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Herbert Smith is in merger talks with Gleiss Lutz Hootz Hirsch Rechtsanwälte, hoping to scoop the last magic circle merger partner in Germany.
It is understood that the two firms have been in talks for over six weeks, although a partnership vote has not yet taken place.
Gleiss Lutz managing partner Martin Diller says: "There are still a number of firms we are talking to and Herbert Smith might be one of them."
Gleiss Lutz has attempted to merge before but with no success. In 1998 it entered into negotiations with Stibbe Simont Monahan Duhot - which ultimately fell through after Gleiss Lutz failed to garner enough votes from the partnership - before it entered discussions with Freshfields the following year.
But Freshfields merged with Bruckhaus Westrick Heller Löber instead. In April Herbert Smith was understood to be making overtures to Bruckhaus Westrick but the German firm decided to carry on with its original merger partner.
Chris Parsons, head of Italy at Herbert Smith, with responsibility for the international network, refused to confirm or deny whether the firm was in discussions with Gleiss Lutz.
But he says: "We are carefully looking at all key European jurisdictions, which include Germany, Italy, The Netherlands and eventually Spain. We understand that to have an ability to service our clients by being present in these jurisdictions is key."
Gleiss Lutz is the last available top tier firm left in Germany since Bruckhaus Westrick and Deringer Tessin Herrmann & Sedemund mer-ged with Freshfields, and Hengeler Mueller Weitzel Wirtz established its "best friends" agreement with Slaughter and May.
A source says: "Gleiss Lutz has the added advantage of being a rarity now that there isn't anything out there left to play with."
But he adds that because Gleiss Lutz's main office is in Stuttgart as opposed to Germany's financial centre Frankfurt, the firm is at a disadvantage.
Regarding the reasons for creating an Anglo/German firm Diller says: "The work we are doing involves a large amount of dual listing and the transactions are international.
"With recruitment, young people want to be sure that they are joining a firm with a European network."