Focus on Lone Star state as merger plans take shape

Merger-mania hit the US late last month as two potentially market-changing deals broke cover in less than a week. Then, within 24 hours, one collapsed.

Few in the market will have been surprised that Orrick Herrington & Sutcliffe featured prominently in one of the potential mergers. The firm, which earlier this year confirmed it had been talking to SJ Berwin about a possible deal, has developed a reputation as a serial merger partner.

It kicked off its latest round of talks in the final days of September, with Texas-based Akin Gump Strauss Hauer & Feld. By the first week of October the deal was off.

Just days after the Orrick-Akin news broke it emerged that another Texas firm, 350-lawyer Thompson & Knight, was also in merger talks, this time with another firm that is no stranger to merger discussions, Reed Smith.

As the firm’s global managing partner Greg Jordan says: “Reed Smith has indicated its interest both in the Texas market and in expanding its energy practice.”

Following the launch of Latham & Watkins’ office in Houston with eight partners the indications are that the energy-rich state of Texas is currently topping the list of many firms’ strategic ambitions.

Peter Kalis, global managing partner at K&L Gates, says the rationale for the present crop of merger talks is clear.

“Texas has the GDP of Canada and it’s larger than India’s,” says Kalis. “It’s a $1trillion-plus per year economy, with more Fortune 500 companies headquartered there than in New York. It’s unthinkable that a global law firm would not be strategically positioned in Texas.”

Kalis’s firm spotted this three years ago when it merged with Dallas-based Hughes & Luce, adding 150 lawyers.

“In 2009 our Texas offices performed nearly $30m (£18.9m) in work on engagements sourced elsewhere on the platform and exported nearly $20m to other offices,” adds Kalis. “As this level of integration reveals, our 2008 merger with Hughes & Luce has been a strategic success from the beginning.”