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New York’s Dewey Ballantine and San Francisco’s Orrick Herrington & Sutcliffe announced Thursday that they have called off their merger discussions. “Both firms are successful, global firms that saw great potential in a combination,” Dewey and Orrick said in a joint statement. “However, a combination of this size and scope posed significant challenges. While both firms tried their best to work through these challenges, we were unable to bring the merger to completion.” They added that no one issue led to the end of the negotiations. Since September, when the two firms confirmed that they were in discussions, the exit door has been swinging at Dewey. Rising M&A stars Michael Aiello left for Weil, Gotshal & Manges, and Jack Bodner jumped to Covington & Burling. Ben Hoch and Dianne Coffino also joined Covington’s financial restructuring and insolvency practice. White & Case snared three partners, including bankruptcy partners Alan Gover, who headed Dewey’s bankruptcy group, and project finance partners Earle O’Donnell and Donna Attanasio. Others who have left include tax partner Thomas Giegerich, who joined McDermott Will & Emery; bankruptcy partner Carey Schreiber, who jumped to Winston & Strawn; and corporate lawyer Arthur Hayes III, who joined Sonnenshein Nath & Rosenthal. “We may have lost a few people because of the discussions,” says Dewey executive committee member Jeffrey Kessler, “but I don’t think it was a mistake [to engage in merger talks with Orrick]. It was something worth exploring. At the end of the day, I think we will both be stronger firms.” Asked if the departures had affected the negotiations, Orrick chairman Ralph Baxter, Jr., said he couldn’t comment on what went on in the discussions. “Most merger discussions don’t result in a merger,” he said. When the merger talks were first reported by The American Lawyer, Baxter said, “I tried to be careful to say, �We shall see,’ ” noting that a final deal would be “ subject to working through complicated questions of due diligence.” However, the firms appeared confident early on that they would be able to complete a deal. In October they issued a statement saying that the management and executive committees of both firms intended to recommend approving the combination. Dewey chairman Morton Pierce also declared that the merger would “change the face of the legal industry, serving as a model of what law firms need to look like in order to anticipate their clients’ needs in a national and international marketplace.” The firms had already decided that the new firm would be called Dewey Orrick and would retain Orrick’s green �O’ logo. A full partnership vote was expected by the end of the year. But in the last few weeks, talks appeared to have hit a snag, as the two firms went silent with the deadline approaching. One former partner attributes the breakdown in the merger talks to a leak early in the discussions between the two firms. “I think the shame was the leak on September 12,” says this former partner. “Trying to put a merger between two very large firms when everything is under the microscope for public consumption makes for a very difficult undertaking. . . . [The merger] wasn’t far enough along. . . . It’s hard to conduct discussions without the benefit of privacy.” Indeed, the existence of the talks caught some Dewey partners off guard. Two former partners confirm that rank-and-file Dewey partners were informed of the merger talks when the firm’s executive committee convened an emergency conference call just before The American Lawyer ran its story about the talks. The combined firm would have had more than 1,200 lawyers and nearly $1 billion in revenue, based on Am Law 100 data. Baxter noted that Orrick had a stellar year in 2006, with revenue up 20 percent, to $666 million and profits per partner up 15 percent, to $1.4 million. One key issue that the two firms had to resolve was how many of the partners in the combined firm would have full equity status. Together they have 260 equity partners and 155 nonequity, with Orrick having the most nonequity partners. Additional reporting by Carlyn Kolker and Andrew Longstreth

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