Arnold & Porter offices in Washington, D.C. May 27, 2016. Photo by Mike Scarcella/THE NATIONAL LAW JOURNAL.
Arnold & Porter offices in Washington, D.C. May 27, 2016. Photo by Mike Scarcella/THE NATIONAL LAW JOURNAL. (Mike Scarcella)

Leaders of Arnold & Porter and Kaye Scholer have known one another for years, but serious discussions about a merger began within the last year, culminating in the union announced Thursday morning that creates a combined firm with close to $1 billion in annual gross revenue.

The deal, which saw partnership votes at each respective firm conclude this week, will be effective Jan. 1, 2017. Arnold & Porter Kaye Scholer will have about 1,000 lawyers, including 300 partners, spread across nine domestic and four international offices.

The merged firm—the only union so far this year between Am Law 100 firms—will also have deep benches of hundreds of lawyers in New York and Washington, D.C. The union represents further consolidation among mid-size and large firms seeking to compete with growing global giants and to bulk up in competitive legal markets amid lackluster demand for legal services.

Arnold & Porter and Kaye Scholer emerged from 2015 in weakened financial positions when compared with previous years. Leaders at both firms, who declined to make any predictions for their 2016 financial performance, said their future combination was not borne out of short-term revenue falls but long-term strategy.

“We’ve seen periods of increase and decrease and we have managed through all of those,” said Kaye Scholer managing partner Michael Solow (pictured right). “We wanted this because what we believe it does collectively for the group,” the firm’s clients and services those clients are seeking.

Arnold & Porter chair Richard Alexander, who will serve as head of the combined firm, said the two firms have shared commitments to pro bono, having a consensus organization and to diversity and inclusion. “This combination gives us additional resources, of people, balance sheet, clients and talent to invest in those core values,” said Alexander, who in late 2015 assumed leadership of Arnold & Porter.

Through the tie-up, Kaye Scholer, founded in 1917, gains a strong regulatory and litigation practice in Washington, D.C. Arnold & Porter, founded in 1946 and among the top tier of firms based inside-the-Beltway, gets a strong New York presence, mid-market deal work and a well-regarded pharmaceutical and life sciences business, said Lawrence Mullman, a partner at Major, Lindsey & Africa in New York who has recruited for Kaye Scholer. He praised the merger.

“They play to each others’ strengths,” said Mullman, most recently global leader of the legal recruiting giant’s law firm practice.

Arnold & Porter Kaye Scholer firm leaders confirmed a limited number of cuts in non-lawyer professional positions, but declined to get into specifics. (Kaye Scholer moved some of its back-office operations in 2013 to Tallahassee, Florida.)

“There are going to be a limited number of redundancies” as a result of operational consolidation, said Alexander (pictured right).

The union is structured as a straightforward merger, said firm leaders, with all lawyers joining the combined firm, unlike other recent deals where one firm dissolves or only some lawyers join the new entity. Alexander said there was “no material debt in the transaction.”

The merger talks between both firms have been reported months ago by several news outlets, including The American Lawyer, then appeared to have ended. But firm leaders, who said they jointly consulted with Newton, Massachusetts-based Hoffman Alvary, insisted Thursday that there was no pause in the discussions.

Arnold & Porter, which is hoping to branch out beyond its Beltway base, is currently handling antitrust issues for AT&T Inc. related to its $85 billion bid for Time Warner Inc. The massive deal could dissipate with President-elect Donald Trump having pledged during his campaign that his administration would not approve the mega-merger. Alexander declined to discuss clients, but dismissed any potential regulatory practice problems related to Trump.

“Both Mike [Solow] and I believe that when you go through change, change presents opportunities for sophisticated multidisciplinary law firms. We believe there will be a period of shakeout and opportunities, and the synergies of this transaction will not be undermined by the results of this election,” Alexander said.

Kaye Scholer, with 370 lawyers about half the size of Arnold & Porter, has significant IP litigation and product liability business in representing branded pharmaceuticals, such as those manufactured by AstraZeneca plc, Novartis Corp. and Pfizer Inc.

One distraction at Kaye Scholer has been the December 2015 indictment of Evan Greebel, a former partner at the firm charged alongside pharmaceutical executive Martin Shkreli in an alleged securities fraud scheme. Greebel, scheduled to be tried next year, was a partner at Katten Muchin Rosenman at the time of the alleged fraud. He resigned from Kaye Scholer after the indictment.

The Greebel matter “was never relevant to the discussion,” said Arnold & Porter’s Alexander.

The law firm merger front was quiet in the third quarter of 2016, but a spate of combinations announced within the last month suggests that year’s end could bring about the usual uptick in merger news.

