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Why Mayer Brown Shunned a Heller Merger

Posted Nov 11, 2008 8:46 AM CDT
By Debra Cassens Weiss

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Mayer Brown has cited conflicts of interest as the reason it decided against a merger with Heller Ehrman, but the real reasons the combination failed may have been bad timing and fears about known problems at the California firm that voted to dissolve less than two weeks later.

Sources told the Recorder that conflicts issues are usually disclosed early in merger talks and that was an unlikely reason for Mayer Brown to get cold feet. Some sources said discussions may have derailed late in the process because Heller managers tended to be guarded about financial details until talks were well along. They also cited the loss of 14 Heller intellectual property partners for Covington & Burling.

But those problems hadn’t stopped plans the morning of Friday, Sept. 12, for a Monday meeting. Heller’s chairman, Matthew Larrabee, and three partners were planning to travel to Chicago for the meeting with Mayer Brown chairman James Holzhauer and other top lawyer managers, according to the Recorder story. A merger term sheet had already been signed, but financial projections needed to be updated to reflect the departure of the 14 IP partners.

The meeting never took place. It was canceled as the Wall Street meltdown dominated the headlines, the story says. Mayer Brown serves more than half of the world’s investment banks, according to its website, and one of its clients was Lehman Brothers, whose value had dropped 80 percent the week before the scheduled meeting. That same week the government had seized Fannie Mae and Freddie Mac and Mayer Brown client Merrill Lynch was nearing collapse.

“The Wall Street collapse, the known problems at Heller and the Covington group's move were enough reason to kill a deal,” the Recorder story says. “And by late Friday afternoon, that's what Mayer did, eliminating Heller's last viable merger partner, and its last hope of survival."

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