The Firms

December 21, 2008 10:42 PM

BREAKING: Sonnenschein Taking On 100 Thacher Proffitt Lawyers; King & Spalding Out of Proposed Acquisition

Posted by Nate Raymond

UPDATE, 12/21/08 at 10:40 p.m.:

Sonnenschein, Nath & Rosenthal announced late Sunday that 100 lawyers, including 40 partners, from Thacher Proffitt & Wood will be joining the firm's New York office, effective January 1. The hires increase Sonnenschein's total headcount to about 800 lawyers, nearly doubling the size of its New York office--it's the biggest group of laterals ever taken on by Sonnenschein, according to senior managing director Audrey Young.

Sonnenschein is drawing from all of Thacher's existing practices, including structured finance (representing the largest number of additions, with 26 partners and of counsel), corporate, banking, real estate, regulatory, and litigation.

The news comes after our report Friday that King & Spalding no longer is in the running to acquire a substantial portion of Thacher it had pursued in recent weeks (see below). Confirmation of the breakdown in talks between Thacher and King & Spalding prompted speculation that Thacher might be facing dissolution as imminently as Monday.

Tonight's announcement means a more optimistic future for these 100 lawyers; Thacher plans to break the news to their associates Monday morning, according to a person with knowledge of the negotiations.

Still, no word yet on what will become of the roughly 75 lawyers who are not joining Sonnenschein. We await word back from Robert McCarthy, chair of Thacher's planning committee. In an interview late Sunday with the New York Times, McCarthy acknowledged that work remains for him and his partners on what becomes of their firm. “We’re still working on what happens to Thacher,” he said. “Its viability going forward was not likely.”

In a statement released tonight by Sonnenschein, McCarthy described the move as an "extraordinary" one for Thacher's clients. "With financial markets evolving and governments playing a greater role in the global economy, our move to Sonnenschein gives us the edge to excel with the industry leaders we serve," McCarthy said. (Download Sonnenschein Release)

We'll be following up with more on these developments in the morning.

--Dimitra Kessenides

King & Spalding Out of Proposed Thacher Acquisition

Originally Published 12/19/2008 at 7:30 p.m.

By David Bario and Nate Raymond

King & Spalding no longer is in the running to acquire the substantial portion of Thacher Proffitt & Wood that it had pursued in recent weeks, according to a lawyer familiar with the negotiations.

Altanta-based King & Spalding has been reported to be in talks for weeks to acquire some or all of beleaguered Thacher, whose once-thriving structured finance practice has been eviscerated by the ongoing financial meltdown. But now King & Spalding is out after another firm entered into talks with Thacher lawyers, a partner at a firm involved in the negotiations says.

The partner says King & Spalding initially explored a deal in which it would acquire substantially all of Thacher. In recent weeks, however, King & Spalding grew wary of the bank debt and lease exposure that an outright acquisition would entail, and instead proposed a deal in which it would take a group of approximately 75 Thacher lawyers as lateral hires.

The group would represent essentially all of Thacher's structured finance practice. The rationale for such a move, says the partner, was that the practice would likely rebound in a year or two.

Within the past week, according to the partner, as King & Spalding neared a deal with Thacher for the structured finance group, it emerged that Sonnenschein Nath & Rosenthal was talking to Thacher lawyers.

The Am Law Daily was unable to confirm whether a deal with Sonnenschein has yet been finalized or how many partners could potentially move. But a person familiar with the situation says Thacher real estate chair Donald Simone is in talks with Sonnenschein. (Simone did not respond to a call or e-mail seeking comment.)

The loss of King & Spalding as a merger partner raises the possibility that Thacher faces dissolution. The firm's marketing director, Lianne Cospito, declined to comment when contacted and asked if the firm is winding down.

The situation has become serious enough that the firm's bank has brought in Gibson Dunn & Crutcher to advise on Thacher, according to a former partner. Gibson Dunn restructuring partner Jonathan Landers, who frequently advises Citigroup on law firm dissolutions, says he "can't talk about it."

Landers also is advising on the dissolutions of Heller Ehrman and Thelen. In those situations, the firms ultimately collapsed after they breached covenants in their credit agreements that restricted how many partners could depart in a 12-month period.

A raft of Thacher partners have departed for other firms. The firm's White Plains office shut down in October as partners there, including vice chairman Thomas Leslie, departed for Greenberg Traurig. In November, Hogan & Hartson hired two partners, including executive committee member Richard Schaberg.

Most recently, as we reported today, Thacher’s head of litigation, Richard Hans, left for DLA Piper.

The partners departed after the firm entered 2008 financially challenged. In 2007 the firm grossed $194.5 million, up only 1.6 percent. Profits per partner last year dropped 22.1 percent to $1.02 million.

Bloomberg reported last week that Thacher's New York office space at Two World Financial Center has been put on the market.

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