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A lot of midsize Texas firms bit the dust in 2001, with a number of venerable names disappearing from the landscape either through merger or a breakup. The list of firms disappearing from the scene in 2001 includes Mayor, Day, Caldwell & Keeton, noted bankruptcy firm Sheinfeld, Maley & Kay and Clark, West, Keller, Butler & Ellis, a firm that could trace its beginnings to 1886. Dallas’ Worsham Forsythe & Wooldridge will join the list when it merges on Jan. 1 with Hunton & Williams, a national firm based in Richmond, Va. While some two- and three-lawyer firms also closed their doors in 2001, at least 10 major midsize firms in Texas disappeared, something that simply didn’t happen in 2000. The remarkable change could simply be the result of the natural ebb and flow of the Texas legal market. And the lawyers from those firms are still around town in Houston, Dallas and elsewhere, with most simply changing the imprints on their business cards. But because of the wave of consolidation at Texas firms in 2001, a lot of clients will find they have fewer choices when they want to hire a firm, and law school graduates may have fewer opportunities. The market forces causing so many midsize firms to fold may prompt some lawyers with an entrepreneurial bent to pause and take stock of the situation before starting their own firms. Worsham Forsythe’s year-end deal suggests the trend isn’t abating as 2001 closes. “I think there’s going to be more next year and the year after,” says consultant William C. Cobb of Houston. “You look at a lot of law firms and discover that the only thing that’s a partnership about it is the name. They all gravitate toward, ‘What’s my personal portfolio [and] how many hours is my team putting in?’ “ Cobb says a number of factors are prompting midsize firms to either merge with a larger firm or dissolve. In some cases, the firms are targets of large national firms who want to establish beachheads in Dallas or Houston because of the corporate headquarters in major Texas cities. Those deals can be tempting. In other situations, he says, the Texas firms are either overly dependent on a particular group of clients, or specific work such as insurance defense, or their workforce is spread too thin, Cobb says. In other cases, the lawyers at the midsize firms succumb to advances from large firms that are growing simply to reach an arbitrary critical mass. “That’s the wrong reason,” Cobb says. A lease can also precipitate a merger or a firm breakup, Cobb suggests. “The firm has not been working as a partnership for many years anyway, and nobody wants to sign the lease,” he says. A lease was a factor in the breakup in July of Henry Lowerre & Frederick, one of Austin’s oldest environmental law firms. The partners decided to shutter the firm in July and create three new firms; the breakup coincided with the loss of a lease in a historic home. It can be a turning point in a firm when senior or founding partners decide to retire or scale back their practice. Cobb also says aggressive headhunters acting as deal brokers can prompt mergers. “Because everyone wants to get into the mergers-and-acquisition business, a lot of headhunters are going out and saying, ‘Hey, you are a great law firm for one of my clients,’ ” he says. “ Hidden in that is, ‘I’m going to make a great commission if they merge.’ “ IT STARTS WITH A FRIEND Texas firms don’t seem to need matchmakers to find that special mate. In fact, preliminary talks start in many cases when a couple lawyers from one firm start talking with some friends from another firm. And sometimes, years pass between the first approach and serious negotiations, like with Mayor, Day and Andrews & Kurth. Howard Ayers, Andrews & Kurth’s managing partner, says he first approached Jonathan Day, Mayor Day’s managing partner, about three or four years ago to discuss a merger, but they didn’t start serious talks until March. Andrews & Kurth & Mayor Day merged on Oct. 1 to create a 350-lawyer firm, the largest-ever merger of two Houston firms. In Worsham Forsythe’s case, an outside lawyer who knows the firm and knows Hunton & Williams well got the ball rolling on merger talks this fall. But the lawyers from the two firms have worked together before, including a stint in the mid-1970s, when the firms each represented plaintiffs in litigation involving nuclear power contracts. They also did litigation and regulatory work together in the late 1980s and early 1990s. Robert Wooldridge, Worsham Forsythe’s managing partner, says it is getting tough for an 86-lawyer firm to compete, even a firm with energy, labor, regulatory, securities, environmental and bankruptcy