Preston Gates to merge with East Coast firm

Preston Gates & Ellis has been part of Seattle since Harold Preston founded the law firm as a solo practice in 1883. Over the years, it has grown into a Pacific Northwest institution, employing such luminaries as civic leader Jim Ellis, retired Sen. Slade Gorton and ex-Microsoft legal chief Bill Neukom.

The firm and its 420 lawyers are now about to become a small piece of a much larger legal machine.

Effective Jan. 1, Preston Gates & Ellis will be merged into K&L Gates, a sprawling, multinational firm with 1,400 attorneys sprinkled across 21 offices on three continents. Preston said Thursday it had finalized plans to combine with Kirkpatrick & Lockhart Nicholson Graham, a much larger and more profitable law firm based on the East Coast.

After the merger Glover will serve as the firm's "global integration partner," based in Seattle. Peter Kalis, who is now chairman and managing partner of Kirkpatrick & Lockhart, will be chairman of K&L Gates, or Kirkpatrick & Lockhart Preston Gates Ellis, as it will formally be known.

Preston's managing partner, Kari Glover, said the merger will have little impact on employees, clients or its place in the Puget Sound legal world. No jobs will be cut, and no offices will be closed, she said.

"We are deeply rooted here and we intend to stay and be a natural force in this community, just as we always have been," Glover said. "For most of our offices it will be business as usual, but with more capability, more resources, more ability to serve our clients."

Their 2005 revenues would have made the combined firm one of the top 25 U.S. law firms.

The most notable logistical change is that the two firms will consolidate their offices in San Francisco and Washington, D.C.

The firms had been talking since late July or early August, Glover said. Talks intensified in September, when the firms announced they were conducting due diligence on a possible combination.

Microsoft long has been one of Preston Gates' most important clients — and not simply because one of the firms' namesakes, Bill Gates Sr., is the father of Microsoft's chairman.

Preston Gates played a major role defending the company in its U.S. antitrust case. Neukom, who served as Microsoft's top lawyer for 17 years, rejoined Preston Gates in 2002 and was named the firm's chairman in 2004.

Brad Smith, Microsoft senior vice president and general counsel, said he welcomed the merger news.

"This is a very positive step for both firms and for the two firms' clients," Smith said. "It adds both depth and breadth to the firms' resources, and we believe that clients large and small will benefit from this."

One reason Glover said Kirkpatrick & Lockhart was an attractive suitor was its strong presence in two markets where Preston Gates has no offices: New York and London.

The combined firms' broader geographic reach is attractive to Microsoft as well.

"The presence in additional cities, both in the U.S. and overseas, means that the new firm will have the capacity to devote added resources to existing projects for us as well as for new legal issues that may arise," Smith said.

Preston Gates had been actively considering merging with another firm since 2004, Glover said.

Economic realities were a big motivator.

When the SARS crisis spread through Asia in 2003, Preston Gates, which has offices in Hong Kong, Taipei and Beijing, took a financial hit.

The aftermath of the dot-com bubble's bursting in 2001 also slammed Preston Gates' revenues from the high-tech industry.

"We realized it's important to have geographic diversification and practice diversification," Glover said.

At the same time, corporate clients large and small were doing more business overseas, and they were looking for law firms that had global capabilities.

"We concluded that scalability and scope mattered in this current environment," Glover said.

The merger announcement did not come as a surprise at Perkins Coie, the next-oldest law firm in Seattle and, with 600 attorneys.

"We have a lot of close friends at Preston, and we've known them as lawyers in the community for a long time," said V.L. Woolston, a member of Perkins' five-member management committee. "We wish them well."

Rather than regard the newly combined firm as a threat, Woolston welcomed it as a validation of the size and importance of the Seattle legal community.

"It's a positive sign for the business and community leaders here that the area is growing in size and in strength," said Woolston. "[The merger] verifies this is a strong legal market, it's had tremendous firms and tremendous lawyers for a long time."

David Bowermaster: 206-464-2724 or dbowermaster@seattletimes.com