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Big law firms are on the make in Northern Virginia. They want in on this market, and they want in now, and many are trying to gain entree by merging with smaller boutiques already established in the region. Partners at many of Northern Virginia’s indigenous firms will listen to what emissaries from Washington and beyond have to say, and at least seven firms have been swallowed in the last year and a half. The number of lawyers who have made lateral moves to large firms is at least four times as many. But leaders of many Northern Virginia firms being courted by outsiders are circumspect about the proposals. They say that the lure of bigger money and a bigger platform also comes with bigger billables and bigger headaches. “We know what would be the outcome of a merger,” says John Siciliano of Vienna, Va.’s Haight, Tramonte, Siciliano, Flask & Yeonas, which does real estate and commercial work. “We’d disappear, and the money might even be better, but we would almost certainly lose control of our destinies.” “I’m not interested in more money. And I’m not interested in working harder,” he says. “If I want to play golf tomorrow, I will.” Siciliano says numerous firms, including Pittsburgh, Pa.-based Reed Smith Shaw & McClay and Chicago’s Winston & Strawn, have courted his 12-lawyer shop in recent years. James Korman, managing partner of 20-lawyer Bean, Kinney & Korman in Arlington, says his general commercial firm has been approached about a merger within the last year, as well as in decades past. His assessment echoes that of Siciliano. “We’ll always listen. But in the past, when it’s happened, we’ve declined,” says Korman. Mergers are “people succumbing to the money. It’s an exchange of money for autonomy,” he adds. NEW ECONOMY The most attractive shops to outside firms are New Economy specialists such as IP and telecom boutiques, as well as real estate firms. Meanwhile, Northern Virginia firms with Old Economy and local specialties, such as state court litigation, generally receive few offers. Robert Surovell, name partner of Fairfax’s 17-lawyer Surovell, Jackson, Colten & Dugan, says his litigation firm has not been courted. Alexandria’s six-lawyer Brincefield, Hartnett, Tompkins & Clark likewise has not been targeted by larger firms. “For a litigation-based firm, unless it’s a marquee firm, or doing a substantial amount of IP litigation, there’s less of an interest from out-of-town firms,” says legal placement specialist Steve Nelson of the McCormick Group in Arlington. CONNECTIONS AND CONTACTS For the larger firms, the benefits of merging are obvious. As Northern Virginia matures into one of the nation’s leading telecom and technology centers, big firms from Silicon Valley to Silicon Alley are seeking a foothold. Local firms offer both an existing client base and office space in a tight real estate market. “Location is clearly one [concern],” says Benton Burroughs Jr. of the Falls Church office of Reed Smith Hazel & Thomas, the product of a merger earlier this year. “A lot of firms didn’t go into Silicon Valley [initially], and they believe that Northern Virginia may be replicating what Silicon Valley had. They’re afraid if they don’t jump in, they may be lost.” When Houston’s Bracewell & Patterson went looking for a firm to acquire in Northern Virginia this summer, it was “extremely important” that the firm have deep roots in the area, says Michael Pate, managing partner of the D.C. office. “They know the area. They know the practices and the individuals,” he says. “They have contacts there that we just don’t have. They certainly know the judges and the people in the real estate business as well.” Many big firms are simply following their clients into the region, says Dexter Odin of Odin, Feldman & Pittleman. But if the firms don’t have clients here, they need to buy their way in by acquiring a firm that does. Odin says his firm, which practices in areas from trusts and estates to corporate law, has received several merger offers in recent years. “What makes a boutique attractive is the quality and the level of expertise,” says partner Edward Hummers in the D.C. office of Holland & Knight. Referring to his firm’s recent acquisition of D.C. telecom boutique Koteen & Naftalin, Hummers says, “We look at it as increasing our ability to serve existing clients. It both broadens and deepens our expertise.” “Up until the late eighties, most of the telecom work was handled by the boutiques,” says Hummers. “Since that time, there’s been a growing trend of large firms to acquire telecom expertise.” Vincent Curtis of D.C.