As merger talks between Heller Ehrman and Mayer Brown ended on Monday, news came that at least 15 intellectual property partners were leaving the San Francisco firm for Covington & Burling.
A Mayer Brown partner said Monday that Chairman James Holzhauer announced the end of the talks in an e-mail to the partnership on Monday morning, in which he praised Heller as a firm. Partners met in Heller's offices on Monday morning to discuss the firm's options going forward, according to sources within the firm.
News of the 15 partners leaving Heller had come in over the weekend and into Monday, according to one source who would not elaborate on whether the announcements precipitated the end of the merger talks or vice versa. Intellectual property is among Heller's core practices, a list that includes antitrust, securities and insurance coverage, in addition to other areas.
Messages left for Heller and Covington spokespeople and several of the partners implicated in a move to Covington were not returned. Reached Monday afternoon, Heller Chairman Matthew Larrabee said he would not comment. Heller's spokesman confirmed that the Covington group includes rainmakers Robert Fram and Robert Haslam.
Heller had been in serious merger talks with at least one other firm -- Baker & McKenzie -- until those talks collapsed under the weight of conflicts about a month ago, according to a partnershipwide voice mail Larrabee left at the time. Before that, Heller was also rumored to be in talks with Winston & Strawn and Proskauer Rose.
Mayer would have been a better fit than Baker & McKenzie, recruiters and consultants said. Mayer and Heller share similar cultures and financials. Revenue per lawyer at both firms differed by only $25,000 last year, while Mayer's $1.2 million profits per partner edged out Heller's $1 million PPP.
The failure to secure the latest potential merger puts Heller in a difficult position, but all is not lost, recruiters and consultants said.
"I don't think it makes it easier, but I don't necessarily think it makes it harder either," said Friedrich Blase, a consultant with Kerma Partners in New York.
Still, he said, "if you were to argue that Heller is under time pressure to make a deal happen, then any deal that doesn't happen isn't good."
The firm was one of three on the Am Law 100 to have seen a drop in revenue in 2007, which Larrabee attributed to several cases wrapping up in the first quarter of that year. The other two firms were Holland & Knight, of Miami, and Atlanta's Kilpatrick Stockton.
Heller's troubles continued into 2008, with a loss of about 35 partners firmwide since January. That total does not include the 15 now bound for Covington.
"If there are truly 15 IP attorneys that are going to leave Heller to go somewhere else, that would be a very serious complication to an already very fragile situation," said recruiter Alan Miles of Alan Miles and Associates. "Departures beget departures," he said.
The newest group to go to Covington will follow Michael Greenberg and Esta Brand, two Heller special counsel who joined Covington's San Francisco office last week. Heller insurance recovery partners David Goodwin and Lawrence Hobel made the same move in July.