Lovells and Hogan & Hartson are in the early stages of merger talks, Legal Week can reveal, with the firms' management teams currently assessing the case for a transformative union.

Lovells is to discuss the proposed tie-up with the top 25 US law firm at a meeting of its international executive on 28 October. A deal would create a top 10 global practice in revenue terms.

A decision to pursue the talks, which were initiated informally several months ago, would trigger wider discussion ahead of Lovells' annual partnership conference on 21 November. The talks are being led on the US side by Hogan chairman Warren Gorrell.

A union between the two firms would create a 2,500-lawyer practice with revenues of around $1.9bn (£1.2bn) according to figures from the latest Global 100 rankings from The American Lawyer and Legal Week.

The Washington DC-based Hogan was the 22nd largest practice in the US in 2008 in revenue terms, with fee income rising 4.9% to $922.5m (£576m), while profits per equity partner (PEP) fell 1.7% to $1.16m (£725,000).

Lovells was an above-trend performer in Europe during the 2008-09 financial year, boosting revenues by 10.9% to £531m, though PEP fell over the same period by 11.3% to £586,000. The performance was ahead of the UK top 50, which saw fee income rise by 2.9% while PEP fell on average by 17.3% in the wake of the banking crisis and global recession.

The firms' practices are also broadly comparable. Hogan boasts a 13-office US network and highly regarded practices in regulatory/government law, real estate, disputes, antitrust and intellectual property. The firm also has a substantial corporate practice.

Hogan has 14 offices outside of the US, compared to 27 foreign offices at Lovells. Both firms have offices in New York, London, Beijing, Brussels, Hong Kong, Moscow, Munich, Paris and Tokyo. In addition to its New York arm, Lovells has a branch in Chicago.

Lovells, which currently generates around 60% of its revenue outside the UK, would bring substantial international capability to a deal as Hogan currently only has 23% of its lawyers based outside of the US.

Despite initial enthusiasm for the deal, both firms will be aware that US/UK mergers are notoriously difficult to secure given the challenge of marrying differing partner compensation and accounting models. The handful of transatlantic deals that have so far taken place in the legal sector have been effective takeovers rather than mergers of comparable practices.

A Lovells spokesperson commented: "In the US, we have to date been focused on providing a clearly defined range of services that reflect our international strengths, and it is no secret that any significant expansion beyond that would require a major strategic move.

"We review our US strategy on a regular basis and we have recently been taking a closer look at market developments and the opportunities that we believe are available to us. Beyond that, we are not in a position to comment further."

Additional reporting by The National Law Journal.

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