Angela Styles. (Photo: Joe Shymanski)
Washington-based Crowell & Moring and New York-based Herrick Feinstein are in close merger negotiations and in discussions to sign a term sheet, sources told ALM on Tuesday.
One source close to Herrick said the talks are still preliminary and that any merger is unlikely to be announced before 2017. Another source with connections to the firm told ALM that the firms have been in talks for months. The discussions were first reported by The Real Deal.
Crowell representatives didn’t immediately return messages seeking comment Tuesday. A Herrick spokesman, Blake Eastman, declined to comment.
Crowell, a Washington, D.C., firm historically known for its work with the government contracting industry, is roughly three times as large as Herrick, a prominent midsized New York firm with strong real estate, sports and art law litigation practices.
A merger between the two would create a firm with roughly 570 lawyers and $478 million in gross revenue. It could allow Crowell, now ranked 88th by revenue among Am Law 100 firms, to leap up about 20 spots in the listings.
Crowell, with about 440 lawyers, generated $363 million in revenue in 2015, while Herrick, an Am Law 200 firm with about 132 attorneys, grossed about $115.5 million, according to The American Lawyer’s latest financial and census figures.
The merger would signal further consolidation among Am Law 100 and 200 firms, which have been coping with flat demand and the rising costs of associate salaries. And it would represent another Washington, D.C.-founded firm acquiring a smaller but prominent New York firm. Just last month, Arnold & Porter in Washington said it would merge with New York-based Kaye Scholer.
Crowell, in its quest to compete in New York and build out a large New York office, has been on the hunt for years to merge with a New York firm. The firm in the last year was in discussions with 60-attorney Satterlee Stephens, but those talks appeared to have fizzled.
Government contracts partner Angela Styles’ promotion to the chair position in 2015 marked an emphasis the firm has placed in its younger generation. Founded in 1979 by 53 lawyers who split from Jones Day, many of the remaining lawyers of its first generation have retired from practice.
Crowell’s gross revenue from 2014 to 2015 fell about 1.5 percent, to $363 million last year, while profits per partner and revenue per lawyer remained flat. The firm registered profits per partner of $1.035 million last year, while its revenue per lawyer was $825,000.
Herrick has often been approached for a merger but had held off. Around 2012 and 2013, two larger firms explored a combination but the talks failed to progress. Meanwhile, in the last decade, several other midsize firms in New York have been absorbed by national law firms seeking to grow or start a Manhattan office.
In 2013 and 2014, Herrick’s finances dropped. But the firm turned its revenue and profit around in 2015, attracting renewed attention from large-firm suitors.
Herrick committed to a cost control plan, including subletting a floor in its Manhattan office, consolidating its New Jersey offices and decreasing nonattorney staff through attrition, the New York Law Journal reported earlier this year.
In 2015, gross revenue shot up 9.5 percent, to $115.5 million, and profits per partner jumped 39.5 percent, to $900,000. Revenue per lawyer rose 12.9 percent, to $875,000. Still, Herrick has not returned to its high of 2008, when it generated about $143 million in revenue and profits per partner of over $1 million.
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Katelyn Polantz contributed to this report.