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The problems are mounting for Powell Goldstein. Last week the Atlanta-based firm lost a big chunk of its health care practice group in Washington — and today, two partners and two counsel will leave the firm’s tax and business and finance practices. Those are just the latest in a long list of departures from the office. But the troubles aren’t limited to D.C. The 256-lawyer firm has been struggling to grow for years, faces increased competition from larger rivals in the Southeast, and has had little luck replacing departed rainmakers with top-tier laterals. Now, the firm may be looking for a merger partner. Sources, including former lawyers and legal recruiters, say that Powell is in serious discussions with Winston-Salem, N.C.-based Womble Carlyle Sandridge & Rice. Such a union would create an 800-lawyer regional powerhouse with combined revenues of nearly $400 million. That’s still shy of King & Spalding and Alston & Bird, but far above other Southern players like Kilpatrick Stockton, Sutherland Asbill & Brennan, and Troutman Sanders. Powell Goldstein has “lost ground to the Alstons and King & Spaldings, and the Sutherlands, and the like,” says Ward Bower, a legal consultant at Altman Weil. A merger would give the firm a chance to “close the gap,” he says. For its part, Womble would gain a large presence in Atlanta, which would complement its already strong base of clients in the Carolinas. But a merger won’t immediately solve some of Powell’s most nagging issues. Its D.C. office, which once constituted nearly half the firm, has declined from 110 lawyers in 2002 to 66 lawyers today. And the firm’s already-shrinking health care practice may clash with Womble’s large client base of tobacco companies. One Washington legal recruiter, taking note of Powell’s and Womble’s complementary office locations, says, “You could write a little business plan here that really makes sense for both firms.” But any change has to happen soon for Powell, especially in the District. “Their backs are against the wall,” he says. LOOKING FOR OPPORTUNITIES Powell and Womble declined to confirm or deny the merger discussions. Womble’s chairman, Keith Vaughan, would only say that the firm is “always looking at a lot of opportunities.” And Powell Chairman James McAlpin Jr. says he’s intent on making Powell “a better version” of itself and emphasizes his intention to transform Powell into “one of the leading Southeastern firms.” McAlpin would not comment on problems at the firm. This isn’t the first time Powell has been in merger talks. A decade ago it publicly announced plans to join forces with Richmond, Va.-based McGuireWoods (at the time, McGuire, Woods, Battle & Boothe). The two firms stressed a desire to build a strong D.C.-based international law practice together, but six months after they announced the merger, the deal fell apart. McGuire’s chairman blamed a lack of enthusiasm among his firm’s partnership, but recruiters pointed to possible client, culture, and management conflicts. Since, Powell has been hit by several major defections — many of them in Washington. The first signs of trouble came in 2001, when Stuart Eizenstat, who founded the D.C. office in 1981, decided not to return to Powell after spending eight years in the Clinton administration. He instead went to Covington & Burling, where he now heads the international practice. A year later, Sidley Austin poached the entire 33-lawyer international trade group. Powell’s D.C. head count has never recovered. Firmwide, revenue has grown slowly for Powell over the past several years, from $122.5 million in the 2003 fiscal year to $128.5 million in 2006 — or less than 5 percent — according to the Am Law 200. Profits per partner were $440,000 in 2003 and $460,000 in 2006. McAlpin says that profits per partner rocketed to $550,000 in 2007, though he declines to provide specifics about how the firm achieved such rapid growth. He does say the firm has “streamlined” itself, and he acknowledges that the firm has trimmed lawyers in some practices. He also says the firm has been looking to clients for more lucrative assignments. And McAlpin has made strides in expanding the firm geographically. Powell opened its 12-lawyer Dallas office in 2006, and it started a six-attorney Charlotte, N.C., outpost last month. But the bottom line may not be helped by the recent departures from the D.C. office. Four of Powell’s D.C. health care partners, including rainmaker Larry Gage, left for Ropes & Gray last week. Gage is president of the National Association of Public Hospitals and Health Systems — previously a major source of business for the health care practice, because it offers access to hospital clients nationwide. Others who have departed Powell’s D.C. health care group in recent years say the latest losses could cripple the practice. “What they’re known for is the Gage group,” says a former associate who left in 2006. The tax practice in the D.C. office appeared to be the strongest of the remaining groups, recruiters and former Powell lawyers said. However, Michael Sanders, the partner who headed the tax group, started today as the head of the tax practice in Blank Rome’s D.C. office. Former tax partner Robert Madden and tax counsel Susan Cobb are joining him at the firm. Martin Jacobs, a business and finance counsel, is also jumping to Blank Rome. Sanders and Madden say Blank Rome will offer them a national reach that Powell did not. As for a possible merger with Womble, Madden says such a union would not have interested him: “It is frankly more of the same in terms of a Southeastern focus for the firm. .�.�. It’s not what I would want.” LIFESTYLE VERSUS PROFITS Lawyers who worked in the Washington office say it has suffered from communication problems with Atlanta. “The firm itself was sending a lot of mixed signals about what direction it was heading in as far as being a top-tier-profitability firm or being a quality-of-life firm,” says Kevin Pooler, who was a midlevel associate in the energy practice from 2004 to 2006. He is now a counsel at Constellation Energy Group in Houston. “There was such a pressure on profitability at the partner level that many partners were keeping the work for themselves for their own hours, rather than funneling it down to the associate level. And some of it was associate-level work,” says Pooler. Cynthia Wong Hu was a senior associate in Powell’s Washington corporate practice from 2000 to 2006. She says that after McAlpin took over as chairman in 2004, the firm began to ratchet up expectations for associates and partners. “There was more attention given to meeting your billable requirements and proving you were valuable to the firm,” she says. Wong Hu is now a vice president and general counsel at pharmaceutical company EntreMed in Rockville, Md. Despite the problems, Womble would still be getting some choice practice areas and office locations. In Atlanta alone, Powell has been a presence for nearly 100 years. “That’s a pretty amazing thing to capture,” says legal recruiter Raffaele Murdocca, who is managing director of BCG Attorney Search’s Atlanta, Charlotte, and Miami offices. Womble is widely considered the king of the Carolinas, with offices in Greenville, S.C., and in North Carolina in Charlotte, Durham, Greensboro, Raleigh, and Winston-Salem, where the firm has its headquarters. Womble also has posts in Atlanta, Baltimore, Northern Virginia, the District, and Wilmington, Del. Womble’s work for Big Tobacco clients such as Reynolds American could pose a problem for the remaining five partners in Powell’s health care group (one client is the American Heart Association). But Altman Weil’s Bower says, “That would most likely be a business conflict, not a legal conflict. It’s a matter of sorting it out with the clients.”
Marisa McQuilken can be contacted at [email protected].

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