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Piper Rudnick has opened discussions with Palo Alto-based Gray Cary Ware & Freidenrich about a merger between the two firms. Law firm consultant Peter Zeughauser confirmed that the firms have had conversations about a union, though he said the talks were in their earliest stages. Zeughauser, who is based in Newport Beach, refused to comment on whether he was working with either of the firms. For their part, firm leaders Frank Burch Jr., who co-chairs Piper, and J. Terence O’Malley, chairman and CEO of Gray Cary, won’t talk about whether they are negotiating. However, Burch says, “We’ve known Terry for a good while and have compared notes with him.” Piper and Gray Cary, both products of mergers, have made no secret of their desire to grow. A merger with Piper not only would bring Gray Cary a substantial East Coast presence, including a New York office, but also would give the lawyers a national platform and a 46-lawyer Los Angeles office, along with Piper’s strong real estate, litigation and lobbying groups. Meanwhile, Piper’s dreams for more California lawyers would come true with Gray Cary’s presence in Palo Alto, San Diego, San Francisco and Sacramento, and Piper could also benefit from Gray Cary’s strong technology practice. The talks come at a time when Piper is in the midst of another major merger discussion. The firm is close to finalizing merger negotiations with 1,800-lawyer U.K. firm DLA. A partner close to the deal says the “leadership of both firms are in agreement on all material terms” and are now working on informing the partners. A merger with DLA would propel Piper, which now has about 975 lawyers, into the ranks of the world’s largest law firms, alongside Baker & McKenzie (3,200 lawyers) and Clifford Chance (3,300 lawyers). A deal with both DLA and 380-lawyer Gray Cary would push Piper over the 3,000-lawyer mark. Piper, the result of the 1999 merger of Baltimore’s Piper Marbury and Chicago’s Rudnick & Wolfe, “has been focused for the last five years on [expanding in] New York and California and most recently the international aspects of our practice,” Burch says. Recently, the firm, which has 13 offices including an 156-lawyer D.C. outpost, acquired D.C.’s Verner, Liipfert, Bernhard, McPherson and Hand, known for its lobbying practice, in 2002; San Francisco’s 39-lawyer Steinhart & Falconer in December 2003; and Hogan & Hartson’s Paris office in June. O’Malley says immediate priorities for Gray Cary’s expansion include opening a Los Angeles office by the end of the year, increasing its presence on the East Coast, and expanding its litigation and transactional practices. Currently, most of Gray Cary’s lawyers are based on the West Coast, with additional offices in Austin, Texas, and the District. Gray Cary is making a financial comeback after a precipitous drop in profits per partner two years ago, when the tech market bottomed out. The firm’s profits per partner fell to $460,000 in 2002 after consistently topping $500,000 during the dot-com boom. Last year, after adopting a conservative strategy which included a cutback of some associates and partners, the profits per partner jumped to $615,000. (Piper’s profits per partner figure last year was $675,000.) “We are having our best financial year in the history of the firm,” O’Malley says. “We’ve enjoyed the benefits of the rebounding capital markets, in particular, and the technology area in general.” This isn’t the first time Gray Cary has talked about merging to get a Los Angeles presence. In 2001, Gray Cary was in merger talks with Los Angeles corporate boutique Riordan & McKinzie, but those talks fell apart, and Riordan ultimately joined with Boston’s Bingham McCutchen. O’Malley says he has known Piper co-chairs Burch and Chicago-based Lee Miller for years, but declined to say whether they are discussing a union. In the beginning stage of the typical merger dance, managing partners of the two firms usually meet to discuss their practice areas, strategic plans to expand, and why they’re interested in a merger, says Altman Weil consultant William Brennan. They usually exchange general financial information, such as their total revenues, total profits and number of lawyers, Brennan says. Consultants agree that law firm mergers are on an upward slope this year. Consulting firm Hildebrandt International counted 35 total mergers in 2003, says consultant James Jones. Through the first half of this year, there have already been 30 mergers and another six that have been publicly announced, Jones says. Christine Hines is a reporter with Legal Times , a Recorder affiliate based in Washington, D.C.

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