McKenna Long’s future in state murky

By Alexandra Schwappach
Daily Journal Staff Writer

Though last year’s merger talks between McKenna Long & Aldridge LLP and the international law firm Dentons did not come to fruition, the discussions helped solidify an important imperative for McKenna Long: it must expand its global presence.

The decision is a significant one for McKenna, which is largely known as a national firm despite having two overseas offices in Seoul and Brussels. Firm leadership portrays McKenna as being well poised to take a leap abroad, but some observers depict the firm as struggling to find a place in the market in the face of harsh global competition.

They say its California offices – which are arguably made up of more localized practices – could get lost in the shuffle. Since April, the firm has seen the defection of at least 19 partners in Southern California, including several rainmakers with deep local roots who joined the firm through a sizeable merger two years ago.

Larry Watanabe, a legal recruiter in San Diego who has moved several groups of attorneys out of McKenna Long, said if McKenna were to expand globally by merging with an international firm, the vast majority of California would “evaporate.”

A number of McKenna’s California practices – such as environmental and real estate – are local and mid-market, and would not function well on an international scale, Wantanabe said.

“Most of the work being done by these practitioners would have zero benefit internationally,” he said. “And potential international merger partners looking at McKenna’s resources in California will lose interest in the firm.”

Discussions over global expansion hit a stride in January when McKenna chairman Jeffrey K. Haidet appointed a group of 10 senior partners – including former Luce, Forward, Hamilton & Scripps LLP partner Kurt Kicklighter and Anthony Williams, past chairman of Coudert Brothers LLP – to study the firm’s needs and develop a plan for growth.

“When merger talks with Dentons ended, we decided we should get our ducks in a row with respect to our international expansion,” said Haidet, who’s based in Atlanta.

In a firmwide survey, the senior partners asked its lawyers what they felt like they needed to improve their practices and help their clients.

“The clear desire was to significantly expand our international presence,” Haidet said. “We want to have the ability to follow our clients across the border and also benefit from inbound work.”

Haidet said the firm – currently made up of about 520 attorneys – would focus on deepening its capabilities in the U.S., especially in New York, Washington, D.C. and Los Angeles. The firm also has plans to break into Texas. Globally, McKenna will start with Canada, then expand into the U.K. and possibly the Middle East. The hope is to accomplish significant growth in three to five years.

Disputing critics, firm leaders highlight significant international investment in California real estate as evidence that the practice area could play well in the global marketplace. Environmental and energy practices have also seen a lot more international attention, and government contracts – one of McKenna’s strongest practice groups – is increasingly worldwide, Haidet said. As part of its strategic growth plan, the firm will also look to target significant growth in its transactional practices – private equity, finance, mergers and acquisitions, tax, and public policy.

McKenna’s international endeavors would have a positive affect in California, said Los Angeles partner Kathy A. Jorrie, who was part of the 10-attorney team that developed the firm’s growth strategy.

“Our domestic clients are becoming more global,” Jorrie said. “We are trying to be on the front end of that.”

Jorrie gave the example of an unnamed but well known entertainment client that started its operations in Los Angeles and within a decade grew to a national and then intentional level. The firm is interested in adding attorneys in California to strengthen existing practices and fill in some gaps, especially in the white collar, intellectual property, and corporate transactional practices, she said.

Some departures in California have created noticeable gaps for McKenna, which legal observers say could negatively impact potential merger partners’ perception of the firm. In April the firm’s real estate chair, Nancy T. Scull, moved with five other lawyers to Sheppard, Mullin, Richter & Hampton LLP in San Diego. That same month McKenna’s insurance litigation chair, Peter H. Klee, moved to Sheppard with nine other partners in tow. Many of those who left were former partners at Luce Forward, a San Diego firm McKenna acquired in 2012.

Following the exodus to Sheppard, McKenna lost seven partners – including its toxic torts chair – to Polsinelli LLP in San Francisco and Los Angeles.

Los Angeles-based legal recruiter Sandy Lechtick compared McKenna to Baker & McKenzie , a global firm that shut its Los Angeles office five years after entering the market by merging with the local firm Macdonald, Halsted & Laybourne in 1988. In 2012 Baker shut its San Diego office, narrowing the firm’s California presence to two offices in the Bay Area.

“A lot of people were less enchanted with moving to that firm after those closures,” he said. “The feeling was: How can a firm be a major global powerhouse when it couldn’t even make it in L.A.?”

Baker has been seemingly successful on a global scale despite shrinking its California footprint. It boasts more than 4,000 attorneys in 75 offices around the world.

Haidet recognizes McKenna’s recent departures but said the firm’s practices in California continue to be robust and have not been weakened by those losses.

“We are proud to be a big player in California,” Haidet said. “When people leave, they leave for all kinds of reasons. Sometimes people aren’t a good fit and sometimes people don’t embrace the strategy that the firm is taking.”

Haidet said he anticipates that McKenna will expand by way of several small mergers instead of one big union. As to the model the firm will adopt for its global strategy, Haidet said he is open to considering a Swiss verein, a partnership in which offices share a brand name and some costs but not profits or liabilities.

“We are not against that concept,” Haidet said. “If that’s the most efficient way for us to expand and serve our clients, then we will consider it.”

 

alexandra_schwappach@dailyjournal.com

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