Perkins Coie beat out six firms in an auction-style process to acquire the Madison, Wis., office of Heller Ehrman, the 118-year-old firm that voted to dissolve three weeks ago, the office's managing partner said Friday.
It's an unusual process, to be sure. Most firms build their offices slowly, through acquisitions of one to two lawyers, then they find some office space and buy furniture along the way. That's how Heller built its Madison office in the first place, when it hired two partners from Foley & Lardner in 2000. But the collapse of Heller meant the 16 lawyers and 10 staffers that worked there were out of a job with little time to dilly-dally.
"Our first priority was to find a home for the entire office and not to split up ... and the second job was to protect the jobs of our associates and staff," says David Harth, the office manager for the Heller office. "So what we did was we held an auction."
Harth says the now former Heller lawyers put a binder together containing information on the office, including financials, billings, lawyer bios and clients. The Madison office had $12 million to $14 million a year in revenue, Heath says, and was profitable. The last section of the binder contained a list of requirements for a potential bidder. "And the first requirement was you have to make an offer for the entire office," Harth says.
There was also the issue of capital. "Whether we'll get our capital back [from Heller] and when nobody knows," Harth says. "And the way that affects the negotiations is that no new firm can expect you to immediately make the full capital contribution when you join." All the firms that showed interest were willing to allow them to defer the payments and make them over time, he says.
Any firm that showed interest got the binder, Harth says. One was Perkins Coie, which found out about the office from IP partner Michael Warnecke, the former head of IP litigation at Mayer Brown who'd joined Perkins in 2007 and was acquainted with the group. The firm was already eyeballing Heller lawyers, but found itself unable to hire many of the Seattle lawyers on the market because of conflicts, says managing partner Robert Giles. (Davis Wright Tremaine apparently didn't have the same problem and hired 20 Heller lawyers Thursday.)
The Madison group, though, was isolated and had a client base largely separate from Perkins Coie's. It would also fit with the firm's strategic goals of building out its IP department. Perkins Coie merged with IP litigation-centric Brown & Bain in 2004 and in 2007 added several Mayer Brown IP litigation lawyers. The IP department now has more than 175 professionals. Heller's Madison group, Giles says, would be a perfect addition.
"We identified right away that this was just a top IP practice, confirmed that with lots of people we talked to, and we made them our focus among the Heller lawyers that were available," he says.
The deadline for bids was set for Oct. 3, and seven, including Perkins Coie, came in, says Harth, who declined to name the other bidding firms. "We spent the weekend sorting through them all and debating the merits of the different firms, and in the end we unanimously decided Perkins Coie had what we were looking for," he says.
That was not necessarily money, Harth adds. "We obviously asked the firms to include the economics in the offer, but we did not sell ourselves to the highest bidder," he says. Instead, the Heller lawyers also weighed factors like the cultural fit and how well each firm's clients would mesh.
By the end of that weekend, Harth and the other Heller partners had picked Perkins Coie. Now it was time to make the acquisition work. Perkins Coie negotiated with one of Heller's banks, Bank of America, and the office's landlord to take over the lease and acquire all of the furniture.
"The lease may have actually been a little over market, but just assuming a lease and being able to take over a whole operation lock, stock and barrel is just a whole lot simpler than trying to buy brand-new space," Giles says. "It made it a very easy turnkey transaction."
Conflicts also had to be worked out. Giles and Harth both say the group will lose some clients, but not a lot. They also expect to actually gain clients, as the group was conflicted at Heller from taking on work from other potential Madison clients.
Three lawyers, though, have not joined the office yet, largely because of conflicts. While Giles and Harth didn't name them, one may be Charles Curtis Jr., the former co-chair of Heller's appellate and strategy practice. Perkins Coie declined to confirm if he was one of the three, and Curtis wasn't available for comment. "We're still hopeful that they can join us as soon as they clear conflicts," Giles says.
Among those who are joining, besides Harth, are IP litigation partners David Jones and John Skilton and insurance coverage partner Timothy Burns.
The associates include David Anstaett, Eric Barber, Melody Glazer, Christopher Hanewicz, Lissa Koop, Autumn Nero, Sarah Walkenhorst and Jeffrey Walker. In Washington, D.C., Perkins Coie will pick up associate Shannon Bloodworth, who works closely with the Madison group.
So what's different? Not much. The office sign will need changing, and the former Heller lawyers have new laptops and computer systems to deal with. But they're already answering the phones saying they're with Perkins Coie. Says Harth: "We will get back to practicing law come Monday morning, and I don't think it'll make much of a difference at all."
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.