K&L Gates and Australia's Middletons approve January merger

K&L Gates is to merge with Australian firm Middletons from January next year, creating a 2,000 lawyer law firm with 46 offices worldwide.

Confirmation of the tie-up earlier today (4 December) comes after 533 equity partners across both firms voted unanimously this week to combine their resources through a full financial and operational merger from 1 January, 2013.

The deal will see K&L Gates take on 300 Middletons lawyers including 70 partners across four offices in Australia – Melbourne, Sydney, Perth and Brisbane – with the firm operating globally as K&L Gates.

It will have a single profit pool with a single firm-wide, merit-based remuneration scheme.

K&L Gates chairman and global managing partner Peter Kalis will remain head of the firm, with Middletons national managing partner Nick Nichola becoming Australia managing partner.

In an interview with Legal Week, Kalis said there would be no consolidation of offices or cut backs following the integration.

“There’s not going to be any consolidation of offices, nor will there be any restructuring of the current offices in Australia or their personnel. This is a very solid foundation for us, and we wish to build on it the way it is – not subtract.”

He added that there would be no major changes for staff in Australia except for the obvious adjustments that come with a merger.

“One of the really appealing things about the combination is how similar the cultures of the two firms are. You hear reports of other firms combining where they have great cultural dislocation. But Middletons does business in very much the same way as K&L Gates does business.”

Pittsburgh headquartered K&L Gates confirmed it was talking to Middletons in August this year.While there has been growing interest in Australia from both UK and US firms, the deal is the first full merger between a large US firm and an Australian outfit, with K&L Gates following the lead of UK counterparts such Herbert Smith, which merged with Freehills on 1 October, Norton Rose, which merged with Deacons in 2010 and Ashurst, which has already combined with legacy Blake Dawson now Ashurst Australia, with the two firms planning to financially merge from 2014.

As well as giving K&L Gates access to Australia, where US direct investment has totaled more than $500bn (£310bn) since 2005, and its natural resources market, the combination will also enhance K&L Gates capabilities across practice areas including biotech and life sciences, IP, employment and projects.

Meanwhile for Middletons the union means access to US, European and Asian markets.

“The opportunities that this will open up for our staff, at all levels but particularly the younger members are tremendous,” said Nichola.

“We came to the conclusion that the successful firms of the future would polarise into two categories – they would be your niche specialist boutique firms and then the well-resourced, full-service commercial firms that truly compete on a global scale. And we made a decision that we wanted to be the latter.

“We had spoken to a number of other firms prior to K&L, but very early on, it was very evident that K&L was a firm that was similar to us.”

Australia has proven to be an attractive market for international law firms in the last 12 months, with a whole spate of UK outfits announcing a variety of different unions with Australia’s best-known national firms.

Other examples of firms tapping the Australian market include the King & Wood Mallesons merger and the alliance between Linklaters and Allens. Meanwhile, Squire Sanders opened offices in Sydney and Perth this year.

One Australian partner in management at a rival firm commented: “Middletons was once one of the top firms in Australia but has slowly dropped down to the low-mid tier because it did not nationalise in the way the top Australian firms did in the 1980s. I expect they are now trying to make a move to compensate for this and grow their footprint. This merger will not have much of an effect on the market but I expect it will be good for the respective firms individually.”