Morgan Lewis closer to acquiring major Boston firm

Philadelphia's Morgan, Lewis & Bockius L.L.P. is moving closer to an acquisition of Boston-based Bingham McCutchen L.L.P., a combination that would create one of the largest law firms in the world.

People familiar with the negotiations said leaders of the firms reached a tentative agreement over the weekend, but stressed that it had many conditions and that discussing the terms would take weeks.

Both firms have been tight-lipped about the talks, which began this year, acknowledging only that a possible acquisition was in the works.

Were Bingham and Morgan to combine, the firm would have nearly 2,000 lawyers and $2 billion a year in revenue.

Morgan, already the largest firm based in Philadelphia, with just under 1,400 lawyers, would greatly extend its lead over other locally based firms, at least in terms of revenue and lawyer head count.

The tentative agreement calls for Morgan to take on about 250 of Bingham's partners, lawyers with healthy books of business that match well with Morgan's strategic plan. Morgan also would hire hundreds of additional associate lawyers and staff while assuming the firm's liabilities.

The combined firm would have, among other assets, a 300-lawyer office in New York and 400 lawyers in Washington. Morgan would also be acquiring Bingham's highly regarded telecommunications team, a practice area Morgan does not have.

But such mergers and acquisitions are inherently difficult, and by the time partners actually vote, an agreement can founder on innumerable issues - from differing levels of profitability to client conflicts and the perceived financial weaknesses of one firm vs. another.

Such was the case when Ballard Spahr L.L.P. attempted to merge with Phoenix-based Fennemore Craig P.C. in 2005. Leaders of both firms favored the move, but a partnership vote at Fennemore Craig failed to gain the required two-thirds majority.

Ward Bower, an analyst at Altman Weil, the Newtown Square-based legal consulting firm, said the lack of growth in legal fees has created an incentive for firms to merge. But, he said, the vast majority of combinations in recent years have involved large firms acquiring much smaller groups. Combinations involving big firms like Morgan Lewis and Bingham, which has 740 lawyers, are far more unusual, in part because of the complexity.

If a combination takes place, Morgan clearly would be the more dominant entity. It is considerably larger than Bingham, and apparently in stronger economic shape. Bingham hit a rough financial patch in 2013, when revenue declined 12.7 percent. A group of lawyers in the firm's Frankfurt, Germany; London; and Hong Kong offices announced recently that they were leaving for Akin, Gump, Strauss, Hauer & Feld L.L.P. There is apparently concern at the firm that others will follow.

Morgan has been growing steadily for the last decade in the United States and abroad. Its incoming chair, Jami Wintz McKeon, has been instrumental in that expansion, and helped engineer the recruitment of 160 lawyers from the California firm of Brobeck, Phleger & Harrison L.L.P. in 2003 as well as other combinations.