A number of law firms shut down in 2003 because the economy left them with real estate burdens too heavy for their books. Closed firms include Arter & Hadden; Brobeck; Altheimer & Gray; and Pennie & Edmonds, whose closure dramatically changed the job market for lawyers. However, it also provided opportunities for firms like Reed Smith to usher in the new year with yet another acquisition.

Reed Smith, which typically grows through acquisition, had a smaller appetite than usual this year, choosing eight-lawyer intellectual property boutique Shanks & Herbert, in Alexandria. (See: LawFuel press releases).The deal was one of the few year-end transactions in the industry.

“We find that it’s easier [adding large groups of attorneys] than adding people one by one if you can find a group that works well together,” says Judy Harris, managing partner of Reed Smith’s D.C. office.

In November 1999, Pittsburgh-based Reed Smith (www.reedsmith.com) consumed the Northern Virginia real estate and land-use firm Hazel & Thomas, which added offices in Leesburg and Falls Church to Reed Smith’s regional addresses.

After the new IP group gets comfortable, Reed Smith, the 27th largest firm in the region, will begin searching for more financial services lawyers. Now, with 95 lawyers in its Washington office, the firm is “bursting at the seams” in its 1301 K St. NW office, Harris says. Reed Smith’s lease expires in December 2005, and the firm will start searching for new space shortly.

Shanks & Herbert received several offers every year during the firm’s seven-year existence, but lawyers accepted Reed Smith’s offer because of the firm’s reputation.

“They do marketing from within,” says Toni Herbert of Shanks & Herbert. “And Reed Smith has a tremendous depth of clients.”

Shanks & Herbert lawyers sublet their offices in Alexandria, and are looking for bidders on a San Diego office.

Reed Smith was one of just a handful of law firms to complete a merger in the waning months of 2003, a time of year when a flood of transactions usually takes place.

“There is still consolidation going on,” says Lisa Smith, a law firm merger consultant at Hildebrandt International (www.hildebrandt.com). “They’re just doing it a little differently.”

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