Reed Smith and Pepper Hamilton Are in Merger Talks

Philadelphia, Pennsylvania, U.S., on Saturday, May 9, 2015. Photo by Victor J. Blue/Bloomberg

The global law firm Reed Smith is in talks to combine with the smaller Pepper Hamilton of Philadelphia, the firms confirmed on Monday night.

“Based on these preliminary discussions, we see many potential benefits to joining forces,” said a Reed Smith spokesman, in a statement. “There remains a significant amount of work to do with Pepper Hamilton to assess those benefits and before any transaction would be ready to bring to the Reed Smith partnership.”

A statement on behalf of Pepper Hamilton was also issued that confirmed “preliminary discussions” with Reed Smith.

The comments came after a lawyer at Pepper Hamilton told Big Law Business that a firm partner meeting was held on Monday that announced the discussions.

“They said they were approached by Reed Smith,” said the source who spoke on the condition of anonymity. “Each side is exchanging information.”

Firm leadership told partners that the executive committee unanimously approved the talks, which are exploratory at this point, the lawyer said. He added that the two firms are expected to draw up term sheets in the next 30 days or sooner.

“They will announce to associates tomorrow,” said this source, who couldn’t speak publicly because he wasn’t authorized. He said Reed Smith is also expected to announce the news of discussions to its lawyers.

If the two firms move forward to completion, Reed Smith, which has 1,620 lawyers in the U.S., Europe, Asia and the Middle East, would acquire Pepper Hamilton’s 490 lawyers scattered throughout 13 U.S. offices. The headcount figures are according to The American Lawyer and offices listed on the firms’ websites.

This year, Reed Smith reported $1.12 billion in revenue for 2015, while Pepper Hamilton reported $388.5 million. Combined, those figures would bring a newly formed Pepper, Reed Smith firm into the largest 25 U.S. law firms by revenue with $1.5 billion, according to last year’s rankings in The American Lawyer.

A full service law firm, Reed Smith counts clients in industries such as energy and natural resources, financial services, life sciences, entertainment and media, and shipping. Pepper Hamilton, meanwhile, has practices in health effects litigation, white collar defense, among other specialties.

In January, Reed Smith conducted layoffs that affected 45 lawyers in the United States, Europe and Middle East. Earlier this month, the firm saw a group of financial services litigators depart in San Francisco and Pittsburgh for McGuireWoods, along with a white collar defense team in New York.

Pepper Hamilton has also undergone changes: In January, former FBI director Louis Freeh, who the firm hired with fanfare in 2012, left the firm to start his own 12-lawyer boutique again, called Freeh Sporkin & Sullivan.

Earlier today, The Legal Intelligencer reported that Hogan Lovells hired three corporate partners from Pepper Hamilton in Philadelphia.

News of the Reed Smith, Pepper Hamilton combination has been rumored for at least a week.

Asked about the possibility of discussions with Reed Smith last week, Pepper Hamilton’s chair Tom Gallagher said: “We get calls all the time and we are looking for ways to improve our position… We are always listening.”

Gallagher and Sandy Thomas, chair of Reed Smith, were not available for interviews Monday night.