LB145 Wilmer/Hale p54-59
24/5/04
4:12 pm
Page 55
Wilmer and Hale’s merger
Wilmer’s arsenal After eight months of top-secret negotiations, Wilmer Cutler Pickering Hale and Dorr launched itself on an unsuspecting world. Legal Business reveals what drove these very different firms to unite, the impact on the London offices, and what the clients make of it all JAMES LEWIS THE ‘KINGS’ IN WASHINGTON, DC were getting restless. Wilmer Cutler Pickering’s top-billing partners demanded that management put the firm’s house in order. The usual weeding out of under-performers wouldn’t be enough: more radical measures were called for. Its merger with Boston corporate technology powerhouse Hale and Dorr surprised many. It went live on 1 June. Some observers may be unimpressed by the combination of two firms with lessthan-dazzling average profits per equity partner: the firms told Legal Business that Hale and Dorr’s PEP is now at $810,000, and Wilmer’s is $776,000. One target for the merged firm is to beat $700m in combined revenues for 2004. Wilmer Cutler Pickering Hale and Dorr would then be of a similar size to Kirkland & Ellis, McDermott Will & Emery, and White & Case. (Wilmer Cutler’s turnover was $337m in 2003; Hale and Dorr’s $321m.)
As such, the pressure is for profits to rise commensurately. This will involve some curious cultural manoeuvrings. For a start, the two legacy firms couldn’t be more different. Wilmer cultivates its exemplary Capitol Hill connections, while Hale and Dorr rubs shoulders with the leading tech-sector entrepreneurs; political bigshots are teaming up with the Playstation generation. (See box, ‘All the presidents’ mentors’.) The cultural disparity was further underlined by the codenames the respective firms ascribed to the remarkably hush-hush negotiations. For Wilmer’s head Bill Perlstein, it was ‘Jefferson and Adams’, a reference to the late 18th/early 19th century US presidents who
ushered in American independence. Thomas Jefferson hailed from the Washington, DC area, so was used to refer to Wilmer. Adams, originally from Boston, was used to symbolise the New England firm. Nothing so high-brow for Hale and Dorr: they preferred ‘Project Arsenal’. It wasn’t about London partner Richard Eaton’s love of the English football club: legacy Hale and Dorr’s US managing partner and co-managing partner of the new firm, Bill Lee, professes to be an avid follower of the record-breaking Highbury side.
Stars and strides Talk to anyone with knowledge of Wilmer’s internal dynamics and the name Bill McLucas soon comes up. McLucas is the star of the firm’s pivotal Washington-based securities regulatory practice (Enron, WorldCom, you name it, the firm’s been involved). He’s reputed to be taking home $2m-$3m a year, at a firm with an average >
June 2004 Legal Business 55
LB145 Wilmer/Hale p54-59
24/5/04
4:12 pm
Page 56
Wilmer and Hale’s merger
> PEP of below $800,000. ‘There’s always been a danger he might leave,’ a former colleague says. ‘He’s been threatening to for some time. He needed the management to make sure the firm was sound financially to attract the right sort of partners for its long-term future.’ McLucas was attracted to the firm by its reputation, but felt it had become complacent. ‘We had tended to rest on our laurels and rely on our reputation,’ he recalls. ‘I’d been here for a few years and said to the management that if they hadn’t started to address the business side of the firm – hustle for clients and compete with other firms – our reputation would suffer. There were a number of people who felt the same way.’ Wilmer’s managing partner Bill Perlstein took heed. Merger with a Boston tech-focused firm may not be enough on its own to reassure the superbillers in DC. People are still getting used to what’s happened. ‘It’s not easy to understand why this makes sense,’ one former Wilmer partner says. ‘It doesn’t propel them anywhere. We always felt the firm really lacked serious M&A capability. It needed a merger with a big New York M&A firm. The corporate technology emphasis of Hale and Dorr doesn’t give them enough of a profile.’ ‘Wilmer has the stronger brand in the States. They are Washington blue blood,’ another former partner says. ‘Almost every
‘It is not a national firm in the true sense. If it wants to be a serious player in the US, it needs to be big in New York.’ Tower Snow, Clifford Chance
ALL THE PRESIDENTS’ MENTORS Many partners and clients have commented on the somewhat long name: Wilmer Cutler Pickering Hale and Dorr. (It brings to mind former Chelsea FC chairman Ken Bates’ comment on Skadden’s lengthy moniker: ‘It’s so ****ing long it even includes the tea lady.’) Comparisons with Skadden, Arps, Slate, Meagher & Flom will be welcome, of course, but there is some conjecture over what the firm will be known as. Perhaps it will be shortened to Wilmer Cutler. Or maybe it will echo the e-mail and website addresses: WilmerHale. ‘For Hale and Dorr, it was extremely important that we kept both names,’ Joe Pillman says. ‘We’re comfortable that all five names are reproduced. Given that we wanted to keep the Hale and Dorr brand name intact, it had to go at the end.
