Lawyers in Love

We've had some discussion already on the proposed Akerman/Wolf Block marriage. Here's a report from New York Lawyer on where things may be at:

According to several sources who recently spoke to The Legal, talks between the two firms are continuing and a potential merger "sounds like it's close." No one was aware of any imminent partner votes, however, and Alderman declined to comment for the article or on recent media reports about the potential deal.

In an article by the Daily Business Review, a sister publication of The Legal, an Akerman Senterfitt shareholder who did not wish to be named confirmed talks were ongoing, but said Wolf Block's unfunded pension plan was a "sticking point" in the deal. The shareholder said a vote was not imminent.

A source told the Daily Business Review midlevel attorneys at Akerman Senterfitt are reluctant to back the merger because of the financial liability the pension fund could cause them. One offer on the table entails a yearlong probationary merger, after which the parties could back out, a source said.

A spokeswoman for Akerman Senterfitt said the firm has nothing to report and does not comment on information published based on anonymous sources.

Sources who spoke to The Legal doubted the pension plan was an issue in this particular case or in Wolf Block's failed merger talks with Cozen O'Connor.

Bill Brennan of Altman Weil said unfunded pension plans are often a "major impediment" to completing a successful merger. He said he has never heard, on the other hand, of a probationary merger and "can't imagine the circumstance where that would be attractive." He said mergers are difficult to unwind, and he can't see how such a setup would be structured that would benefit either firm.

In an October 2006 interview, Alderman told The Legal Wolf Block terminated its pension plan at least 10 years ago and there were a "manageable" number of attorneys who were grandfathered in. The firm now uses a 401(k) plan, he had said.

Alderman said in February Wolf Block is talking to firms that are smaller in size and ones that are comparable in size, with the latter being the more difficult. He said then that he is not talking to anyone who would acquire the firm. Most of the discussions are with firms smaller in scale.

"We are not selling the firm," he said. "The firm is not for sale."

Alderman had said he considers Akerman Senterfitt a comparably sized firm, but that could add another challenge to an already difficult process.

According to Alderman, part of the reason the Wolf Block-Cozen O'Connor discussions — which ended in February 2007 — didn't work out was structural. Wolf Block is a limited liability partnership and Cozen O'Connor is a corporation, he said in February.

A source close to the Wolf Block-Cozen O'Connor merger talks said the pension plan was never an issue in the discussions because Cozen O'Connor has no unfunded liabilities and felt it would be able to work that issue out.

The source said problems ensued over structural issues that Wolf Block was not willing to change. After looking at the balance sheets of the two firms, which in the source's opinion demonstrated Cozen O'Connor's strength over Wolf Block financially, it only made sense for the combination to go the way Cozen O'Connor wanted it to. One of the main structural problems, the source said, was the issue of a partnership versus a corporation.

Alderman said in February that business structures, capital considerations and differing tax years make finalizing a merger a tough task.

Akerman Senterfitt is a corporation, which could throw a roadblock into any merger discussions between the two firms. Their financials, however, are comparable.

Again, feel free to email me privately with any scuttlebutt on this one.