-based 22-lawyer communications boutique Fletcher, Heald & Hildreth, says the same is true in his field and that his firm fields offers weekly. “Communications is a sexy thing today,” he says. “A lot of big firms want to build up, or even start, a communications practice.” Boutiques are also less controversial at big-firm partnership meetings, says Burroughs of Reed Smith. “Some firms would rather do a small merger because it’s easier to get it approved,” he says. In addition to Reed Smith and Holland & Knight, firms that snapped up local shops when they moved into the region include Rochester, N.Y.’s Nixon Peabody, and Richmond’s Williams Mullen Clark & Dobbins and LeClair Ryan. Cooley Godward; Wilson Sonsini Goodrich & Rosati; Skadden, Arps, Slate, Meagher & Flom; and others pillaged partners and practice groups from McGuire Woods; Hunton & Williams; Piper Marbury Rudnick & Wolfe; and others to get their start. McGuire Woods, in turn, recently brought on the nine attorneys from Reston, Va., IP boutique Whitham, Curtis & Whitham. Meanwhile, firms with large regional presences before the rush, including Shaw Pittman and Hunton & Williams, beefed up their ranks by transferring people from other offices and picking up laterals. THE TRADEOFFS For the local Northern Virginia firms, the advantages are a little more subtle. Many are first-generation firms, started 25 or 30 years ago and run by an aging group of founding partners. Merging is one way to assuage worries about succession when the founders retire — and to minimize the financial pain when they cash out with sizeable retirement packages. And, of course, there is the promise of more money for the lawyers who stay on. “The little firm gets access to more resources — that can be an advantage,” says Korman. “Also, you get the possible access to bigger cases in your field.” With greater resources come an introduction to a larger client base, increased training opportunities and leverage, a bigger attorney hiring pool, and the ability to better absorb costs. For example, Charles Leedom, now a partner at the McLean office of Nixon Peabody, says, “Information technology is a very huge investment that can be spread over a number of attorneys in a large firm.” After declining offers for more than 10 years, Leedom’s firm, Sixbey, Friedman, Leedom & Ferguson of McLean, Va., decided last year that it was ready to merge. “While there’s always going to be room for IP boutiques, on balance, we found that more and more IP services were going to be delivered through large IP firms,” says Leedom. “More and more of our clients were looking to larger firms for the added resources they could find.” Birch, Stewart, Kolasch & Birch executive director John Sadowski has looked at the merger equation from both sides. The 60-lawyer IP firm in Fairfax, Va., has been contacted by larger outfits, but Birch, Stewart would rather acquire small IP boutiques of its own. This year, the firm picked up two partners from the five-lawyer Alexandria, Va., IP boutique Griffin, Butler, Whisenhunt and Kurtossy, and is in the process of working out a merger with another area IP shop. Sadowski says the financial incentives for absorbing IP boutiques are strong, estimating that a healthy Northern Virginia 12-lawyer IP shop has profits of about $5 million a year. “When you get some clients already packaged and bundled, it’s worth a lot of money,” he says. Meanwhile, if large firms come into this region “and start from scratch, they are still about 20 years behind the game.” On the downside, overestimating the desire of the small firm’s lawyers to join a bigger outfit can be painful. If the new lawyers end up less than satisfied, they’ll depart and take their clients with them, Sadowski says, leaving the acquiring firm with little more than a set of office equipment. Furthermore, the partnership structure at some of the smaller firms allows founding partners to reap greater rewards than they could expect to get at large firms, discouraging deals. When Odin Feldman reaches the critical point of making a merger decision, it does not rely solely on its partners. Associates are brought into the vote, since, as Odin points out, they are the ones who will be at the new firm longest and will be most affected by the merger. Indeed, for small firms, the stakes are bigger than they are for their prospective partners. Big firms can more easily shed a practice area or an office that isn’t profitable or doesn’t fit in. But for small firms, there may be no turning back. ‘SLOW GROWTH’ “We’ve done it our way, and gotten to wherever we are by our own slow growth,” says John Keith, of 13-lawyer Fairfax general commercial practice firm Blankenship & Keith. “It’s generally a concern to us to suddenly become part of a big-firm culture. I think we fear the culture shock would be hard to take. Certainly, I fear that we wouldn’t meet the expectations they have for us.” A merger, Keith says, is “always tempting. But so far, we’ve gotten cold feet.” When the bad times come, says Korman, small-firm refugees shouldn’t expect that giant firms will show loyalty. “IP is the hot field right now. But this goes in phases,” says Korman, who points out that real estate was hot in the 1980s, and bankruptcy in the 1990s. “If the trend changes,” he warns, “as fast as they brought them in, they’ll let them go.” But with IP and telecom on the rise, the more pressing problem is staying independent at a time when national firms are offering across-the-board salaries greater than smaller shops can afford. “They’re taking lawyers, and they’re taking staff,” says Siciliano, who saw two lawyers recently depart for Holland & Knight. “We’re at Tysons, and they’re forcing the rents up. Our costs of doing business continue to go up, and so does the cost of insurance.” Ultimately, the pay scale at big firms and the escalating costs of doing business may be the trump cards in the merger game in Northern Virginia. These pressures, Siciliano says, “may force us to change our minds [about merging] at some point.”

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