56 Legal Business June 2004
corporate will need to call on the kind of capability that Wilmer can offer at some point. Hale and Dorr is the best Boston firm,’ this partner adds. ‘But that’s not the same thing at all.’
Big Bills Last summer, Wilmer managing partner Bill Perlstein and his opposite number at Hale and Dorr, Bill Lee, met when the two firms were working on a major piece of litigation for Wellstat Therapeutics, in San Diego. ‘Bill Lee was one of many managing partners I knew,’ Perlstein recalls. ‘I hadn’t spent an enormous amount of time with him before then.’ The Wellstat case symbolised the respective strengths of the two firms: Wilmer had a litigation team on it and Hale and Dorr some IP litigators. Because it was a significant client, it needed
a lot of staffing, and both managing partners were co-ordinating the teams. ‘This led to the meeting last July,’ Lee explains. ‘The quality of the people struck us. They did great work. Each firm represented a unique opportunity for the other. Last July we sat down to learn about what each other was doing. We at the Hale and Dorr end thought, “That’s a terrific firm with terrific people that is culturally a good match for us”, and I think they did too.’ The two Bills agreed to meet in Boston a month later and quickly concluded that, professionally and economically, there was something worth pursuing. That set them on an incredibly direct path to merger. ‘We’re very pleased that something that started off literally with a single lunch last summer obtained the unanimous approval of both partnerships just eight months later,’ Perlstein says.
60 minutes
Perlstein makes it sound easy: mergers most certainly are not. Ashurst’s recent efforts with some leading US firms make for a contrast with Wilmer’s 60-minute fix. ‘Management structure, compensation, and the name was settled within an hour,’ Perlstein claims. ‘Our systems are so similar. Once you From Wilmer’s perspective, the names mean agree it’s going to be a merger of something above and beyond branding. It goes back to equals and it’s going to be the firm’s roots as the Cutler link in Washington, DC. managed that way, it makes a lot Name partner Lloyd Cutler is still alive and, at age 86, of things follow. Then we got still turns up for work at the DC office every day. down to the things we needed to Cutler embodies the esteemed standing of the firm. flesh out with our partners: He’s the only lawyer to have been White House counsel cultural compatibility and how to two presidents – Jimmy Carter and Bill Clinton. we’d get people comfortable with When the allied forces failed to find weapons of mass that. Between last July and destruction in Iraq, a common refrain was: ‘What announcing it in April, we were George Bush needs is a lawyer who is beyond getting people together socially reproach. What he needs is a Lloyd Cutler.’ and for strategic discussions.’ In the event, he got the man himself. So imperative Given that this process was it that Bush get his man, that an unprecedented occurred over an eight-month deal was struck whereby Cutler advised the White period, it’s to their great credit House while also retaining his private business clients. that both firms managed to keep it quiet. The point is not lost on
LB145 Wilmer/Hale p54-59
24/5/04
4:12 pm
Page 57
Wilmer and Hale’s merger
one of Wilmer’s London partners, Gerry Cater. ‘One of the key lessons learned is to really try and keep these things secret,’ he says. ‘The stumbling blocks for Latham/ Ashurst, Ashurst/Fried Frank is that, when you are in the spotlight, it leads to all sorts of tensions, real or not, being drawn out and amplified. It’s best to keep it as private from the outside world as possible. Also, there was genuine consultation with the partners. Outside of that glare, we could conduct that process with serious deliberation.’
