By Casey Sullivan
NEW YORK (Reuters) - Two U.S. law firms are in advanced merger discussions to create one of the 10 largest in the country, according to the firms' chairmen.
San Francisco-based Orrick Herrington & Sutcliffe is expected to sign a letter of intent next week to join with Pillsbury Winthrop Shaw Pittman, a source with direct knowledge of the discussions said.
Pillsbury Chairman James Rishwain and Orrick Chairman Mitch Zuklie issued a joint statement to Reuters on Friday that said: "Our firms are in exploratory discussions about a possible combination. These talks are serving to confirm the great respect our firms have for each other."
Orrick, with about 1,000 lawyers, is known for its intellectual property, litigation, emerging companies and corporate practices, while the 700-lawyer Pillsbury of New York has a well-known energy practice. Their joint revenue, based on figures reported by the legal trade publication American Lawyer for 2012, would place them at No. 9 in the United States.
Orrick is known for representing clients such as Apple (AAPL), Microsoft (MSFT) and PG&E Corp (PCG), according to its website. Pillsbury has represented Chevron Corp (CVX), BNY Mellon (BKBML.UL) and Xerox (XRX) among others, according to legal experts and the firm's website.
Orrick has represented Oracle Corp (ORCL.N) in a patent lawsuit against Google (GOOG), over the Android mobile operating technology, and Microsoft in a patent lawsuit against Barnes & Noble (BKS) over its Nook electronic book reader.
Meanwhile, Pillsbury has represented a number of companies and banks in mergers and acquisitions and initial public offerings this year.
There have been at least 58 mergers between U.S. law firms announced in 2013, a particularly active year, according to legal consultancy Altman Weil. In July merger activity in the first half of 2013 was its highest since 2008, it reported.
The mergers have been driven both by the globalization of corporate clients that increasingly face complex national and international legal issues and by sluggish demand for legal services, leading firms to try and boost revenue by joining forces, legal experts said.
At the same time, many large law firms in California have grown outside the state through mergers and acquisitions and by picking up partners as legal work has migrated to other parts of the country, according to legal experts.
Over the years, they said, major financial institutions such as Bank of America and Wells Fargo have relocated their headquarters and offices outside of California, and as a result, many major law firms such as Paul Hastings, Latham & Watkins and Morrison & Foerster have seen their firms grow elsewhere.
"The California economy isn't growing like it once was years ago," said Robert O'Brien, a partner at Arent Fox in Los Angeles who acknowledged that other major law firms have rejiggered their business models to remain competitive.
"Los Angeles has become very much middle market," said O'Brien.
One source, who spoke on the condition of anonymity but was familiar with the latest merger, said that the discussions between the firms had been ongoing for months and that Orrick is expected to sign the letter of intent sometime next week.
The deal could still fall apart, the source said.
Both firms have been looking for partners for some time. The more profitable firm, Orrick, engaged in protracted merger discussions in 2006 with Dewey Ballantine, according to legal experts, but Dewey ended up merging with LeBoeuf Lamb Greene & MacRae to form the ill-fated Dewey & LeBoeuf later that year.
Pillsbury has had discussions with a variety of firms such as the Washington law firm Dickstein Shapiro and the larger Fulbright & Jaworski, which ended up merging with the UK-based Norton Rose earlier this year.
(Reporting by Casey Sullivan; Editing by Ted Botha, Kenneth Barry and Leslie Gevirtz)