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D.C. corporate lawyers, buffeted by years of low billables, layoffs, and a sluggish transactional market, say their practices are finally making a substantial comeback.

Mergers and acquisitions, private equity, financing, and outsourcing work is up significantly in the last six months, they say, with growth in the “hundreds of percents,” according to Robert Robbins, chairman of Shaw Pittman’s corporate practice. “We in the corporate group are seeing our highest billable hours probably in four years.”

But with the 2000 technology crash still fresh in their minds, D.C. firms say they are taking a cautious approach to the corporate turnaround. That means they aren’t contemplating associate hiring sprees like the ones that punctuated the economic boom – though partners do say they have their eyes on hiring midlevel associates with experience doing deals.

The firms’ renewed optimism is backed up by key economic indicators that show a rise in the number of deals and in venture capital investment. The fourth quarter of 2003, for instance, was the first in six that saw a jump in venture investment in D.C. metro-area companies, according to data from the MoneyTree Survey. The survey, which details venture investment nationwide, is conducted by PricewaterhouseCoopers, the National Venture Economics Association, and Thomson Financial Venture Economics.

“The overall state of the economy bodes well,” says Akin Gump Strauss Hauer & Feld chairman R. Bruce McLean. “There’s finally a reason for optimism.”

To be sure, D.C.’s transactional market still pales in comparison with those of New York, Silicon Valley, and New England, and continues to be a shadow of what it was at the height of the boom. To boost their transactional practices, Washington-based firms have made a concerted effort to build up offices in other markets. In the past several years, for example, Hogan & Hartson and Covington & Burling acquired New York firms, and just two weeks ago, Wilmer Cutler Pickering announced its merger with Boston corporate firm Hale and Dorr.

But strong regulatory practices at home are driving growth in transactional work as well. Catherine Dargan, a partner in Covington’s corporate and securities practice, says mergers and acquisitions work related to the firm’s traditional strengths – life sciences, broadcasting, and sports – has been particularly busy.

“There’s a regulatory component,” she says. Clients “are looking for that capability in addition to traditional M&A capability.”

Dargan and partner John Hurvitz recently represented Japanese pharmaceutical company Eisai Co. in its $130 million purchase of the anti-epileptic drug Zonegram from Irish biotech company Elan Corp.

“It required around-the-clock negotiations for several weeks,” says Dargan.

The firm, which in addition to its transactional practice has a 19-lawyer energy regulatory practice, is handling oil producer Kerr-McGee Corp.’s $3.4 billion acquisition of the Westport Resources Corp., a deal announced in early April.

Dargan says the firm’s corporate practice has also benefited from local clients. Covington represented Lanham, Md.-based Radio One Inc. in a joint venture with the Comcast Corp. to launch TV One, a network geared toward African-American and urban viewers, last July.

Steven Kaplan, chairman of Arnold & Porter’s corporate and securities group, also cites local businesses, especially biotech companies, technology companies, and defense contractors, as a major source of transactional work for the firm in recent months.

“The business environment here is very strong and is much different than it was 20 years ago,” says Kaplan. “It’s a great market to be in.”

He also says says cross-selling the firm’s transactional and regulatory practices to clients has been key. “There’s a lot of synergy between those regulatory practices and our corporate work,” he notes.

But local work isn’t paying all of the bills. National and international clients have tapped D.C.-based firms for recent corporate deals. Hogan & Hartson is handling the reincorporation of Rupert Murdoch’s media company News Corp. in the United States.

And Shaw Pittman, which touts its transactional practice as one of D.C.’s largest, was one of the few survivors of Schroders’ overhaul of its roster of law firms, according to Robbins. The global fund manager was using more than 100 law firms, Robbins says, and cut that panel down to just 11, of which only Shaw Pittman and Boston-based Ropes & Gray are U.S.-based.

“We’re very excited to be named to that panel,” says Robbins.

The D.C. offices of out-of-towners are reaping the benefits of the revitalized economy as well. But rather than relying on overflow transactional work from New York and other traditional corporate centers, the offices are originating their own deals.

Daniel Masur, a partner in Mayer, Brown, Rowe & Maw’s D.C. office, says the firm’s outsourcing practice has seen a substantial increase in its volume of work, and the D.C. office alone has about 11 transactions pending.

“I don’t recall there ever being a time when we were as busy as we are now,” he says.

Although outsourcing deals are common during a recession, Masur says, “the economy has improved, and people are doing deals that are driven not just by the reduction in costs.”

Eric Bernthal, managing partner of Latham & Watkins’ D.C. office, says the firm has seen an increase in work across the board, prompted in part by an increase in transactional work.

Telecom and health-services deals have been driving much of the growth, he says. He cites the proposed merger of Arch Wireless Inc., the largest wireless messaging company in the United States, and Metrocall Holdings Inc. as an example. Bernthal represented Arch Wireless in the stock-for-stock deal announced at the end of March.

“Demand is at a level that we haven’t seen in probably three years,” he says.

The surge in transactional work has also caused a rise in regulatory work, says Charles Horn, a financial services regulatory partner at Mayer, Brown in D.C.

“Your average corporate transaction brings into play a lot of different practices,” he says. “All those allied practice groups are going to be affected as well.”

Hildebrandt International Inc. law firm consultant Lisa Smith agrees. “Even if the D.C. firms are not the primary advisers on the deal, they still get involved in some of these major transactions,” she says. “When there’s a pickup on the corporate side, it tends to raise the tide of all practices.”

The uptick in work has also helped revitalize the market for lateral hiring. Firms say they need more midlevels, associates who went jobless or were laid off when the economy tanked and corporate work took a hit.

“Trying to manage a capacity in the legal business is very tricky,” says Bernthal. “Demand tends to rise and fall on an immediate basis.”

For this reason, Akin Gump partner Rick Burdick, chair of the firm’s business transactions practice, says the firm started looking for laterals early last year in anticipation of economic growth. But it found laterals were unwilling to forsake their job security or “sell themselves at a low” during the downturn rather than wait it out for a few years and command a higher salary when the work started to pick up again.

“People are now willing to talk to us when they weren’t a year ago,” he says.

Both Shaw Pittman’s Robbins and Arnold & Porter’s Kaplan say their firms are hiring. But Covington, says Dargan, is well-staffed to handle the current volume of transactional work.

“During the heyday of the Internet boom, we didn’t hire large numbers of new lawyers,” she says. “We’ve always been pretty careful to maintain certain hiring standards.”

While D.C. transactional lawyers are certainly enjoying the return of their billable hours, they aren’t getting too excited. Akin Gump’s Burdick, for one, says he is “cautiously optimistic” about the future of corporate work in D.C.

“I don’t think it’s at the point yet where people can say, ‘We’re back,’ ” says Burdick.

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