150 reactions Such a message may surprise many in London. Consult with the partners, present a strong business case, keep it quiet, and bingo. Looking at the numbers for 2003, Hale and Dorr had its best revenue year and second-best profit year. Not, perhaps, the best time to persuade your partnership that urgent action is needed. ‘The biggest hurdle,’ Lee concedes, ‘was that the partners on both sides like their partnerships and the people they’re practising with. We had 150 partners and 150 reactions, but most could see it from the firm’s perspective and that helped address any concerns they had individually.’ ‘The real question was what we could do to convince our partners, given what they all thought was a wonderful situation, why you should do something different,’ Lee explains. ‘We spent the last nine months convincing them that a new firm of the size that we are talking about would retain the best elements of both. We did that by articulating a clear business case.’ Despite the scepticism of former partners, notably on the Wilmer Cutler side, Lee presents a good argument. In the US, the merged firm will start off – going on the track records of the legacy firms – by being in the ‘top three’ in antitrust and competition; litigation and trade; international arbitration; corporate technology; communications; bankruptcy; contentious and non-contentious IP work; and securities. ‘And in some cases we’re the very top,’ Lee says of that farreaching roster. ‘They are areas people will be interested in. A firm with those combined sets of strengths is pretty much unique.’ Perlstein stresses that they’ve not lost sight of the fundamental reason for taking such a risk. ‘Our top priority is the integration of practice teams and systems,’ he says. ‘Then we will be going to the existing client bases of both firms and seeing what
received the merger extremely well. Dan Abdun-Nabi is general counsel at Maryland biotech Since becoming Hale and company, Bioveris. He has Dorr’s managing partner in instructed both Hale and Dorr February 2000, Bill Lee and Wilmer in the past. ‘I has won acclaim as one of think it’s a fantastic move,’ he the most influential lawyers enthuses. ‘I won’t need to go to in America. A top litigator, separate firms for regulatory he is widely credited with and corporate.’ leading Hale and Dorr to its While his company currently dominant position for tech uses Cravath for its corporate expertise. Partners note work done out of New York, these leadership skills Abdun-Nabi explains: ‘On the and tip him to become M&A side, the new firm may not managing partner when the be on the level of Cravath, but firms are fully integrated. my overall impression is that the He makes light of his role quality of the people is on a par. in the merger. ‘Bill Perlstein and I agreed at the outset not to If you’re an international investdominate negotiations,’ he says. ‘The important thing was ment bank, you may need that getting the partners together to talk.’ kind of New York capability, but I’m not sure a New York presence is so important to me. The transactions I’m dealing BILL PERLSTEIN with [generally] don’t take place there.’ This is good news for the newly merged firm, as Formerly chairman of its New York presence is a Wilmer’s management relative weak spot, with fewer committee and head of the than 100 lawyers. firm’s bankruptcy and Margaret Seif is senior viceworkout practice, which president at Massachusetts-based acted on the Orange County RSA Security Inc. A Hale and bankruptcy among many Dorr client, RSA’s business is in others, Perlstein takes up providing secure environments the position of co-managing for web browsers across the partner on 1 June. ‘We will world. Seif spells out her prioribe focusing on integrating ties: ‘Hale and Dorr had no depth our practices in London; in dealing with government the same in Germany,’ he agencies; Wilmer didn’t have says of the firm’s priorities. much on the corporate side. The ‘Then, some way down the new firm gains important capaline, we will look at the West Coast in America. In New York, I bility in those areas.’ For Seif, don’t know that we need a heavy-hitting M&A practice.’ though, it is no foregone conclusion that she will shift all instructions to the merged firm. ‘Historically, opportunities there are with the we’ve used other firms in Washington,’ she increased capabilities that the explains. ‘I’ll have to assess whether to combined law firm has.’ instruct Wilmer in future.’ Of the clients, Lee believes: It’s a similar story for David Warnock, ‘They all recognise that there will founder of Camden Partners in Baltimore, a be greater depth and breadth and diversified private equity fund. Wilmer’s a greater collection of practice London office has advised him on various areas at the top of the market.’ investments. ‘I don’t think they’d expect us to suddenly switch instructions away Client voices from our Boston law firm, Testa Hurwitz, On the whole, clients on both just because of the merger,’ he says. sides of the Atlantic have
BILL LEE
June 2004 Legal Business 57
>
LB145 Wilmer/Hale p54-59
24/5/04
4:12 pm
Page 58
Wilmer and Hale’s merger
STAR PLAYERS Bill McLucas One of Wilmer’s most influential partners, McLucas served as SEC director of enforcement for eight years, leading numerous landmark enforcement actions, including the SEC’s cases against Michael Milken. As a result, McLucas is among the most sought-after advisers to the world’s biggest corporations and investment banks. He led the Wilmer team that was counsel to the investigation of Enron.
