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No merger comes without its bumps and bruises. And that is certainly true of the mammoth 2005 union between California-based Pillsbury Winthrop and D.C.-based Shaw Pittman. The merger, second in size only to DLA Piper that year, continues to have reverberations in its Washington office, which still faces lawyer defections, decreasing gross revenue, and integration issues. One sign of success: Pillsbury’s individual lawyer stats, such as profits per partner, rebounded last year. In 2006, Pillsbury was the only firm in the D.C. 20 to drop in revenue. The firm’s gross revenue fell by $11 million from $196 million in 2005 to $185 million in 2006. The decrease was costly, pushing Pillsbury down eight slots to No. 16. Still, Stephen Huttler, Pillsbury’s vice chairman and former head of Shaw Pittman, views the merger as a success. He discounts the lower revenue figure and says it’s a function of the firm’s smaller head count. “We are extremely pleased with how the merger has worked out,” Huttler says. “The proof [in the] pudding is the PPP statistics and other statistics. We had a bang-up year.” The firm’s individual lawyer stats were up, including profits per partner, which rose from $765,000 in 2005 to $895,000 in 2006. The firm’s revenue per lawyer also jumped $63,000 from $645,000 to $708,000. Still, one measure of a successful merger is limited attrition. Since the firms announced their intent to combine, the firm has watched a large number of lawyers depart — including a 20-lawyer group that jumped to Hunton & Williams in 2005 and a six-partner, 13-person group of banking regulatory attorneys in January 2006 to Mayer, Brown, Rowe & Maw. In April 2005, at the time of the merger, the combined Washington offices had 396 lawyers. Last year, Pillsbury’s Washington roster continued to slide, losing 42 lawyers. The firm went from 304 lawyers in 2005 to 262 lawyers in 2006. Lawyers who have left cite the different rate structure as a critical factor in their departures. Pillsbury’s higher billable requirements created tension in some of Shaw Pittman’s practices, forcing them to increase their billable rates in price-sensitive practices. Last year, key practitioners in the firm’s vaunted global outsourcing practice left, including the group’s head Trevor Nagel, partner Lee Van Blerkom, and associate Norman Fry to Alston & Bird in July. The D.C.-based co-chairman of Pillsbury’s private equity and China practices, Jay Tannon, also bailed for DLA Piper in May. And Lawrence Gotts, head of the national intellectual property section, and Michael Bednarek, head of the firm’s financial institutions intellectual property practice, exited for Paul, Hastings, Janofsky & Walker. The defections are not a big deal, Huttler says. “As part of any merger inevitably there are some people who are not going to participate,” Huttler says. “We had some departures and, therefore, fewer lawyers to generate revenue. The lawyers that we have have generated more revenue per lawyer and are more profitable than ever before.” Last year, the number of equity partners at Pillsbury dropped from 58 to 45 in D.C. Maureen Dwyer, managing partner of the firm’s Washington office, says there was no systematic de-equitization at the firm. She attributes the decrease in equity partners to lawyer departures and a few retiring partners. The firm is wary of de-equitization. In order for the merger to go through, Shaw Pittman lopped off more than half of the equity partners from what had been a single-tiered partnership. The firm’s number of equity partners fell from 99 in 2003 to 43 by the end of 2004. That helped the firm boost its profits per partner 44 percent from 2003 to 2004 — but it also left a lot of lawyers unhappy. “We do want to grow back to the same size or even larger than we were before,” Dwyer says. She says the Washington office’s head count is already back to 275 lawyers and that, firm-wide, Pillsbury’s goal is to grow every office in 2007. Despite the departures, the firm attracted laterals last year in key practice groups, such as energy partner William Hollaway from Skadden, Arps, Slate, Meagher & Flom, eight public policy lawyers from Patton Boggs, and corporate partner Richard Rosenfeld from Akin Gump Strauss Hauer & Feld. “People want to take a wait-and-see approach to see how the merger works, and I would say that there is a fairly extraordinary uptick in the level of activity in terms of lateral recruiting this year,” Huttler says. He says the firm is looking to grow in financial services, technology, energy, and real estate in Washington. And, while he acknowledges that the firm took a hit with global outsourcing chairman Nagel’s exit, he says the firm expects to grow that practice, too. Pillsbury continued to reap the benefits of one of its stronger units: Its well-regarded real estate practice, led by partner John Engel, helped the Mark Winkler Co. sell-off its entire real estate portfolio. The deal, valued at $2.3 billion, was the largest-ever onetime disposition of real estate assets in the D.C. area. The firm also represented Sinclair Broadcast Group Inc. in an antitrust case brought by cable company Mediacom. Led by partners Kathryn Schmeltzer and Richard Liebeskind, the lawyers convinced a U.S. district judge in Des Moines, Iowa, that Mediacom failed to demonstrate that Sinclair, which owns the broadcasting rights for several stations and network programs, unlawfully had tied major network stations with minor networks when negotiating cable contracts. For now, Huttler says the firm doesn’t expect to open any new offices, but will instead focus on continuing to integrate and build on its 15 offices. It is also looking at building special niche market practices like climate change and sustainability and stock-options backdating. “The work of integration is never done, but I think we’ve made enormous progress in two years, and I’m very happy with the outcome,” Huttler says. The bumpy ride may not be over. Although the number of partners exiting has slowed recently, Pillsbury is after all under new management. Its chairwoman, Mary Cranston, who helped orchestrate the firm merger, has stepped down, and a new chairman, James Rishwain, took over last May. “We’re continuing to build on that foundation that Mary created,” Huttler says.
Anna Palmer can be contacted at [email protected].

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