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Washington, D.C.’s Swidler Berlin Shereff Friedman and San Francisco-based Orrick, Herrington & Sutcliffe are in merger talks, according to lawyers close to the discussions. Though they have not advanced beyond the firms’ leaders, the negotiations are serious, say five sources with knowledge of the talks. When a partnership vote might occur, however, is still unclear. Orrick Chairman Ralph Baxter Jr. and Swidler managing partner Barry Direnfeld did not return repeated calls seeking comment. Swidler is a longtime D.C. player, with roughly 177 lawyers in the region and another 80 in its New York office. In recent years, however, its revenue has been flat — up only 4 percent from 2000, reaching $158 million in 2003. Also, it has lost more than 50 attorneys since 2000. A merger with Orrick would give Swidler lawyers a national footprint, and would marry them to a firm that has seen its bottom line jump dramatically in recent years, up 53 percent from 2000, to $488 million in 2003. For Orrick, the move would instantly make it one of the biggest firms in Washington. Right now, the firm has fewer than 50 lawyers in D.C., and would top 200 with the merger. Orrick partner Lynne Hermle, an executive committee member who works in the firm’s Silicon Valley office, says she could not confirm merger discussions. But, she says, “Swidler is a great firm. We’d be lucky if we could pull that off.” Baxter, Orrick’s chairman, has made no secret of his desire to catapult the firm into the ranks of the nation’s largest. Last year, he told The Recorder, a San Francisco newspaper affiliated with Legal Times and, “our goal is to be one of the greatest law firms in the world.” Indeed, Orrick is a firm on the make: It has the highest profits per partner, approaching $1 million, in the San Francisco Bay area; a commanding hold on legal work in California’s municipal bond market, which is the nation’s largest; and some 200 lawyers in New York. Baxter tried in 2003 to merge with Palo Alto, Calif.’s 500-lawyer Cooley Godward and the smaller technology boutique Venture Law Group. But negotiations fell apart last summer. The firm has also tried to expand in Europe, exploring a merger with London-based Bird & Bird. While Orrick has 14 offices around the world, it has kept its D.C. outpost — which resides in the same Washington Harbour office building as Swidler — relatively small. Last fall, however, the firm snagged Lanny Davis, former special counsel to then-President Bill Clinton, from his longtime home, Patton Boggs. Davis’ move to Orrick — a relatively unknown quantity in D.C. — surprised many in the local legal community. A merger with Swidler would give Orrick strong energy, telecom and lobbying practices in D.C. and would also bolster the firm’s already strong New York presence. “To be a credible, world-class firm, you’ve got to have strength on the ground in New York, and strength on the ground in Washington,” says Ward Bower, a law firm consultant at Newtown Square, Pa.-based Altman Weil. “This would really make [Orrick] a player in Washington.” Elizabeth Lampert, a California-based law firm marketing specialist and Orrick’s former outside public relations consultant, says Orrick has been on a growth spurt, but the firm’s small presence in the nation’s capital has been its weak link. A merger in D.C. “makes sense for Orrick because they are a global law firm with a strategic mission, and D.C. appears to be an office that could use a surge of new attorneys,” Lampert says. Orrick has experienced significant growth over the past several years. Between 2000 and 2003, the firm increased its head count by 30 percent. Revenue jumped 53 percent during the same period. Profits per partner have increased at a brisk clip as well, rising 26 percent, from $750,000 in 2000 to $945,000 in 2003. Swidler’s numbers tell a different story. The firm, which is the product of the 1998 merger of D.C.-based Swidler & Berlin and New York transactional firm Shereff, Friedman, Hoffman & Goodman, posted a revenue increase of 4 percent between 2000 and 2003, from $152 million to $158 million. And during that time, the firm lost 18 percent of its lawyers, down to 256 from 312. But Swidler has managed to keep profits per partner high, and in 2003 raked in an average $940,000 per equity partner. Last year, the firm and its ancillary consulting business, the Harbour Group, brought in more than $10 million in the battle over asbestos legislation. Swidler and the Harbour Group did lobbying work for the Asbestos Study Group, which represents companies pushing for legislation to create an asbestos victims compensation fund. Lampert says that although Swidler is a strong D.C. firm, Orrick needs to consider the baggage from Swidler’s 1998 merger. “There’s still some residual talk about how the Swidler merger is faring,” says Lampert, referring to tensions between Swidler’s D.C. and New York offices. Altman Weil’s Bower agrees that there could be difficulties ironing out the wrinkles, although he sees symmetry between the firms. Swidler can enhance Orrick’s New York transactional practice and give it a lobbying practice in Washington, while Orrick can give Swidler a bigger platform. But he cautions that there are some significant hurdles to a final deal. “Swidler’s a big enough bite that you could choke on it,” he says. Among the challenges, consultants say, is Orrick’s strength relative to Swidler’s. Because Orrick is almost three times as large as Swidler and counts 14 offices to Swidler’s two, the transaction would likely look more like an acquisition than a merger. “This is not a Wilmer-Hale deal,” says California-based law firm consultant Peter Zeughauser. Baxter, who has been Orrick’s chairman for 14 years, is a strong leader and the firm’s public face. Any firm trying to merge with Orrick would likely have to agree to his taking the reins. “Ralph is one of the longest-reigning chairmen of a law firm,” says Lampert. “It would be hard to imagine this merger taking place without him being in charge.” But while there are certainly logistical stumbling blocks, the firms are a seeming financial match. Profits per partner at both firms are very close. And both firms have large classes of non-equity partners. Bower, for one, thinks the challenges can be surmounted. “If the right preparations are made, this should be doable,” he says. “This is a real coup for Orrick if it happens.” Brenda Sandburg of The Recorder contributed to this report.

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