Gary Born Wilmer’s London office marched into the Legal Business City 50 thanks largely to Born, the firm’s head of arbitration. His practice billed more than £6m in 2002 and has undertaken four of the five largest ICC arbitrations for Deutsche Telekom. ‘The merger offers us IP expertise, which is becoming increasingly important in arbitration as tech and biotech industries dominate the economy,’ he explains.
Richard Eaton Hale and Dorr London’s corporate star takes up position as co-head of the firm’s newly created European corporate team, alongside legacy Wilmer Berlin partner Roland Steinmeyer. Eaton’s passion for Arsenal FC is replicated in his zeal for tech-focused dealmaking. He proved his worth by advising Wolfson Microelectronics on the UK’s first technology IPO in years at the end of 2003.
Dieter Lange Wilmer’s elder statesman takes up a position on the firm’s 12-partner global management committee as its European representative. He’s been at the forefront of Wilmer’s European adventure from the outset, having set up its London office back in 1974. ‘We can give our aviation clients, like Lufthansa, a fuller offering, especially in corporate finance,’ Lange says.
Joe Pillman A meteoric rise for the legacy Hale and Dorr European managing partner. Pillman jumped ship from the Oxford office of regional UK firm Morgan Cole to join Hale and Dorr in 2000. He now finds himself as one of two European members on the 12-strong global management committee of a firm that will shoot to the top of any ranking of the richest firms in the world.
Charlene Barshefsky A former US ambassador, Barshefsky is Wilmer’s senior international partner. She is now charged with ensuring the new firm has a China presence sooner rather than later. Few could be better placed. She joined Wilmer in 2001 after serving as the chief trade negotiator and principal trade policymaker for the US. She is renowned internationally as the chief negotiator of China’s historic WTO agreement.
> ‘Nevertheless, there’s no doubt we will gain the ability to have a broader view on what we’re doing.’ He slips into an American football analogy: ‘What Hale and Dorr brings is more bench strength. It’s like having more than one match-winning quarterback available.’
Coast to coast Despite the persuasive case presented by Lee and Perlstein, and the generally positive response of clients, major issues need to be resolved. Most glaring is the weakness in New York, given the size – 324 equity partners – of the new firm. Perlstein concedes that growth in New York must be the top priority. To be fair, both firms’ track records bode well: Wilmer and Hale and Dorr have grown exponentially since respective New York openings in 1999 and 2000.
58 Legal Business June 2004
Wilmer opened with three lawyers and now has 60; Hale and Dorr opened with four and grew to over 30 lawyers. The merged firm now numbers 22 partners and 95 lawyers in New York. ‘We will clearly be focusing on continued growth in New York,’ Perlstein says, ‘and developing a corporate technology practice from a combination of their skill base and our ties to the many investment banks we represent on securities and litigation matters.’ ‘We will want to beef up on straight corporate M&A.’ Lee adds. ‘We’ve been the leading East Coast IPO firm over the past decade and we were the
leader in Europe when there was an IPO market. The transactional market is coming back and we’ll use that to build on what we’ve got.’ The obvious difficulty for a firm with a PEP of around $800,000 is to attract the heaviest-hitting corporate partners. ‘We attract the best litigators in the world, so there’s no reason why we can’t attract the best corporate lawyers in the world,’ Lee argues. ‘We already compete with Skadden. They’re on the other side from us on a number of deals. We don’t have the breadth of a Skadden or a Wachtell – we’ll develop that over time if we can find people who will fit into our culture.’ That’s a pretty big ‘if’.
