Orrick, Meet Dewey: Dewey, Meet Orrick. Shall We Dance?

It's not our wont to try to "cover" late-breaking news—that's not an arena where I care to compete, nor is it why I think you come to "Adam Smith, Esq."—but just as every rule has exceptions, so today's word of merger talks (confirmed by both firms' Managing Partners) between Orrick and Dewey Ballantine provokes a few observations.

The headline: The common wisdom that elite New York firms will never merge is now obsolete.

The finances: Bode remarkably well for the merger actually happening, and, more important, actually succeeding.  Profits per equity partner are for all practical purposes indistinguishable ($1.23-million at Dewey, $1.24-million at Orrick, per The American Lawyer) and the much-harder-to-fudge and, I believe, more telling figure on a number of scores, revenue per lawyer, is also identical ($780,000 at Dewey, $765,000 at Orrick).

The practices:  Are highly complementary.  At least since being counsel for the Golden Gate Bridge construction bonds, Orrick has been a go-to firm in municipal finance, and, more recently, mortgage-backed and asset-backed securities.  Dewey, as befits an NYC firm, deals from strength in representing investment banks, M&A, and counsel to investment advisors.  While this doesn't mean there will be no client conflicts to be ironed out, it's hard to imagine there being a deal-breaker among them.

The geographic footprint:  Again, all indications seem go.  Consider the four primary loci of economic activity in the world:

• New York:  The combination would have what can only be called a "powerhouse" office of 500 lawyers:  300 from Dewey and 200 from Orrick (NYC already being its largest single office).
• California:  Orrick, needless to say, has deep bench strength here (over 400 lawyers on the Coast) while Dewey has heretofore had no meaningful presence.  A critical-mass California presence being indispensable to a serious global firm, Dewey gains on this score while Orrick helps lead from its strength.
• London:  According to The Lawyer (UK), Dewey's office generated £20.3m in revenue in 2005, while Orrick's office was not in the top 30, at £13m.  But Orrick's pickup of most of Coudert/London is not reflected in those figures, and again, the combination of the two will be very strong.
• Asia:  Orrick, we all know, acquired much of the crown jewels of Coudert/Asia, and in the 21st Century an Asian presence is non-negotiable.

The non-equity partner issue:  Per The American Lawyer, as of late 2005 Orrick had 149 equity partners and 130 non-equity partners last year, or a 1.1:1 ratio.  Dewey had 110 equity partners and 25 non-equity partners, or a 4.4:1 ratio (and, I'd wager, the Dewey non-equity partners are there because they serve niche practice areas whereas most of the Orrick non-equity's are there because they're good people the firm wants to keep on general principles). But this is not in my opinion a deal-breaker:  Accomodations for the greater good can  and will be made.

Bottom line:  This deal makes eminent sense.  Whether or not it  happens—two very strong-willed individuals, Morton Pierce and Ralph Baxter, are, after all, on center stage, which means it ain't over 'til it's over—I stand by my headline:  The received wisdom that no elite New York firm will ever merge is dead. 

Was that nostrum, then, misguided from the beginning?  Yes and no, depending on one's time-frame.  In the less-than-10-year time frame, there's nothing remotely wrong with the elite NYC firms' models that needs to change.  And if  many senior partners' careers will conclude within or shortly after that time-frame, "don't fix what ain't broken."  But farther out, I question the primacy and supremacy of the NYC elite if they remain bound essentially to this island, privileged though their positions be. 

Dewey may be the first, or it may not happen after all, but either way I believe the received wisdom is dead. Long live the received wisdom.