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Seattle’s Preston Gates & Ellis and San Diego’s Luce, Forward, Hamilton & Scripps announced Thursday they are courting and appear headed toward a merger. Through a joint statement issued by Zeughauser Group, the consulting firm helping broker a deal, the firms said they are in “preliminary merger discussions” and “are assessing the benefits of combining their practices.” Mozhgan Mizban, a Zeughauser partner, said firm management let the word out Wednesday to partnership ranks that initial management meetings were encouraging and they were moving forward with merger talks. “All the signs are good and now they’re really doing the analysis,” Mizban said. Robert Buell, Luce’s managing partner, said the firms have common goals of maintaining a collegial atmosphere and expanding within California. “It really is pretty straightforward for us,” Buell said. “It puts us in a position to better achieve our strategic goals.” Preston’s managing partner, B. Gerald Johnson, did not return calls for comment by press time. Mizban said the next stage of discussions is expected to last through March. A merger of the two firms appears to make sense to expand the geographic reach and practice group mix of both sides, say legal consultants in Southern California who are not working on the deal. The 400-lawyer Preston Gates has seven offices in the western United States plus satellites in Washington, D.C., and Hong Kong. The firm, however, has failed to gain a strong foothold in Los Angeles and stands to gain from an alliance with the 200-lawyer Luce Forward, said Larry Watanabe, a partner of Watanabe Nason & Seltzer. Luce also stands to pose few conflicts troubles with Preston Gates’ longtime representation of Microsoft Corp., Watanabe said. Luce specializes in general corporate work for non-technology and traditional companies, has an active real estate practice and modestly sized intellectual property group, Watanabe said. In addition, the firms have comparable economic benchmarks, he said. In 2001, according to the AmLaw 100, an annual survey of law firm finances, Preston Gates, the larger of the two firms, pulled down $155 million in revenue and logged profits-per-partner of $405,000. Luce Forward grossed $87.5 million in revenue and pulled in $360,000 in profits-per-partner but scored a higher profit margin of 39 percent compared to Preston’s 36 percent. Luce and Preston recorded net profits of $34 million and $56.5 million, respectively, in 2001. Steve Barrett, an independent law firm strategy consultant in Rancho Palos Verdes, said a Preston-Luce merger was a boon for both firms. The deal would give Luce access to the Pacific Northwest and Preston’s deep technology prowess, he said. “In the Seattle market, there’s a new gorilla on the block,” Barrett said. “Nice move.”

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