CLOSEClose Law.com Menu
 
X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
No law firm merger is pure heaven, but firms joining forces sometimes can expect to see some hell. Among the firms on The National Law Journal‘s 250 feeling aftershocks this year: � Katten Muchin Zavis Rosenman, which lost significant chunks of several practice groups. � Holland & Knight, where serial mergers were counterbalanced by retrenchments. � Pillsbury Winthrop, sued by a former partner who claimed that the firm deliberately nixed his partnership deal with Latham & Watkins. In the bigger-is-better school, mergers catapult firms into the fast lane. Getting to the top of the list is one thing, observers say; staying there is another. Even the best-planned union has fallout. Mergers mean change, and change is not for everyone. Mergers are expensive — Pillsbury Winthrop spent some $18 million on the new firm’s information technology platform. Every detail needs review or overhaul, from the compensation system to the dress code. Culture clashes, overhead spikes and the exodus of valuable legal talent are often part of making two (or more) firms one. Significant departures of legal talent punctuated this year’s merger between Chicago’s Katten Muchin Zavis and New York’s Rosenman & Colin. Both sides saw talent head for the door. On the Chicago side of the union: eight lawyers left for Jenner & Block’s office in town; 10 departed for Washington, D.C.-based Howrey Simon Arnold & White’s new Chicago office; and four health care lawyers went to the Chicago office of Milwaukee’s Michael Best & Friedrich, among others. Rosenman lost people, including real estate powerhouse Samuel H. (Sandy) Lindenbaum, now counsel to New York’s Kramer Levin Naftalis & Frankel; partner Alan Raylesberg to Vinson & Elkins; partner Michael Butowsky to Chicago’s Mayer, Brown, Rowe & Maw; and Proskauer Rose of New York got partners Stephen L. Ratner and Howard Wilson. Did these exits hurt? “Sandy most definitely was a casualty,” said Joshua Rubenstein, chairman of Rosenman before the merger and a managing partner at the new firm. “He’s the most prominent person in the New York land use market, he was the guy.” Yet Rubenstein said that everyone else moved for “highly idiosyncratic” reasons, for example, to join a firm with a family member or close friend. He also noted that departures coincided not only with the merger, but with the turn of the firm’s fiscal year, a time when lawyers who had plans to move on do so anyway. “If someone moves up the food chain it’s probably a loss,” said Jonathan Lindsey, managing partner of the New York office of the legal consulting firm Major Hagen & Africa. Jeff J. Marwil views his move from Katten Muchin to Jenner as a step up, though he said that the merger is not what made him go. “At the end of the day, Jenner & Block, its national reputation, its access to truly national clients, provided a better base for me to grow my practice,” said Marwil. By moving to Jenner, he and partner Mark Thompson took “extraordinarily significant” client revenues, plus five bankruptcy lawyers and a senior finance partner, Marwil said. Ten litigators who left Katten Muchin for Howrey Simon “were not satisfied with being the leading litigators at a sort of mid-level firm; we had to be with a market leader,” said Joel G. Chefitz, who spent 16 years at Katten Muchin. Internal efforts to move Katten Muchin in that direction were not working out, he said, when the opportunity arose to help Howrey Simon build the Chicago office for the litigation firm. And one lawyer, who asked not to be identified, said that he and his peers were “looking for a more focused environment,” when they jumped from Katten Muchin for Michael Best. “We came here because the health care practice was very well developed,” added the lawyer. Katten Muchin’s management is not fazed. “I don’t think we’ve been hurt at all, revenue wise,” said Vincent A.F. Sergi, national managing partner at Katten Muchin in Chicago. So far, both sides seem to have what each went after. Rosenman had two merger goals: gaining a “national footprint” and wooing laterals, Rubenstein said. The Chicago side “was looking for critical mass,” said Sergi, from the Katten Muchin camp. SERIAL MERGERS Holland & Knight used serial mergers to expand its ranks and its reach; this year the firm absorbed Chicago’s McBride Baker & Coles and Seattle’s VanValkenberg Furber Law Group. “Holland & Knight has gotten very big and they’re in a lot of locations. Is that success?” asked legal consultant Peter Zeughauser, adding that profits per partner are low. “My observation is that Holland & Knight has acquired a lot of small firms in onesies and twosies,” he said, adding that if the firm paid search fees to find firms, that could be a very expensive enterprise, and that successive mergers can dilute revenue, especially if they launch the firm into markets with lower prevailing rates. The firm says it did not pay a search firm. Still, Holland & Knight went on a diet. Last May, the firm laid off 5 percent of its legal talent and 10 percent of its staff, some 60 lawyers and 170 staff in all, according to spokeswoman Karen Schoening. “There is a need for any business after a period of rapid growth … to take a hard look at how your resources line up,” said Robert Feagin III, the firm’s managing partner. Many may criticize the Holland & Knight growth-by-merger model, but acquiring a series of smaller firms also secures accounts receivable and ongoing work, said Ward Bower, principal with Altman Weil Inc. in Newtown Square, Pa. On the downside: “There are no economies of scale. … Larger firms always spend more per lawyer than do smaller firms,” he said, adding that growth by merger only works if it helps a firm get on “the short list” for big-time clients. PILLSBURY GOES EAST Pillsbury Winthrop represented the union of two respected firms that were financial underachievers, some observers say. Pillsbury got a big New York presence and gave strong management to Winthrop, which was in a “spiral,” according to Zeughauser. Lindsey sees the merger as a boon to Winthrop, snubbed premerger by some lateral-hire prospects. Pillsbury trimmed ranks postmerger. The firm laid off nine to 12 staffers in June 2001 and 22 lawyers that November, according to spokeswoman Crystal Rockwood. Ex-partner Frode Jensen sued Pillsbury in October, claiming that management foiled his move to Latham & Watkins by defaming him. The suit catalogs Jensen’s list of failed aspects of the merger, including the loss of some 70 partners. Pillsbury, speaking through California-based partner Patrick Marshall, chief of the firm’s attorney development committee, declined comment on the suit. Jensen claimed that competition between Pillsbury and Latham prompted the badmouthing. Rockwood conceded that Pillsbury lost focus before Cranston took charge. “I think it’s fair to say that during the 1990s Pillsbury was a bit asleep at the wheel and its focus was not that sharp.” Before the merger, Pillsbury woke up and realized, as Rockwood said: “we had to be national, we had to be global.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.