West Coast hole Given the firm’s technology focus, the lack of a West Coast office also needs to be
LB145 Wilmer/Hale p54-59
24/5/04
4:12 pm
Page 59
Wilmer and Hale’s merger
addressed. Hale and Dorr could so easily have had that premium West Coast presence. It had developed a close relationship with Brobeck, Phleger & Harrison, at the time one of San Francisco’s finest firms. The two firms established a joint venture in 1990 to represent European technology companies in international and domestic transactions. The joint venture, Brobeck Hale and Dorr, opened an office in Oxford in 2000 and Munich in 2001. This was seen by many as a sign of the potential for full merger. However, when Brobeck’s managing partner Tower Snow led a 17-partner defection from the firm’s West Coast office to Clifford Chance, he tipped the firm towards terminal decline. While Hale and Dorr rescued the European venture, the ailing West Coast operation suddenly made a less appealing merger prospect. Now at Clifford Chance, Tower Snow has strong views on the new firm. ‘It is not a national firm in the true sense,’ he says. ‘If it wants to be a serious player in the US, it needs to be big in New York and build out and get a West Coast presence.’ Snow offers some tips about options in the Valley: ‘Both Orrick, Herrington & Sutcliffe and Cooley Godward have made it clear they’d consider a merger.’ ‘We have a lot of work on the West Coast,’ Lee concedes. ‘Also, the combined firm will have a Beijing office. Having Washington as the closest office to Beijing doesn’t make a lot of sense.’
strategic plan based on confidential interviews with clients and look at which areas we need to beef up. The reunified Europe is an important source of work. Berlin will be key to servicing that, but London will always be the anchor in Europe. I have assurances from my colleagues on the management committee that we will have a new office in Düsseldorf. I don’t think we need offices in all the German centres. We have no plans to be in Frankfurt.’ Lange does indeed have support at the highest level. ‘We plan to have another office in Germany,’ Bill Lee confirms.
(alongside legacy Wilmer Berlin partner Roland Steinmeyer). ‘Hale and Dorr has always had a tech focus,’ Eaton points out. ‘Wilmer doesn’t have tech, but Stephanie Liston has a great telecoms practice – we now act for Orange in London, Belgacom in Brussels, and Deutsche Telekom in Berlin – and both firms have good links with the venture capitalists. What we need now is to crack New York and the West Coast.’ The firm’s rivals are as yet untroubled by the new firm’s TMT presence. ‘Both are well-respected firms, but in London they’re operating in a crowded market place,’ Baker & McKenzie’s London managing partner Gary Senior says. ‘I wouldn’t be surprised, given that TMT is a focus of both firms, if West Coast expansion is an objective for the merged firm.’
‘What Hale and Dorr brings is more bench strength. It’s like having more than one match-winning quarterback available.’ David Warnock, Camden Partners – a legacy Wilmer client
The European union This merger was conceived and driven by partners in the States. And, as with most global developments, Europe must follow where the US leads. Dieter Lange is the legacy Wilmer senior partner based in Berlin and London. He established the Wilmer office back in 1974. He and legacy Hale and Dorr European managing partner Joe Pillman (who will continue to base himself in Oxford) will take their places as European representatives on the firm’s 12person management board. ‘We have to make it work,’ Lange says. ‘The real work starts now. The partners will develop a
‘I personally think Düsseldorf would make sense.’ Gerry Cater is clear on where the firm is going. ‘In London, the simple message is that we are just beginning to reach critical mass and we will continue to make investment,’ he says. ‘We have played off our strength in the US. Our securities practice acts on the world’s highest-profile matters like Enron and WorldCom. It was natural for us to do the same in London as a financial services centre.’ While Cater plays up the financial services strengths, legacy Hale and Dorr partner Richard Eaton emphasises the complementary nature of the practices in London that will contribute to a formidable TMT offering. He will take up a position in the new firm as co-head of a newly created European corporate group
‘We need a West Coast presence to add that bit of credibility,’ Eaton admits. ‘We’ll find that easier than New York because our level of PEP is on a par with the top West Coast partners. For New York, we may need to bring in an outlier. Nothing like Allen & Overy with Cunningham, but we need to do enough to attract two real heavy hitters.’ Unfortunately for Eaton, this runs counter to Bill Perlstein’s view (see box, ‘Bill Perlstein’). Some tensions over the remuneration priorities are bound to come to the fore. ‘The kind of people we want to attract are not those looking for every last dollar,’ Lee notes. Both firms have a heavy commitment to pro bono, to the extent that it bolsters the talk of the two firms’ similar cultural priorities. It also has a dampening effect on PEP: Hale and Dorr worked 30,000 pro bono hours last year. ‘There are few firms in the country that could make us look inadequate on that front,’ Lee says. ‘Wilmer happens to be one of them.’ Adequacy in pro bono is a great start: stars like Bill McLucas will be impatient for much more. LB james.lewis@legalease.co.uk
June 2004 Legal Business 59