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Reed Smith is currently engaged in serious merger discussions with 200-attorney Chicago-based Wildman Harrold Allen & Dixon, according to several sources in the Windy City. Such an acquisition would move the Pittsburgh-based Reed Smith to nearly 1,200 lawyers. Michael Pollack, Reed Smith’s partner in charge of strategic planning, confirmed that his firm has talked to Wildman Harrold but said it is talking with more than one Chicago firm. Wildman Harrold managing partner Robert Shuftan could not be reached for comment Tuesday. But at least two Chicago sources said that talks between the two firms have reached an advanced stage. “I think they are pretty close,” said one Chicago legal recruiter. “Wildman has been talking to a number of firms but this one is the most serious they have been. We’ll probably know for sure in the next four weeks or so.” Pollack did confirm that Chicago is next on Reed Smith’s domestic expansion agenda. A merger with Wildman Harrold would be quite similar to the 2002 union Reed Smith had with Oakland, Calif.’s Crosby Heafey Roach & May. Like Crosby Heafey, Wildman Harrold is a mid-market law firm with a strong litigation practice that has struggled to compete for clients with larger firms and suffered through a flat financial year. The only major difference is that while Crosby Heafey had lawyers balanced in several different offices in Northern and Southern California, Wildman Harrold has almost all of its lawyers in Chicago. The firm has small offices in suburban Chicago and London. At the time of the Crosby Heafey merger, Reed Smith’s financial indicators were much lower than they are today. Pollack admits that the firm’s new status limits potential merger partners in the mid-size level. “There are not 50 firms that would work but there are several that would fit even though our standards are higher,” Pollack said. “Even back then, Crosby was not on our level but we found a way to make the deal get done.” One method Reed Smith used to get the California deal done was through de-equitizing some Crosby Heafey partners. But it might not have to do that in a potential merger with Wildman Harrold, which in the recently released Am Law 200 survey results listed only 44 equity partners out of 185 full-time equivalent attorneys. Those numbers, published in The American Lawyer magazine, are from fiscal year 2004. The financial indicators between the two firms are not dissimilar, though while Reed Smith has undergone three years of significant increases, Wildman Harrold had a flat 2004. Wildman Harrold was ranked 187 on the Am Law 200, down from 185 the previous year. That was largely due to the fact that the firm reported the same gross revenue as it did the previous year, $94.5 million. Wildman Harrold’s profits per equity partner increased by 3.3 percent to $475,000 and its revenue per lawyer increased only 1 percent to $510,000. In contrast, 950-attorney Reed Smith was ranked 31 on the strength of a 14 percent increase in its gross revenue, which was listed as $503.5 million. Reed Smith’s profits per partner increased 18.8 percent to $665,000 and its revenue per lawyer rose by 14 percent to $570,000. Wildman Harrold sports more than 100 litigators with roughly 30 corporate lawyers and 30 intellectual property lawyers, and some presence in labor and employment, real estate and government affairs, according to the firm’s Web site. Pollack said Chicago would be a logical next step for Reed Smith being that the firm has the East and West coasts pretty well covered. “There is a lot of space between Pittsburgh and San Francisco,” Pollack said. “It doesn’t mean we have to fill it. It’s just a question of opportunity. Chicago is a great legal market with a lot of companies based there. We have a lot of clients there and in the upper Midwest that might give us more work if we were strategically closer to them. That’s why we did the Crosby deal.” The July edition of The American Lawyer contains an article headlined “Coming to Chicago” in which Chicago is described as being more open to outsiders after having a longstanding reputation for being a closed legal community ruled by indigenous firms such as Kirkland & Ellis, Winston & Strawn and Sidley Austin Brown & Wood. The article counts 13 firms from the Am Law 200 who have opened or greatly expanded offices in the city since the start of 2001. Among those firms are Morgan Lewis & Bockius and Drinker Biddle & Reath. Duane Morris opened there in 1999 and Cozen O’Connor has been there for a number of years. Blank Rome is on the record as being interested in expanding into Chicago and is rumored to have held discussions with Wildman Harrold. “I call it the Philadelphia invasion,” said Jeffrey Simon, a legal recruiter with Chicago-based River View Consultants. “I called my friend [Philadelphia legal recruiter] Michael Coleman and asked him why all of the Philly firms were taking over our town. He said there was no rhyme or reason for it. Chicago is a legal and financial services mecca, and I think firms are beginning to recognize its importance in their strategic plans. Each of the Philly firms are national general practice firms with a different marketing niche, and each has acquired a respected group of Chicago lawyers.” Simon said it is easier to pick up smaller groups and make them fit into a firm’s culture and economic structure but growing via that route is a more expensive proposition. According to the American Lawyer article, many firms coming to Chicago believe they need to start there with a large presence. “Many out-of-town firms think you should be ‘relevant’ if you’re here,” Major Lindsey & Africa recruiter Mark Jungers told the magazine. “Relevant equals 100 lawyers. There aren’t all that many examples of people who are.” Reed Smith clearly subscribes to that theory with virtually all of its expansion plans. In 2001, the firm opened a London office with the acquisition of 60-attorney Warner Cranston and ended the year with the addition of 26-attorney Parker Duryee Rosoff & Haft to Reed Smith’s already 35-attorney New York office. In 1999, Reed Smith entered the Northern Virginia market with a merger with 85-attorney Hazel & Thomas. “It’s not our style to go into a market with five or seven people,” Pollack said. “Our preference is a significant presence, which to us is over 100 lawyers.”

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