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Dewey Ballantine and Orrick Herrington & Sutcliffe have ended merger talks in the face of a steady flow of Dewey partners defecting from the firm and disagreements over the management of the firm.
Chairmen for both US firms confirmed late yesterday that merger discussions had been aborted.
A Dewey source said: "There were issues with management control. With Ralph and Mort there would only be one presiding partner and it was felt that two much power would reside with one of those individuals."
It is understood that there were three major sticking points in the discussions: Dewey's unfunded retirement benefits, the number of Dewey partners leaving the firm, and disagreements over management and governance at the new firm.
"If you're losing those kind of quality partners, you have to ask why. We had to take the merger talks back to the table before we lost any more," said the source.
The announcement follows earlier signs that the merger talks were coming under increasing strain. In December, the respective management of the two firms announced that they had delayed a vote on the deal, which had been expected in December, until the New Year.
More than 10 partners have left Dewey since the firms confirmed they were in merger talks in October. This included M&A star Jack Bodner, who represented Lottomatica recently in its $5bn (£2.8bn) acquisition of Gtech Holdings, who defected to Covington & Burling.
Orrick chairman Ralph Baxter had previously declared in October that he and Dewey chairman Mort Pierce would co-chair the firm, with Baxter responsible for day-to-day management.
However, sources close to the deal had claimed that Baxter’s dominating personality and Orrick’s top-down management was likely to have upset many Dewey partners.
The combined firm would have had 1,500 lawyers in 21 offices around the world and revenues of more than $1bn, placing it in the top 10 firms in the US.
A joint statement from the firms read: "Orrick, Herrington & Sutcliffe and Dewey Ballantine have jointly decided to end merger discussions. Both firms are successful, global firms that saw great potential in a combination. However, a combination of this size and scope posed significant challenges. While both firms tried their best to work through these challenges, we were unable to bring the merger to completion. No one issue led us to this point, and each firm leaves this process with great respect for the leaders and partners of the other."