X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Lloyd Cutler remembers a time when the firm he helped to found reached 60 lawyers — and some partners were concerned that it was growing too large, too fast. How times have changed. Last week, Wilmer Cutler Pickering announced that it would combine with Boston’s Hale and Dorr — a move that immediately creates a 1,000-lawyer firm. “One thing you can be sure of in this world,” Cutler says. “Standing still because you’ve done so well up to now may not be a good reason to turn down a good merger fit.” The combined firm’s managers say the merger will marry Wilmer’s capabilities in key areas, including securities, litigation, and bankruptcy, with Hale and Dorr’s strengths in intellectual property counseling, transactional, and corporate work. But any merger — even one pairing firms that appear evenly matched — has its complications. Even with its greatly expanded size, the new Wilmer Cutler Pickering Hale and Dorr may need to grow quickly in key markets to rival other national legal players. It must blend disparate partnership structures, and grapple with the always complex process of integrating offices, practice groups, and firm cultures. The process is likely to be made smoother by the similarities between Wilmer and Hale, the new firm’s managers and law firm consultants say. Both have around 500 lawyers, are anchored in East Coast cities, and share values in common, including a commitment to pro bono work. Each brought in about $300 million in revenue in 2002, neither carries significant debt, partners say, and they share roughly proportionate billing rates. According to the most recent annual survey of law firm finances by The American Lawyer, Hale and Dorr had profits per partner of $810,000 in 2002; Wilmer Cutler, $760,000. “This is a merger of equals. It is not to save money or reduce staff,” says John Pickering, one of Wilmer’s founders. “It’s the combination of two good law firms at the top of their professional lives.” The new firm has stressed the equality of Wilmer and Hale from the moment the merger was announced April 19. Effective May 31, the merger was kept closely under wraps as the firms worked out the details of how the new entity will be structured. The firm will be co-led by William Perlstein, a bankruptcy partner and chairman of Wilmer’s management committee, and William Lee, an intellectual property litigator and managing partner of Hale and Dorr. In addition, the firm will have a 12-member management committee with six members from each firm, including representatives from European offices. But building a truly national or international player isn’t as easy as pulling together equally sized players to gain critical mass, says William Brennan, who consults on law firm mergers for Newtown, Pa.-based Altman Weil. The new firm, which will have the majority of its lawyers concentrated in Boston and Washington, doesn’t have a broad national reach. “They are now a super-regional firm,” Brennan says. “But the merger is a step in the right direction toward becoming a national firm.” Brennan says the merger will undoubtedly put the new firm on the short list for many large corporations considering changes to their legal counsel. Yet penetrating markets beyond Washington and Boston is a necessary step to qualify as a truly national firm. It’s imperative, legal consultants and big-firm lawyers say, to create a strong presence in New York, and they recommend opening a California office. Neither Hale and Dorr nor Wilmer Cutler has an outpost in California. Though managers of both firms say the new firm is already strong, they have immediate plans for growth in New York and say a California presence is part of their long-term growth strategy. With the combination, the new firm will have 95 lawyers in the Big Apple. To grab more corporate work in New York, Perlstein says, the firm will attempt to capitalize on Hale and Dorr’s links to the technology sector and Wilmer Cutler’s close ties to investment banks. The firm will likely look to add laterals and small practice groups from other firms, he adds. Both firms are relatively new entrants to New York, having opened offices there within the last five years. Wilmer Cutler arrived in 1999 with three lawyers, and Hale and Dorr in 2000 with four lawyers. In recent years, D.C.-based firms Dickstein Shapiro Morin & Oshinsky, Covington & Burling, and Hogan & Hartson have moved aggressively in the New York market. Last year, Hale and Dorr’s Boston competitor, Ropes & Gray, acquired New York’s 55-lawyer private equity boutique Reboul, MacMurray, Hewitt & Maynard. As for the West Coast, Lee says, the firm hopes to establish an office there within the next three to five years, a move that will hinge largely on IP and tech-related work. The new firm will concentrate on growth in Europe as well, where both firms have multiple offices. With nearly 140 lawyers in Europe now, the new Wilmer plans to expand its presence in Germany and establish a foothold in Paris. Its largest office, in London, will have a total of nearly 80 attorneys. CORRALLING CLIENTS In spite of their geographic limitations, the two firms have some obvious strengths. They both bring a powerful list of clients to the table, and in Washington, at least, will have a battery of rainmakers and politically connected partners. Wilmer has represented clients in many high-profile investigations by the Securities and Exchange Commission. Rainmakers such as William McLucas, who has been the outside investigator into the failures at WorldCom Inc. and the Enron Corp., and former Solicitor General Seth Waxman, who heads the firm’s appellate practice, have helped propel the firm’s reputation as a top destination for high-level attorneys exiting government