Orrick in West Coast merger bid for Venture Law Group

It is understood that the talks, which could mean a full takeover or laterally hiring a substantial number of lawyers, are at an early stage.

They have had a referral relationship since 1999, within which VLG, which acts for technology start-ups often taking equity in lieu of fees, passes on those clients to Orrick, which needs advice on areas such as intellectual property and litigation.

Although there are strong ties, it is understood that one of the main hurdles to a full takeover lies in the diversity of the firms' business structures: Orrick operates a traditional partnership as opposed to VLG's propensity for taking equity instead of fees, as well as acting as both a law firm and business adviser to its young venture capital clients.

However, in recent months VLG has been hit by the dwindling appetite for technology investment, resulting in an office closure and associate redundancies. From a high of 92 lawyers in 2000, the firm now has 68 attorneys.

Craig Johnson, a VLG director, said the firm has just reported first quarter profits that were flat on the comparable period last year.

Johnson added that both firms meet one another every month as part of their referral agreement and that options had been discussed. "A combination is a possibility," he commented.

Orrick was unavailable for comment.