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Reed Smith rainmaker Michael Sanders had his hands full. In July, Volcano Therapeutics Inc. needed a new round of venture capital financing. It also planned to acquire a U.S. subsidiary of a European company with cutting-edge cardiac monitoring technology. Nearly 80 attorneys in London, Pittsburgh, Pa., Oakland, Calif., and San Francisco jumped to action, helping Sanders handle overseas assets, federal regulators and intellectual property. Volcano Therapeutics ended up with $50 million in financing and muscled past Fortune 500 competitors to acquire Jomed Inc., a 400-employee firm with several health product lines. The deal also helped forge alliances between Volcano and other companies that bought related assets from Jomed. It was quite a moment for Pittsburgh’s Reed Smith, the firm that acquired Crosby, Heafey, Roach & May in January 2003. The merger gave birth to a behemoth: The combined firm has nearly 1,000 attorneys and 18 offices on both coasts and in London. That extra manpower was instrumental to the success of the Volcano deal, Sanders said. “It was the type of transaction that, if we had just been … Crosby Heafey, we would have had to reach outside of the firm” to get it done, Sanders said. The firm is touting the rare, complex deal internally, making Sanders the “poster boy” for the merger, he added. One year after 215-attorney Crosby Heafey and 780-attorney Reed Smith walked down the aisle, there are many signs of success. The merger allowed the firm to generate $17.4 million in additional work, including Sanders’ deal. With one exception, all of the Crosby lawyers who joined Reed Smith as equity partners have stayed and are making more money, Reed Smith’s officials say. But the marriage wasn’t for everyone. At least 10 Crosby partners have exited for other firms or to do general counsel work. And while Reed Smith was busy cementing its California ties, there was unrest back east. Dissatisfaction spread among Reed Smith’s East Coast associates, who complained about the firm in a survey, and a few longtime partners left the firm. But overall, Reed Smith has plenty to celebrate, said Chairman Gregory Jordan. “It really couldn’t have gone better,” he said. Crosby Heafey attorneys who joined Reed Smith as equity partners took home more profits after the merger, Jordan pointed out. In 2002, the last year before the merger, Crosby’s profits per partner were $304,000. After the first year of the merger, Reed Smith attorneys raked in an average of $550,000 in profits. East Coast clients who used Reed Smith’s West Coast attorneys generated $11.7 million in new business. California clients who used Reed Smith’s West Coast attorneys generated $5.7 million, Jack Nelson, the head of Reed Smith’s West Coast operation, said. The firm plowed some of the $17.4 million in new business into a revenue-sharing program, which means that 140 associates firmwide will get a $7,500 bonus this year — a program that wasn’t available at Crosby. The firm is on track to do even more cross-selling this year. The firm raked in $4.9 million worth of similar work in January and February, Nelson said. The success of the merger is due at least in part to Crosby shedding 30 equity partners — and thereby shoring up its profits — shortly before the deal was done. But in an interview, Jordan sidestepped Crosby’s action and instead praised Crosby leaders for putting the firm in good financial shape before the merger. Jordan emphasized the careful planning that went into the merger. The firms integrated all internal functions, and Reed Smith continues to hold quarterly meetings to hash out merger issues, said Michael Pollack, director of planning and strategic growth. Reed Smith has adopted successful Crosby Heafey programs such as an associates committee and has put Crosby lawyers in firmwide leadership posts, Pollack said. Day-to-day life at Reed Smith’s new California offices — all former Crosby Heafey offices — is almost the same as it was before the merger, Jordan said. Reed Smith management doesn’t want its California lawyers to feel “that they are governed by remote control from some far away place.” There have been a few adjustments. Crosby Heafey associates needed a minimum of 6 1/2 years’ experience to make partner, but at Reed Smith they need a year more. Although Reed elevated five Crosby Heafey associates to partner during the merger, there were no California faces in the fall partnership class. The firm plans to tap California associates for partner posts next fall, Jordan said. Overall, Bay Area attorneys say they were pleasantly surprised by the smooth transition. “Not much has changed,” Oakland associate Theodore Ting said. “You don’t get the sense that people came in, dictating a lot of stuff.” But everything hasn’t been picture perfect. About 10 Crosby partners have left since the merger became official in January 2003. The list includes equity partner Laura Amy Blum, an IP partner who now works in house at UCLA. Peter Laufenberg, an insurance coverage of counsel, left Crosby’s Oakland office to work at Oakland’s Wendel, Rosen, Black & Dean. JoAnne Redmann, an IP of counsel, went to Los Angeles’ Liner Yankelevitz Sunshine & Regenstreif. Both said they wanted to work at smaller firms. Redmann, a litigator, worked in Century City, one of the centers of Reed Smith’s transactional practice. She said she felt too removed from cases that were being handled at distant offices. “It really was too big,” Redmann said, adding that she enjoyed working at Crosby Heafey and wished her colleagues well. “In general, it’s not unusual that perhaps some people would choose not to be part of a large organization,” Jordan said. “Overall, we feel good about the personnel situation.” In fact, the firm has bulked up the California offices since the merger. More than a dozen senior lawyers lateralled to Reed Smith California offices in 2003, Jordan said, bringing the total number of lawyers in California to about 230. Outside California, there was disquiet in the firm. In an October survey by American Lawyer magazine of large law firms, several of Reed Smith’s East Coast associates gave the firm low scores for work satisfaction, salary and benefits, and quality of work. The firm’s rank, 157 of 159 firms, was far below its showing in 2002, when it ranked 102. While Jordan called the associate survey “disappointing,” he argued that the associate survey could have been skewed because it used a small sample of associates. The firm has since worked to improve life for associates by improving mentoring and training opportunities. Next year’s ranking will be higher, Jordan said. Also on the East Coast, Reed lost longtime partners Peter Tucci, who left for Piper Rudnick in 2003, and Michael Browne, the former head of the Philadelphia office who left the firm earlier this year to become the CEO of Harleysville Insurance Co. A group of Wilmington, Del., attorneys, whom Reed Smith harvested from Duane Morris in early 2000, continued to filter out of the firm. While the Delaware office’s bankruptcy and litigation practice is still going strong, by 2003, none of those original Duane Morris Wilmington attorneys remained. Jordan, noting that some Duane Morris attorneys still work at Reed, says the departures and the associate survey issue are not related to Reed Smith’s West Coast expansion. “The proof is in the pudding,” Jordan said. While the firm has grown from 600 to nearly 1,000 attorneys in the past few years, Reed Smith has had very little partner attrition, he said. The firm plans to super-size its West Cost operation over the next few years. While Jordan and Pollack declined to be specific, they wouldn’t rule out another California merger. Firm leaders say Reed Smith wants to be a go-to California firm for financial services work such as representing banks and financial institutions, as well as handling Business & Professions Code 17200 litigation and class action defense. The firm also wants to continue to expand its intellectual property practice and to increase the pace of the life sciences work that Sanders, the Volcano Therapeutics dealmaker, is doing. “Part of the plan is to grow Northern and Southern California,” Jordan said.
Reed Smith in brief: Headquarters: Pittsburgh Number of lawyers: 969 Number of equity partners: 219 Number of offices: 18 2003 revenue: $438 million 2003 profits per partner: $550,000

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