Los Angeles-based Latham & Watkins LLP is quietly developing a New York state of mind as it propels to the top tier of U.S. firms with high-dollar corporate and finance deals, according to new rankings.

"If you take a look at a list of the eight firms ahead of us, my guess is seven are in New York," said Peter Kerman, Latham's global chairman of the corporate department who represented Kohlberg Kravis Roberts & Co. in the recent $6.6 billion sale of Toys 'R' Us Inc. "Brick by brick, every year, we get more improvements and a little bit larger in New York. Now, we're at a point where New York is bigger than the L.A. office."

In addition to Toys 'R' Us, Latham's recent deals included Amgen Inc.'s $1.3 billion purchase of Tularik Inc., Harrah's Entertainment Inc.'s $9.4 billion acquisition of Caesars Entertainment Inc. and the $4.85 billion sale of Metro-Goldwyn- Mayer Inc. to Sony Corp.

Growth in the New York office, as well as a rapid growth strategy, has helped Latham generate enough high-billed corporate work to compete with the New York firms.

But its success also comes from handling more mergers and acquisitions for publicly-held companies rather than the small and mid-sized private businesses that make up much of L.A.'s economy. The firm is also representing investment banks, private equity firms and other financial entities that bankroll the dealmaking.

In joining the ranks of the New York firms, Latham has surpassed its local rival in business deals, Gibson Dunn & Crutcher LLP. While Gibson continues to be the most profitable firm in Los Angeles, generating $1.5 million per partner last year versus Latham's $1.4 million, the firm generated half the revenues of Latham last year.

'Less parochial' American Lawyer magazine's "Corporate Scorecard" recently placed Latham among the nation's top five firms in eight out of 24 categories of corporate deals brokered during 2004. Latham, whose top rankings include serving as legal counsel to both the issuers and underwriters of initial public offerings and high-yield debt offerings, was trumped only in number of categories by three other firms.

"What the ratings reflect is the fact they have become less parochial and been willing to grow in New York and internationally," said James Hunt, managing partner at Santa Monica-based Bison Capital Management, a private equity firm that Latham has represented for more than a decade.

Latham, with 1,500 attorneys, is now twice the size of Gibson. Latham also has 22 worldwide offices, compared to Gibson's 12.

Dennis Friedman, co-head of the corporate group at Gibson, said his firm has a slower growth strategy that he calls more "calculated" and "focused."

"We're extremely disciplined in the way in which we bring people into the partnership," he said. "I want to be satisfied that if I turn over a deal to one of my partners in London and Munich, I'm comfortable with the person who's handling that there."

Kerman said Latham's objective is to make large investments in the hiring of lawyers and become a leading global firm. Those investments have added costs that hurt profits but brought additional revenue through various practice areas other than the corporate and finance departments.

Many of last year's IPOs, for instance, came from the venture capital-backed clients of lawyers in the biotechnology and life science practices in San Diego and Menlo Park. Others, such as the IPO of Maguire Properties Inc. two years ago, came from real estate investment trusts.

Nowhere have the corporate deals been greater than in Latham's New York office, with its 120-lawyer corporate practice. Kerman said the firm made a strategic decision to focus in New York on mergers and acquisitions of public companies, which are often higher-dollar deals than the M & As; of private companies.

"We didn't have as much recognition in the market as we deserved," said New York partner Chuck Nathan, who joined the firm four years ago. "A lot of what I've been doing since I came is building credibility in the market for the M & A; practice."

Private equity factor
Latham handled 88 mergers and acquisitions last year with a total value of $161 billion, according to American Lawyer's "Corporate Scorecard." Those deals earned the firm a No. 6 ranking in representing investment advisors on mergers and acquisitions and a No. 9 ranking in representing the principals.

Gibson made the Top 10 once, ranking No. 8 on the list of representing investment advisors. They handled 13 deals totaling $20 billion.

Friedman attributed its rank to the particular mix of deals and to a less active group of private equity clients. Latham's private equity clients have been more willing to go public.

Last year, Latham's corporate finance practice gained a significant group of partners from New York-based Skadden Arps Slate Meagher & Flom LLP, which ranks consistently at the top on the corporate charts. Three partners joined the New York office, but the Los Angeles office gained John Mendez, who formerly headed Skadden's West Coast banking and institutional investing practice.

Mendez said corporate finance is more of a "leading punch practice" at Latham. "At Skadden, the practice is as much representing borrowers doing transactions with the M & A; group and the corporate group," he said. "Contrast that with Latham, where the practice is representing banks and lending to the borrowers."

Representing banks, particularly on high-yield deals, goes back to the days when Latham handled much of the legal work for Drexel Burnham Lambert.

"When Drexel dissolved, and all the investment bankers went to different investment banking firms, we continued those relationships with those individuals and today are routinely in the top one to three representing issuers in that product category," Kerman said.

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