lawyers. “While we have grown steadily and probably with more acceleration over the last several years, the size of the firms that compete for the quality corporate business are growing very fast and it’s very difficult to do alone,” Wooldridge says. The deal combines Worsham Forsythe’s offices in Dallas and Austin and its satellite office in Richardson with the 15 offices of 782-lawyer Hunton & Williams. Worsham Forsythe, primary outside counsel to TXU, gets entr�e into markets like Washington, D.C., New York and London, while Hunton & Williams moves into Texas. “The beauty of this is to look at complementary opportunities,” says Thurston Moore, Hunton & Williams’ managing partner. Both Wooldridge and Moore describe the deal as a combination of assets instead of a merger. Wooldridge says partners in his firm will become partners in Hunton & Williams in January; he says the firms are compatible on an economic and cultural basis. Hunton & Williams posted revenue per lawyer of $445,000 in 2000 and profits per partner of $475,000, according to the AmLaw 100 published by The American Lawyer, an affiliate of Texas Lawyer. CROSS-SELLING Many of the major firm deals in 2001 involve two Texas firms. Winstead Sechrest & Minick is one firm that took advantage of the play in the market in 2001. On Aug. 1, the firm merged with Dallas’ Donohoe, Jameson & Carroll, strengthening its financial institution/banking practice, and also merged with Dow, Cogburn & Friedman of Houston, which added a strong real estate practice. Often, firms decide to link because the lawyers expect their practices to mesh and provide cross-selling opportunities, as well as a larger platform for lawyers from the smaller firm. For example, Strasburger & Price of Dallas acquired Griggs & Harrison of Houston in April. Partner W. Garney Griggs said at the time of the deal the firm had been approached many times over the years by firms talking merger, but Strasburger’s culture gave it the edge. But J. Wiley George, Strasburger’s partner in charge in its Houston office, said talks began with Griggs & Harrison because lawyers at Strasburger knew lawyers at Griggs & Harrison and knew of Griggs’ reputation as an oil and gas transactional lawyer. Then there are the firms that simply disintegrated. Sheinfeld Maley closed its doors in July after lawyers from the firm’s three Texas offices moved to other firms. Firm president George Tarpley said the beginning of the end of Sheinfeld Maley came after a number of lawyers from the firm’s Houston office decided to leave to join Akin, Gump, Strauss, Hauer & Feld. That led to plans to close the Houston office in June and uncertainty for the offices in Dallas and Austin, he said in July. Other Houston firms falling apart in 2001 include 17-lawyer Greenberg Peden, which reached a crossroads when considering an acquisition offer from a large national firm, and Woodard, Hall & Primm, which will close its doors around the first of the year. With the firm’s two founding shareholders moving toward retirement, the younger shareholders in Woodard Hall decided to do their own things and have been moving to a number of firms over the last few months. In Dallas, lawyers at Clark West — which did labor and employment, trial work, family law and transactions — attributed the firm’s demise in July to a changing legal environment that makes it tougher for midsize firms to compete for business with large firms. Some midsize firms don’t plan to give up the fight and are fending off pressures to shrink into a niche firm or boutique or join a larger operation. “I think that midsize is sort of in the eye of the beholder. At 80 lawyers plus, I’m not sure we are midsize any more,” says William Porter, managing partner in Houston’s Porter & Hedges. He says the firm is competitive because its lawyers are service-oriented and they provide good quality work in their specialty areas. “We return our phone calls and we don’t try to be all things to all people,” he says. “There are a lot of things we don’t do in this firm. If there’s enough demand by our clients, we will start doing it.” Recruiter Rob Rowland, of Associated Counsel of America, says that while consolidation will continue in 2002, it’s a cyclical phenomenon, and some of the firms that were involved in mergers in 2001 were themselves once spinoffs of larger firms, like Mayor Day, which came out of Butler & Binion. “It’s probably a pretty natural progression. People break off and form firms, they grow, they either merge or go out of business, and you have break-offs,” Rowland says. “Look at how many firms Butler & Binion gave rise to before it gave up the ghost.”

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