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 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, said he “couldn’t talk about it.”