Heller Bobs and Weaves on Merger Rumor

Niraj Chokshi

The Recorder

Heller Ehrman, rumored to be in merger talks with Baker & McKenzie, was cagey when confronted with the speculation on Friday.

Chairman Matthew Larrabee was traveling and unavailable to comment, and a call to Managing Partner Robert Hubbell was not returned, but Heller's director of communications, Patrick Bustamante, said early in the day that the firm "is not considering" a merger with Baker & McKenzie and would not comment on whether the firm had talked with Baker in the past.

Asked later to clarify whether "not considering" meant the firm was not in current talks with Baker to explore the possibility of a merger, Bustamante was less clear. "I don't know that I can go into that kind of detail or comment at all," he said.

While he wouldn't rule out that the firms were discussing a union, he did say, without elaboration, that formal talks were not in progress. "I'm talking about us being in formal discussions with any particular firm," he said. "There's nothing to talk about, or no formal announcement with any firm, including Baker & McKenzie."

Heller's revenue was down 3 percent in 2007, and the firm has lost about 35 partners in the past year. Larrabee has said in recent weeks he does not feel Heller must merge to succeed, but that a merger has not been taken off the table. Bustamante reiterated that position on Friday. An earlier rumor about talks with Chicago's Winston & Strawn apparently have quieted.

Calls to several people at Baker were not returned, although the firm's director of communications said in an e-mail statement that it is "continuously studying the market for strategic growth opportunities" and "may be in discussion with a number of individuals, practice groups or firms around the world."

The Heller-Baker merger rumor has reached consultants, recruiters, and current and former partners. London's Legal Week, a sister publication of The Recorder, blogged on Friday about the rumors -- and Heller's apparent unwillingness to flatly deny them.

There has been some "anticipation" among partners regarding the status of Heller in light of all the merger-rumor chatter, said Warrington Parker, who left the firm for Orrick, Herrington & Sutcliffe earlier this month. Still, he said he knew nothing regarding any mergers and added that he had heard more rumors from the press than within the firm. The partnership had adjusted to the idea of a possible merger, said another former partner, speaking anonymously.

"Over the last year, so many people have left," a former partner said. "That's something just really new for Heller Ehrman. That's a real shock to the system."

While the status of alleged talks between 3,300-attorney Baker and 600-lawyer Heller is uncertain, such a merger could be a boon to both firms, some consultants said.

"If it were true, I think it would provide Baker with a significant U.S. presence, a marquee brand in litigation," said consultant Peter Zeughauser of the Zeughauser Group. Baker would also pick up strong corporate, antitrust and securities litigation practices, he added.

Heller would benefit from Baker's global platform, he said, "with a powerful global corporate and tech practice." Zeughauser would not comment on whether he is working with either firm on a merger.

Mergers can be a vehicle for change, said Mary Cranston, who oversaw mergers in New York and Washington, D.C., as chairwoman of what is now Pillsbury Winthrop Shaw Pittman from 1999 to 2006.

"A merger gives you an opportunity to make a radical shift in your platform and footprint," she said, adding that integration can be a huge cost.

For a big firm merging with a very big firm, a merger can provide new opportunities, Cranston said.

"As you get up in scale and scope, there are things you can do just to run your firm that you can't do when you're smaller," she said.

Among the list of concerns prior to any merger, she said, is finding a cultural match.

While at least one former partner feels such a merger would leave Heller's long history behind, Zeughauser thinks the cultures at both firms match up well.

"In many ways it would create a new firm," he said, "but I think in many ways they have similar cultures where they are very collegial and have a strong commitment to pride and service."