K&L Gates in Talks with Australian Law Firm

Thomson Reuters; August 17, 2012

(Reuters) – Seeking to strengthen its position in the Asia-Pacific region, the Pittsburgh-based law firm K&L Gates has engaged in discussions to acquire the smaller Australian full service commercial law firm Middletons.

If a deal is consummated, K&L Gates, which employs roughly 1,900 lawyers in 41 offices worldwide, would gain offices in Brisbane, Melbourne, Perth and Sydney, and up to 300 more lawyers.

The firms said in a joint statement that discussions had been under way for several months and that they expected to present formal proposals to both partnerships later in 2012 if talks are successful.

The potential deal marks the latest effort by K&L Gates Chairman Peter Kalis to expand internationally. K&L Gates has added hundreds of lawyers through several mergers and acquisitions since its 2007 inception, when Seattle’s Preston Gates & Ellis merged with Pittsburgh’s Kilpatrick & Lockhart Nicholson Graham to create a 1,400-lawyer firm. If K&L Gates acquires Middletons, the firm’s headcount will rise to more than 2,000 lawyers.

In 2011, K&L Gates grossed $1.06 billion, according to The American Lawyer, while Middletons was ranked 16th in revenue for Australian firms, according to a Down Under publication, Business Review Weekly. The magazine put the firm’s revenues for fiscal 2011-12 at $112 million. In 2010 the firm advised Harbert Australian Private Equity in its investment in Emeis Holdings, the owner of the Aesop cosmetics business. Other Australian clients have included Converse, Skechers and American Crew. Middletons is also the official law firm of the Australia Open, according to the firm’s website.

K&L Gates’ and Middletons’ leadership declined to speak further about the merger talks since the negotiations are ongoing, but legal experts said Australia has recently become an attractive location for law firms to position themselves, mainly because of its proximity to China.

China has made investments in natural resources and infrastructure projects in underdeveloped and developed areas throughout Australia, which has led to close relationships between China and law firms in the southern continent, according to legal experts.

“China has people, whereas Australia has lots of empty land and resources,” said Bill Brennan, a consultant with Altman Weil. “As a result they are becoming tied economically, which will help Australian law firms penetrate the Chinese marketplace.”

Other law firm marriages in Australia in the past several months have included the merger between China’s King & Wood and Australia’s Mallesons Stephens Jaques and between the UK’s Herbert Smith and Australia’s Freehills.

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