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San Francisco-based Pillsbury Winthrop and Washington, D.C.-based Shaw Pittman announced Wednesday that they intend to merge, creating a 900-lawyer giant with national reach and global ambitions. The two firms signed a letter of intent Monday and said they expect the deal to be ratified by partners in March and finalized by April 4. If that happens, the newly minted Pillsbury Winthrop Shaw Pittman LLP would catapult into the top quarter of The Am Law 100 list, long a stated goal of Pillsbury firm chairwoman Mary Cranston. However, many details remain — including how many attorneys will exit because of client conflicts. The 700-lawyer Pillsbury stands to gain as many as 350 Shaw Pittman lawyers, most of them in D.C., but Cranston said the 900 number “is a safe floor” for the combined head count. “We could have potentially — because of client conflicts — attorneys who could not join the merged firm and would find another platform.” She declined to identify the conflicts. Cranston, who announced the deal in Washington Wednesday alongside Shaw Pittman Managing Partner Stephen Huttler, said the merger fills Pillsbury’s last major geographic gap in the United States and helps position it as one of the “leading global firms.” “We definitely will continue to build our platform,” Cranston said. “Europe and Asia are both areas of interest.” For Cranston, it’s another chance to preside over a bicoastal merger. In 2001, San Francisco’s Pillsbury, Madison & Sutro merged with New York’s Winthrop, Stimson, Putnam & Roberts. Before that, Pillsbury had merged with Lillick McHose in Los Angeles and Cushman, Darby & Cushman, a Washington, D.C.-based patent boutique. But the mergers haven’t translated into steady growth. After the Winthrop merger, Pillsbury boasted it had 850 lawyers. As of August, the firm said it had 643. Still, Shaw Pittman’s top-notch outsourcing practice would allow Pillsbury to carve out another niche practice for itself — along with capital markets, intellectual property, technology and litigation. “We have international recognition for our expertise and for our knowledge of the industry and the players and concepts,” said Huttler. “That international stature and the profitability of our stature and the profitability of our practice has made us the envy of other large firms.” In fact, Shaw’s outsourcing group has recently been raided by Morrison & Foerster, Latham & Watkins and Morgan, Lewis & Bockius. But Huttler says the firm still has 90 lawyers and consultants in the practice, and Pillsbury expects a combined force of 110 professionals in the group once the firms are merged. The letter of intent calls for Cranston to continue as chairwoman. Huttler would serve as vice chairman along with Pillsbury’s David Snyder. Pillbury’s Marina Park would continue as firmwide managing partner. The firms would have a combined board with Shaw Pittman holding a third of the seats and Pillsbury, two-thirds. Both firms have offices in London, Northern Virginia, Washington, New York and Silicon Valley. Cranston said the combined firm would operate a single office in each locale. “We’ve looked into it and we will rationalize it through sublets and various things,” she said. Leaders at other firms said the deal made sense. “Pillsbury was obviously looking to grow in the D.C. market, and this deal definitely does that for them,” said MoFo Chairman Keith Wetmore. Orrick, Herrington & Sutcliffe’s Ralph Baxter Jr. said the merger was “an example of Mary Cranston’s leadership.” Baxter acknowledged reports that his firm has sought a merger partner in D.C., but said he hadn’t talked to Shaw Pittman. “Washington is the capital of the government of the United States and that matters to global firms,” he said. “We think Washington is an important place, but the most important places are San Francisco — the Bay Area — and New York.” Former Pillsbury partner Michael Meyer, now at DLA Piper Rudnick Gray Cary, called it a “great overall merger where truly the total will exceed the sum of its parts. Pillsbury will wind up a much stronger firm as a result.” But reconciling financial differences could prove a challenge. Shaw Pittman’s revenue has been stagnant for the past few years, hovering around $192 million, and Pillsbury posted only a 2 percent increase in revenue, to $432 million in 2004. Profits per partner were $545,000 at Shaw Pittman and $775,000 at Pillsbury. “We have a different partnership structure,” Cranston said. “When you look at their numbers, it is like comparing apples and oranges. We believe it will be a nondilutive deal.” It is also unclear how changes in compensation will shake out. Although both firms have tiered partnerships, neither is exactly like the other, and more of Shaw Pittman’s partners will shift to income-based compensation, Huttler said. Huttler believes the increased capacity of the two firms will help increase their revenues “immediately.” Already the firms are working through the logistics of integrating their computer systems and moving Pillsbury’s 27-partner Washington office into Shaw Pittman’s newly renovated space on N Street, N.W. “We want to really hit the ground running,” Huttler said. Emma Schwartz is a reporter with Legal Times in Washington, D.C. Marie-Anne Hogarth is a reporter with San Francisco-based The Recorder.

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