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‘A variety of reasons’: Reed Smith and Pepper Hamilton call off merger talks

Less than a fortnight after negotiations were reported, Reed Smith and Pepper Hamilton have called off talks over a combination.

A merger between the two US firms, which would have pushed Reed Smith to more than 2,000 lawyers with revenues of $1.5bn, making it one of the 20 largest firms in the world.

A spokesperson for Reed Smith said: ‘Reed Smith…periodically has discussions with other firms regarding joining forces. As part of that process, we had some preliminary discussions with Pepper Hamilton, a firm we know well and respect, about a possible combination.

‘While our conversations with Pepper Hamilton were positive and informative, both firms have concluded that for a variety of reasons those discussions should end.’

Pepper Hamilton has 13 US offices but no overseas network, while Reed Smith has 14 US offices and 12 overseas. While there is some cross-over between the two firms’ American practices, a merger would have added offices in Boston, Silicon Valley, Harrisburg and Berwyn, Illinois.

At just under a third of the size of Reed Smith, Pepper Hamilton’s 490 lawyers grew revenue by just 1% in 2015 to $388.5m. Nonetheless, that figure marked a record high for the Philadelphia-based firm, and profits per equity partner crossed the $1m boundary for the first time as PEP grew 9% to $1.03m.

The rising PEP at Pepper Hamilton last year coincided with a fall at Reed Smith, bringing the two firms’ profitability into closer alignment. With revenue falling 3% to $1.15bn in 2015, the knock-on effect was an 8% dip in PEP to $1.1m.

Reed Smith made redundancies at the start of this year, with the firm losing 45 lawyers across its US, Europe and Middle Eastern offices in a move it said involved ‘necessary adjustments to remain competitive’.