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Fresh off of a merger in Seattle, K&L Gates has set its sights on the South.

The 1,400-attorney firm has said that it is in merger discussions with Dallas-based Hughes & Luce.

The two firms have been talking since the spring and anticipate formal proposals to be issued by the fall if talks continue to progress, the firms said in a statement yesterday.

If a merger went through, K&L Gates would have more than 1,500 attorneys in 24 offices.

Hughes & Luce is a full-service firm with 150 attorneys spread throughout offices in Dallas, Fort Worth and Austin, Texas.

“More than 10 percent of the Fortune 1,000 call Texas home,” Peter Kalis, K&L Gates’ chairman and global managing partner, said in a statement. “These and other Texas-based enterprises – including an enviable number of middle-market and emerging-growth companies, funds and financial institutions, and individual entrepreneurs – compete in regional, national and global markets, just as enterprises based elsewhere in the world do substantial business in Texas. Hughes & Luce is one of the pre-eminent law firms in the state and thus a very attractive potential partner.”

K&L Gates already has a Dallas office with close to 35 attorneys. The firm entered the market in January 2001 when it merged with Wolin Ridley & Miller.

Kalis said a merger with Hughes & Luce would help K&L Gates plug some holes in its network of offices.

“K&L Gates is underinvested in the Sunbelt . . . if you look at the demographics movement, not just of people but of corporate decision-markers,” he said in an interview. “This is an extraordinarily ripe market opportunity.”

While K&L Gates has been successful in the Dallas market on a smaller scale, Kalis said he wanted to achieve critical mass in the area.

Edward Coultas, managing partner of Hughes & Luce, said the firms want to move the talks along and hope to have a formal agreement signed by November if the deal goes through.

Coultas said his firm would benefit from all of K&L Gates’ geographic locations, as the firm’s practice is regional, national and international.

“Being in Dallas/Fort Worth, it’s really a global economy that we address,” he said.

Hughes & Luce clients, according to The Legal’s sister publication Texas Lawyer‘s list of the 100 largest firms in Texas, published on April 30, include San Antonio’s AT&T Inc., Dell Inc., Electronic Data Systems Corp., Wells Fargo Foothill Inc. of Los Angeles and Wal-Mart Stores Inc. of Bentonville, Ark.

In 2006, at Hughes & Luce, profits per partner (PPP) averaged $574,000 and revenue per lawyer (RPL) averaged $527,000, according to Texas Lawyer’s annual Report on Firm Finance.

The financials were higher at Kirkpatrick & Lockhart in 2006, according to the AmLaw 100 report published by The American Lawyer, a publication of ALM. PPP averaged $780,000 and RPL averaged $605,000. At Preston Gates, PPP averaged $500,000 and RPL came in at $535,000 on average, according to the AmLaw 200 report. Kirkpatrick & Lockhart Nicholson Graham merged with Preston Gates & Ellis on Jan. 1.

Coultas said the firms went public with the talks to stave off the rumor mill.

“Once you put anything out among two lawyers, it’s out,” Coultas said.

Kalis said K&L Gates also has informed its lawyers and staff about the talks with the 34-year-old Hughes & Luce.

The negotiations are sufficiently serious and promising that it makes sense to “conduct our discussion publicly . . . rather than skulking around behind closed doors and keeping secrets, or trying to keep secrets, from our partners, our associates and our staff,” he said. “We would not put this in the public domain frivolously.”

Coultas said talks began when Robert Wolin, K&L Gates’ administrative partner in Dallas, approached Mark Shank, Hughes & Luce’s hiring partner.

“He just wanted to have a cup of coffee and visited about what we are doing, and it started at that point,” Coultas said. “We’re really at the starting pages of looking at it.”

The two firms hadn’t had too much interaction prior to the start of discussions. Coultas said K&L Gates’ smaller Dallas office was “very highly respected” with a good reputation. He said his firm hadn’t faced them in litigation but had done some real estate work with K&L Gates.

Kalis said the Dallas offices of both firms are friendly, and it was a natural progression to start conversations about a potential merger.

While several out-of-town firms have looked to Dallas — and Texas in general — in the last few years, Kalis said none of the Texas-based firms have K&L Gates’ national and international footprint.

“We are finding in market after market that our global platform is a profound differentiator,” he said.

If a merger were to go through, Kalis said the combined firm would have two main standouts. It would have a presence of nearly 200 lawyers in Texas and would have the national and global footprint to back that up, he said.

How far along the merger discussions are is unclear.

Recruiter Diane Caldwell of Caldwell & Associates in the Dallas area said she had heard from attorneys at Hughes & Luce that talks didn’t seem to be progressing fast.

She said it is just talks at this point.

“No one is taking it too seriously,” Caldwell said.

She said Hughes & Luce is one of the major firms in Dallas. She said they have talked with several other firms in the area about potential mergers.

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