By V. Dion Haynes
Washington Post Staff Writer
Friday, October 30, 2009
Officials at the Washington-based Hogan & Hartson law firm and London-based Lovells said Thursday that they are discussing a possible merger, a move that would make the combined entity one of the largest law firms in the world, with 2,500 lawyers and 40 offices.
Both firms specialize in similar practice areas -- mergers and acquisitions, initial public offerings, litigation and other corporate transactions. A merger, officials said, would allow them to increase market share and become a global powerhouse in three of the most important financial markets in the world: the United States, Europe and Asia.
"In order to play at the top tier of the legal profession, you need breadth and depth in all three of these geographic markets, and you need to be at the top of the markets," said Peter Zeughauser, chairman of the Zeughauser Group, which is advising Lovells on the proposed merger. The new firm would "draw more clients and more top talent to service that work," he said.
The management teams at Hogan & Hartson and Lovells are expected to make a unanimous recommendation to the partners of the firms, who have the final say on the proposal, officials said. Documents detailing the merger will be sent to partners next week, officials said. If they approve the proposal in December, as is expected, the merger would go into effect in May.
"This would be the first trans-Atlantic merger of two top 30 global law firms, creating a unique global firm covering the U.S. and other international markets," J. Warren Gorrell Jr., chairman of Hogan & Hartson, said in a statement.
The merger, a Lovells official said, would give each firm access to about 15 new markets. News of the proposal appeared Wednesday on the Wall Street Journal's Web site.
More than 60,000 people work in the legal profession in the Washington area, which is more per capita in that sector than in any other U.S. metropolitan region. Much of the work centers on the federal government, providing stability and steady work for many lawyers. But because so many global law firms have offices in the area, the Washington area's legal sector is subject to the same economic turmoil seen around much of the country.
With a drop in business from financial service firms and corporate clients, profits per partner at the largest U.S. law firms declined last year for the first time since 1991 -- 4.3 percent, according to a survey by American Lawyer. Profits are expected to drop again this year, legal experts said.
As a result, numerous law firms, including Thelen and Heller Ehrman, closed this year. Many of those that remained open have been pressured by corporate clients to discount their services.
Others have trimmed their staffs through voluntary and involuntary reductions. In February, Hogan & Hartson said it planned to reduce 257 support staff positions -- including 149 in the District -- through buyouts.
"Big law firms are finding 2009 a very difficult year. It's going to be harder than 2008," said Ward Bower, principal of Altman Weil, a legal consulting firm based near Philadelphia. Bower said that law firm mergers were down substantially during the first half of the year but that talks between larger firms have picked up in recent months.
Zeughauser, the Lovells consultant, said that the two firms are compatible. Both have "sticky cultures," he said, meaning they have high employee retention rates.
However, they would have to work out differences in partners' compensation, Zeughauser said. In the United States, partners are paid based on the business they bring into a firm, he said, but their British counterparts generally receive earnings based on years of service.
"The two firms are much closer to the center" in their compensation policies and should be able to meld easily, he said.