posts. Hale and Dorr has carved a spot representing major biotech clients in intellectual property matters, an area Lee has emphasized since he became managing partner four years ago. Among its litigation clients are chipmaker the Intel Corp. and pharmaceutical giant Pfizer Inc. The firm recently represented Goldman Sachs in connection with the initial public offering by GTx Inc., and Eyetech Pharmaceuticals in its IPO. The solid client base has helped both firms weather the economic downturn of the last few years. Wilmer’s revenue jumped more than 25 percent to $296.5 million in 2002. Its average profits per partner (PPP) followed suit, rising from $620,000 in 2001 to $760,000 in 2002. At the time, the firm had 450 lawyers, 131 of whom were equity partners. Hale and Dorr, which invested substantially in the tech sector, traveled a somewhat bumpier path. In 2000, its PPP soared to $835,000. The next year, as the economy soured, that figure dropped to $750,000, according to The American Lawyer. In 2002, per-partner profits rebounded smartly to $810,000. At the same time, however, the firm’s revenue was relatively flat. In 2002, revenue climbed just 3 percent to $306.5 million. The firm reported 453 lawyers, at the time; 143 of them were equity partners. Lee says the PPP increase is owed to cost management. Hale and Dorr and Wilmer Cutler have taken different approaches to partner pay and promotions. Hale and Dorr has two levels of partnership — senior partners and junior partners — and an “up or out” policy, which means that a junior partner who is passed over for full partnership is forced to leave the firm. Wilmer Cutler has a single partnership tier and no up-or-out mandate. At Hale and Dorr, associates are usually promoted after five years to junior partner, which does not make them a shareholder. Lee insists that the system isn’t tantamount to a two-tiered partnership and likens the status of junior partners from Hale and Dorr to of counsel lawyers at Wilmer Cutler. One Boston recruiter says Hale and Dorr’s approach to promoting partners has left some attorneys unhappy. “Being a junior partner there means you are a highly paid employee, it doesn’t mean anything as far as making equity partner,” the recruiter says. Junior partner elections will occur this year as planned. The two firms are in the process of deciding what system they will implement next year, but Lee says that of counsel at Wilmer Cutler will not be subject to an up-or-out policy. “We’re trying to figure out what’s right,” he says. Partnership structure — and, in turn, compensation issues — can rupture merging firms and is a particularly difficult issue when those firms are similar in size. When there isn’t a clearly dominant firm, it can be difficult to decide which firm’s methods should be adopted. “The question of whose billing system, payroll system, and image you choose are not necessarily self-evident,” says Altman Weil’s Brennan. “The process of integrating two firms is very tricky. If you don’t pay careful attention, it is very likely to create animosity, dissension, and unhappiness. The costs can be very dramatic.” DINING TOGETHER The two firms have been trying to head off those kinds of problems. Months ago, partners at each firm began meeting with their counterparts over informal lunches and dinners. David Redlick, co-chair of Hale and Dorr’s life sciences practice, says the time spent getting to know Wilmer Cutler lawyers was invaluable because it “led to a very high level of support for the combination. The level of unanimity [on the merger] was surprising.” Indeed, Perlstein and Lee say partners at both firms voted unanimously to approve the merger. While the meetings have been a first step toward opening lines of communication, they may also get partners in the habit of pitching the expertise of other practice groups to clients. Neal Wolin, the general counsel of the Hartford Financial Services Group, which retains Wilmer Cutler for complex civil litigation and appellate litigation, says he expects to hear soon about the new services the firm can provide with the addition of Hale and Dorr lawyers. Although Wolin says that developing relationships with Hale and Dorr lawyers would be similar to getting to know a new firm, he says comfort and trust are key issues when finding outside counsel. So his familiarity with Wilmer Cutler immediately gives the Hale and Dorr lawyers an advantage. “It’s a big leg up for the firm when I’m thinking of engaging them on other matters,” Wolin says. Jeffrey Liss, chief operating officer of Piper Rudnick, itself the product of a combination of firms of similar size — Chicago’s Rudnick & Wolfe and Baltimore’s Piper & Marbury — says getting partners informed about the new firm is a key step in helping them pitch services to clients. “The challenges really go to educating everyone around the firm as to what your partners’ strengths and capabilities are so you can constantly be thinking how to use an expanded platform,” Liss says. Client relations are likely to be helped by the stable of former Hale and Dorr and Wilmer Cutler lawyers in general counsel positions, including former Wilmer Cutler partner Michael Helfer at Citigroup Inc., and Jeffrey Carp, who left Hale and Dorr two weeks ago to head the law department for mutual fund MFS Inc. Carp, whose company is involved in the mutual fund scandal and retains both firms, acknowledges that the merger represents a marked shift in the approaches that both firms have historically had toward growth. “It’s a huge change in the life of both organizations, but this was not a 24-hour thing,” Carp says, citing the unanimous vote by both partnerships as proof of a broad consensus on the deal.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.