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Embattled Steel Hector & Davis, formerly one of Miami’s fastest growing and most powerful law firms, is close to finalizing a deal to merge with Cleveland-based Squire Sanders & Dempsey, according to several sources. Under the proposed combination, Squire Sanders, a 700-lawyer firm that has been expanding aggressively through acquisitions, would gobble up Steel Hector. The Miami firm suffered financial setbacks recently and has been plagued by partner defections amid much speculation about its ability to stay afloat. The sources said the merger could be announced as early as Sept. 1. Representatives for both Squire Sanders and Steel Hector acknowledged that serious talks are under way but denied that a merger is imminent. “We’re talking with Squire Sanders but we’re also talking with other firms,” said Joseph P. Klock Jr., former managing partner of the 160-lawyer Miami firm. He added that Squire Sanders “is an outstanding firm. The people are extraordinary. They have 27 offices throughout Europe and Asia. That’s an extremely tempting platform for us.” Squire Sanders is ranked as the nation’s 35th largest law firm by The National Law Journal, an affiliate of the Daily Business Review. In 2000, Steel ranked second among South Florida law firms in gross revenues, according to the Daily Business Review‘s annual Review 15 survey. Last year the firm dropped to fifth, with $57.3 million in gross revenues. Several sources, including a partner, an of counsel and a legal recruiter, said Steel Hector is looking at a Sept. 1 merger. All spoke on the condition of anonymity. The partner said management has threatened to fire any lawyers who spoke to reporters. “The merger is moving forward,” the partner said. “The fine details are still being worked out. But there will be a partnership vote very soon.” If the deal is finalized, it would wipe out the name of one of Miami’s oldest institutions and give Squire Sanders its long desired boost in Florida and Latin America. But Steel’s roster of 160 lawyers would remain intact. Squire Sanders spokeswoman Drez Jennings acknowledged that her firm is in merger talks with Steel, but characterized them as “exploratory.” While the majority of the Miami firm’s partners favor the proposed merger, some — particularly equity partners — are unsure, said the partner. “It all comes down to money,” he said. “Some people are worried about how the salaries will be affected. Some people are worried that they won’t be calling the shots any more, that some group in Cleveland will be calling the shots.” Squire Sanders apparently has a longer partnership track than Steel, added the partner. Another Steel lawyer said he would probably not remain with the combined firm and already is talking to other area law firms about making a switch. “I’m not a big-firm kind of person,” he said. “I don’t want to be a cog in a great big machine.” Most other lawyers at the firm “seem positive about this,” the lawyer added. He said Klock was enthusiastic about the plan. “If the deal goes through, that is a good strategic move for Steel, to join with a firm with a national platform,” said Cesar Alvarez, managing partner of Miami-based Greenberg Traurig. “I’m delighted that the firm is still going to be around. It’s sad that the name will be gone — that’s a name that’s been around for a long time. But the spirit of the firm still remains, and that’s the next best thing.” Steel Hector & Davis, which was formed in 1925, was riding high in the 1970s and 1980s with clients such as Southeast Bank, Florida Power & Light and the wealthy Palm Beach sugar family, the Fanjuls. But the firm’s expenses exploded under Klock, who inaugurated a rapid expansion of the firm in the early 1990s. He opened the firm’s first Latin America office in 1993. Later, he hired former judges and ambassadors who brought more cachet than clients to the firm. Within the last year, the firm was beset by highly publicized reports of partners being owed draws and the defection of more than a dozen lawyers, including large portions of its tax and real estate departments. Klock was voted off the board of directors after Alvin Davis was appointed managing partner. Davis was out of town Wednesday and could not be reached for comment. Davis told the Review in March that Steel Hector was repositioning itself as a boutique firm. Soon after that, the firm began merger talks with several law firms. Squire Sanders emerged as the apparent favorite. Founded in 1890, the Cleveland firm has been merging with law firms around the world. It maintains a five-lawyer office in Miami which mostly does bond work and serves as bond counsel to the city of Miami, the state of Florida and Miami-Dade and Broward counties. Sources said Squire Sanders has twice tried but failed to merge with Miami firms to expand its Florida presence. Squire Sanders already has an office in Rio de Janeiro, but a merger with Steel would significantly boost its Latin American platform. Steel, which also maintains an office in Rio de Janeiro, operates in Buenos Aires, Caracas, Rio de Janeiro, Santiago, Santo Domingo and Sao Paulo. Steel also has offices in Tallahassee, West Palm Beach and London. “We have had talks with other Florida firms, too,” she said. According to the Steel partner, the firm would retain the Steel Hector name for a one-year transitional period before becoming Squire Sanders & Dempsey. The combined firm would likely maintain Steel’s office space in the Wachovia Financial Center at 200 S. Biscayne Blvd., the partner said. Dean Colson, a partner with the Coral Gables firm Colson Hicks Eidson, reacted with sadness to the possible loss of the Steel Hector brand. Colson, an associate at Steel from 1978 to 1980, said he remembers then-managing partner Darrey Davis taking all the firm’s lawyers to lunch every Saturday. “That firm has such a great history,” he said. “It was a great place to work.” Klock said no vote has been taken by partners yet and none was scheduled, and that he has not discussed a potential merger with any of his clients. Klock said he is not sad about the possibility of losing the Steel Hector name. “The name Steel Hector has changed a lot in the past,” he said. “The name isn’t important. What is important is whether you have respect in the community and in the courtroom, whether the firm is well thought of. That is what concerns me.” Klock said he is not sure whether he favors the merger. “Is it worth losing your independence … to gain instant access to Europe and Asia?” he asked. “That’s a decision for the partners. I don’t know.”

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