As Thelen Reid Brown Raysman & Steiner and Dewey & LeBoeuf have demonstrated, law firm mergers and acquisitions can be tricky—and potentially fatal. However, not all Am Law 200 dissolutions play out so publicly—or so rancorously. In April, New York–based Hughes Hubbard & Reed and Luskin, Stern & Eisler quietly parted ways with a minimum of animus. When Hughes Hubbard acquired eight-lawyer Luskin Stern in September 2008, the marriage seemed like a good fit. Hughes Hubbard had just landed the Lehman Brothers bankruptcy, and its 12-lawyer department needed reinforcements. Nineteen-year-old Luskin Stern fit the bill. “Luskin, Stern & Eisler routinely goes toe-to-toe with the big players in major U.S. and cross-border insolvencies,” said Hughes Hubbard managing partner Chuck Scherer in a statement at the time of the acquisition. “Now they’ll have a larger, deeper platform to do it from. And we’ll have an expanded restructuring practice when the time is clearly right.” So why are they separating now?
According to name partner Michael Luskin, he and partners Richard Stern and Nathan Eisler wanted to get back to their roots. “We were never big-firm people,” he says. “And we missed the flexibility and control and lack of conflicts of interest that come from working in a small firm.” Candace Beinecke, chair of Hughes Hubbard, agrees that the split simply boiled down to size. “It was clear they preferred their old situation. We understood that completely and look forward to continuing to work with them on a number of significant matters,” says Beinecke. The three name partners of Luskin Stern departed along with two Hughes Hubbard associates. Patrick Gartland, a former Luskin Stern counsel who became partner after the acquisition, will remain with Hughes Hubbard.
Separating involved more than just figuring out who would leave. “We discussed with every client for whom we worked together what arrangements best served their needs,” says Beinecke.??”We didn’t view the clients as something that we could give and take.”??According to Luskin, Hughes Hubbard management came up with a list of the matters Luskin and his partners had worked on, and the firms mutually agreed upon which clients Luskin’s team would take with them. “Once our clients signed release letters, [Hughes Hubbard] immediately transferred their files to us,” Luskin says. (Both firms declined to provide details on how they untangled their finances.) Additionally, the firms decided that on some matters, it made sense to continue working together. The two firms are still working together on approximately six to 10 cases, and in May they secured a dismissal for their joint client, M&T Bank Corporation, from a mortgage-backed securities suit brought by CIFG Assurance North America Inc.
The reestablishment of Luskin Stern after merging with another firm is a rarity in the law firm world, though there have been exceptions. In 1986 Greensboro, North Carolina–based Smith Moore Smith Schell & Hunter merged with Charlotte-based Helms Mulliss & Johnston, creating Smith Helms Mulliss & Moore. The union lasted until 2002, when the firms split back into their predecessor entities, albeit with slightly different names: Smith Moore and Helms Mulliss & Wicker. And when WolfBlock dissolved in 2009, one of the firms it had acquired six years earlier, Roseland, New Jersey–based Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone, resurrected itself as Brach Eichler.
“It’s unusual for everyone to decide to stick together and [for each firm to] decide that they’re better off on their own,” says Jon Lindsey, managing partner at recruiting firm Major, Lindsey & Africa. “Mergers are usually good for some partners and not others, so [lawyers] often decide to go their separate ways,” he adds. Ward Bower of consulting firm Altman Weil likens the undoing of a merger akin to trying to unscramble eggs. “Almost all mergers lead to some kind of partner attrition, usually in the first year or two,” says Bower. “Splitting into former entities is highly unusual.” And to do it so amicably? That’s almost unfathomable.