm (The suit, now in federal court in New York, has not yet been resolved).
Orrick also gained a sizable contingent amid Heller's collapse, hiring 27 lawyers from the firm in 2008, and grabbed just four partners from Dewey as it went under in 2012.
The talks with Pillsbury appear to be the first such discussions Orrick has held since Zuklie took the helm a year ago following Baxter's two-decade reign. (Zuklie joined Orrick as a lateral in 2005 from VLG, two years after that firm's merger discussions with Orrick.)
Pillsbury's Rishwain has not overseen a major merger since taking over the top leadership post in 2006 from Mary Cranston, a vocal and often-criticized chair who pushed the firm through its various combinations in the early and mid-2000s. Rishwain, a real estate lawyer who now runs Pillsbury full-time, has long harbored hopes of expanding the firm's footprint and bolstering its reputation.
Pillsbury has struggled to gain the same prestige as other large law firms with California roots—a group that includes Gibson, Dunn & Crutcher; Latham & Watkins; O'Melveny & Myers; Morrison & Foerster; and Paul Hastings—and has a more middle-market client base in some practice areas, legal industry observers say. "They've had trouble getting momentum," says legal consultant Peter Zeughauser, who is not advising either firm in connection with the negotiations.
Financially, Pillsbury is the weaker of the two firms. Landing at No. 56 on The American Lawyer's Am Law 100 rankings of the nation's highest-grossing firms last year, Pillsbury had gross revenue of $561 million, up 6.6 percent from 2011, and average profits per equity partner of $1.1 million. Orrick, which ranked 27th on the list, had gross revenue of $866 million, 2.4 percent higher than 2011, and average profits per equity partner of $1.6 million (Both firms saw their profits per partner rise 10 percent between 2011 and 2012). Pillsbury had $845,000 in revenue per lawyer last year; Orrick had $890,000.
Orrick and Pillsbury are among a handful of Am Law 200 firms that have looked to cut costs by sending administrative work to back offices in cheaper locales. Orrick opened its global operations center in Wheeling, West Virginia, more than a decade ago, shifting both lawyers and administrative staffers to the Mountain State. Pillsbury sent IT, human resources, billing, and other jobs to Nashville in 2012.
"Both firms have been in the market for a merger for many years," says Zeughauser, who notes that a combination of the two would create a powerhouse in California specifically. He points to Pillsbury's strong nuclear energy practice and legacy corporate practice as two areas that Orrick may find appealing, and to Orrick's intellectual property and emerging companies practices as among its strongest assets.
Looking at the broader law firm merger market, which during the past year has also seen Fulbright & Jaworski join Norton Rose and the three-way tie-up that created Dentons, Zeughauser says the perceived goals of the firms can been measured by a recent Acritas survey of what were described as the strongest law firm brands in the world.
"If you put any credence in the Acritas study, brand is a function of three things—size, revenue, and profitability," he says. "You don't need all three."
Brian Baxter is a senior reporter with The Am Law Daily, a Recorder affiliate.
Sara Randazzo is a reporter with The Am Law Daily, a Recorder affiliate.