Firm leaders are well aware of a slack in demand for high-end legal services, and Am Law 100 firms are competing to be one-stop shops to satisfy all client needs, said MLA’s Mullman, something he believes factors into many large combinations.

Leaders of Arnold & Porter and Kaye Scholer have known one another for years, but serious discussions about a merger began within the last year, culminating in the union announced Thursday morning that creates a combined firm with close to $1 billion in annual gross revenue.

The deal, which saw partnership votes at each respective firm conclude this week, will be effective Jan. 1, 2017. Arnold & Porter Kaye Scholer will have about 1,000 lawyers, including 300 partners, spread across nine domestic and four international offices.

The merged firm—the only union so far this year between Am Law 100 firms—will also have deep benches of hundreds of lawyers in New York and Washington, D.C. The union represents further consolidation among mid-size and large firms seeking to compete with growing global giants and to bulk up in competitive legal markets amid lackluster demand for legal services.

Arnold & Porter and Kaye Scholer emerged from 2015 in weakened financial positions when compared with previous years. Leaders at both firms, who declined to make any predictions for their 2016 financial performance, said their future combination was not borne out of short-term revenue falls but long-term strategy.

“We’ve seen periods of increase and decrease and we have managed through all of those,” said Kaye Scholer managing partner Michael Solow (pictured right). “We wanted this because what we believe it does collectively for the group,” the firm’s clients and services those clients are seeking.

Arnold & Porter chair Richard Alexander, who will serve as head of the combined firm, said the two firms have shared commitments to pro bono, having a consensus organization and to diversity and inclusion. “This combination gives us additional resources, of people, balance sheet, clients and talent to invest in those core values,” said Alexander, who in late 2015 assumed leadership of Arnold & Porter .

Through the tie-up, Kaye Scholer , founded in 1917, gains a strong regulatory and litigation practice in Washington, D.C. Arnold & Porter , founded in 1946 and among the top tier of firms based inside-the-Beltway, gets a strong New York presence, mid-market deal work and a well-regarded pharmaceutical and life sciences business, said Lawrence Mullman, a partner at Major, Lindsey & Africa in New York who has recruited for Kaye Scholer . He praised the merger.

“They play to each others’ strengths,” said Mullman, most recently global leader of the legal recruiting giant’s law firm practice.

Arnold & Porter Kaye Scholer firm leaders confirmed a limited number of cuts in non-lawyer professional positions, but declined to get into specifics. ( Kaye Scholer moved some of its back-office operations in 2013 to Tallahassee, Florida.)

“There are going to be a limited number of redundancies” as a result of operational consolidation, said Alexander (pictured right).

The union is structured as a straightforward merger, said firm leaders, with all lawyers joining the combined firm, unlike other recent deals where one firm dissolves or only some lawyers join the new entity. Alexander said there was “no material debt in the transaction.”

The merger talks between both firms have been reported months ago by several news outlets, including The American Lawyer, then appeared to have ended. But firm leaders, who said they jointly consulted with Newton, Massachusetts-based Hoffman Alvary, insisted Thursday that there was no pause in the discussions.

Arnold & Porter , which is hoping to branch out beyond its Beltway base, is currently handling antitrust issues for AT&T Inc. related to its $85 billion bid for Time Warner Inc . The massive deal could dissipate with President-elect Donald Trump having pledged during his campaign that his administration would not approve the mega-merger. Alexander declined to discuss clients, but dismissed any potential regulatory practice problems related to Trump.

“Both Mike [Solow] and I believe that when you go through change, change presents opportunities for sophisticated multidisciplinary law firms. We believe there will be a period of shakeout and opportunities, and the synergies of this transaction will not be undermined by the results of this election,” Alexander said.

Kaye Scholer , with 370 lawyers about half the size of Arnold & Porter , has significant IP litigation and product liability business in representing branded pharmaceuticals, such as those manufactured by AstraZeneca plc, Novartis Corp. and Pfizer Inc.

One distraction at Kaye Scholer has been the December 2015 indictment of Evan Greebel, a former partner at the firm charged alongside pharmaceutical executive Martin Shkreli in an alleged securities fraud scheme. Greebel, scheduled to be tried next year, was a partner at Katten Muchin Rosenman at the time of the alleged fraud. He resigned from Kaye Scholer after the indictment.

The Greebel matter “was never relevant to the discussion,” said Arnold & Porter ’s Alexander.

The law firm merger front was quiet in the third quarter of 2016, but a spate of combinations announced within the last month suggests that year’s end could bring about the usual uptick in merger news.

Firm leaders are well aware of a slack in demand for high-end legal services, and Am Law 100 firms are competing to be one-stop shops to satisfy all client needs, said MLA’s Mullman, something he believes factors into many large combinations.