In the starchy, buttoned-up world of corporate law, Covington & Burling has long been considered the firm with the shiniest buttons and the heaviest starch. For decades, it has stood as Washington's leading legal brand name, home to former top administration officials and an army of 340 lawyers in sensible suits.
Now, this old-school operation is taking a decidedly new-school step. Firm officials announced yesterday that they will merge with Howard, Smith & Levin, a New York firm that specializes in corporate mergers and acquisitions.
The deal, which has been a closely guarded secret for weeks, is Covington's effort to grab a share of the hugely profitable transactions work generated by the spate of corporate mergers in recent years. It is also an attempt--somewhat belated--to quickly establish a sizable beachhead in Manhattan, a thriving legal market that a handful of Washington firms are already trying to invade.
Cultivating the prestige value of the name, the combined firm will be called Covington & Burling. On Oct. 1, the Howard Smith lawyers will effectively dissolve their partnership and join the larger firm.
For Covington, the merger is risky and certain to startle observers who've always regarded the firm as an insular and somewhat stuffy loner. It has rarely hired lawyers from other firms, preferring to cultivate its own employees straight out of law school or after prestigious court clerkships.
But merging with Howard Smith suddenly brings 60 newcomers to the Covington fold, none of them reared within the firm's perfectionist culture. The risk is that Covington's clients--a list that includes the National Football League and Microsoft Corp.--may abandon the firm after concluding that it has compromised quality in order to keep pace in an increasingly sharp-elbowed business. Another potential pitfall: jostling by lawyers in both firms for the leading role in each practice area.
"A lot is at stake for us," said Andrew Friedman, a Covington partner. "But when we started talking to Howard Smith, we felt like we found our soul mates."
Covington leaders might have had little choice but to chuck any inhibitions and get married. The firm is growing and prospering in this boom era for corporate lawyers, but it has lately been losing ground to other Washington firms in terms of size and total revenue. For years, Covington was the city's largest law firm; today it is number four, according to a June survey by Legal Times. With a $485,000 profit per partner each year, the firm does not quite crack the top 10 list of most profitable firms.
"They're a dinosaur," said a law-firm consultant who declined to be identified. "They think of themselves as high-quality lawyers and they clearly are, but they have few discernible assets. Covington is a quality brand, but I don't necessarily know what to call them and buy. Antitrust and regulatory work, sure, but what else?"
That could change with the Howard Smith merger. The Wall Street firm, founded in 1983, has focused on merger work for high-tech corporations, representing Computer Associates International Inc. in several multibillion-dollar acquisitions and working on the Ticketmaster Online-CitySearch merger. With Covington now emphasizing its work on the regulatory side of high-tech issues such as cellular-phone competition, Howard Smith leaders figured they'd found a match.
"We've had many suitors, but we never had any interest in a combination," said Philip Howard, a founder of the New York firm who is better known as the author of the bestseller "The Death of Common Sense."
Wiping his name off the marquee doesn't bother Howard, who quipped that he's so embarrassed by the relative youth of his firm that he occasionally tells people that his father founded it.
"The only weak thing about our firm is that we don't have a venerable name," Howard said. "They're lucky to get us, and we're luckier to get them."
The Howard Smith firm is slightly more profitable than Covington, but salaries and shares of the profits earned at the two offices will not change.
The announcement comes as law firms are scrambling for partners like sophomores at a high school dance. Much like the clients they serve, corporate firms have been struggling to get larger fast, hoping to offer companies the equivalent of a legal shopping mall, where every possible need can be met under one roof through an affiliate of offices spread across the country and the world.
The Covington firm was launched in 1919 by a federal judge and a successful Chicago lawyer. It seems unfathomable today, but at the time there were no regulatory-law firms in Washington.
But the advent of the New Deal spurred an explosion in regulation, and Covington boomed right along with it. The firm's first associate was Dean Acheson, later secretary of state in the Truman administration, and it has been a thruway for administration appointees and Justice Department lawyers ever since. Most recently, the firm welcomed back Charles Ruff, who was the White House counsel during President Clinton's impeachment trial.
Covington lawyers have left their mark on a large body of federal legislation, including the Telecommunications Act of 1996, and the firm represents Exxon Corp. in the oil giant's pending merger with Mobil Corp. In May, Covington helped the NFL beat back a lawsuit by former New England Patriots owner Victor Kiam, who alleged that the league forced him to sell the team in a distress sale. A federal jury sided with the league.
It is regarded as one of the legal profession's elite--or elitist--"white shoe" firms (although nobody at Covington has worn that kind of footwear for many years). Still, it remains one of the most sought-after destinations for law-school graduates and wins high ratings in associate surveys of job satisfaction.
In the march toward modernizing the profession, Covington has typically been a step or two behind. For instance, it ran its first advertisements in 1997, about five years after corporate law firms started to ditch their traditional squeamishness about self-promotion.
And Covington is coming to the merger game long after it started. Washington firms such as Arnold & Porter already have New York offices. Other firms, such as Swidler Berlin Shereff Friedman, have already merged with Manhattan outfits.
Covington has spent months seeking out a partner, firm officials said. Most of the discussions never made it past an introductory handshake, in part because Covington's leaders were looking for a firm willing to ditch its name and identity and become a New York satellite office. At least one firm balked at the offer.
Then, in July, Covington's managing partner, Jonathan JJBlake, cold-called Scott Smith, a named Howard Smith partner and a lawyer who, coincidentally, turned down a job offer at Covington 21 years ago.
"Are you following up on that offer?" Smith asked.
As it happens, he was.
HOWARD, SMITH & LEVIN LLP
* Main office: 1330 Avenue of the Americas, New York
* Founded: 1983
* Number of lawyers: 60 in New York
* Areas of expertise: Mergers and acquisitions, finance, the Internet and new technologies, executive disputes
* Among the firm's lawyers: Philip K. Howard, regulatory adviser and author of the bestseller "The Death of Common Sense"; Scott F. Smith, principal counsel on three of the four largest software-company acquisitions; securities-law authority Leonard Chazen.
* Annual profit per partner: Not available
* Among its clients:
Computer Associates, in its acquisition of Platinum Technology and Legent.
Co-counsel to the Bank of New York in the Irving Trust takeover.
MetLife, in challenging the RJR Nabisco buyout.
COVINGTON & BURLING
* Main office: 1201 Pennsylvania Ave. NW, Washington
* Founded: 1919
* Number of lawyers: 340 in offices in Washington, San Francisco, London and Brussels
* Areas of expertise: Regulation and technology, including intellectual property, communications, health sciences, the Internet, antitrust and tax.
* Firm's first associate: Dean Acheson, who was later secretary of state in the Truman administration.
* Among the firm's lawyers: Jonathan Blake, managing partner; former White House counsel Charles Ruff; class-action litigator Peter Nickles.
* Annual profit per partner: $485,000
* Among its clients:
Exxon, in its merger with Mobil.
Microsoft, in intellectual property.
Counsel to National Football League.