leadership team, led by go-get-‘em chairman Hugh Verrier, finally started
work on Monday (1 October).
Decisions, decisions. After what seemed like an eternity, White & Case’s new leadership team, led by go-get-‘em chairman Hugh Verrier, finally started work on Monday (1 October).
And, oh boy, is the firm in safe hands. Verrier is a wildcat, a human dynamo. Watch in awe as White & Case rips up the rulebook and kicks off its assault on the world’s legal markets in earnest.
Just kidding. Hugh’s not quite ready yet. On the day the project finance and banking partner took over as top dog from former managing partner Duane Wall, he dodged the chance to outline his vision for the firm to the wider market in person. Instead, the firm put out a press release. Snore.
You might recall that Verrier was eventually chosen to head White & Case after one of the longest election processes in law firm history. It was an epic consultation process that also defined, eventually, White & Case’s new governance structure. We did a story on it when the process started – in March 2006.
Now the firm finally had its new structure in place, surely it was a great chance to talk about it? Not according to Verrier. The main man on the brand new executive committee instead chose to say, via a PR flunkey, that he was still putting the finishing touches to the firm’s strategy. Incredibly, he wasn’t ready yet. Er, how long does he need?
But wait for it. According to the press blurb, the new executive committee is designed to act as White & Case’s “decision-making body”. You couldn’t make it up. Let’s hope they don’t have to make any decisions too quickly.
And what did the thrilling message in the release have to say anyway? There was something about the firm’s “global strength”, “core elements” and “clients, people and teamwork”, but sorry, I’d nodded off before I got to the end.
Luckily, help was at hand. The one decision Verrier had taken was to pass the communications buck to his PR, who had this to say: “Hugh is a very deliberate and thoughtful guy. He’s a chess player and this is a step-by-step process. He will start to be public about what his broader plans are over the next few weeks but this transition will happen at his own pace.”
No change then.
Earlier Byrne in the USA blogs
Recharacter building – 1 October 2007
Recharacter building – 1 October 2007
Lordy. Who rattled his cage? Paul Pearlman, managing partner of New York firm Kramer Levin, got what we Brits describe as “a bit shirty” when I quizzed him about the demise of his outfit’s relationship with Berwin Leighton Paisner (BLP).
“We’re not ending anything, we haven’t ended anything,” Pearlman snapped. “The only thing that’s happened is we’ve recharacterised our relationship.”
Never mind the fact that reliable sources on the other side of the Atlantic confirm that BLP has dumped Pearlman and his firm. The real truth, according to Pearlman, is that the Kramer Levin/BLP relationship is alive and kicking and has just been “recharacterised”. That’s all.
Apparently this all boils down to the interpretation of the word ‘alliance’. According to Pearlman, it was we pesky media types who had it wrong all along. Far from there being a close and exclusive working relationship between his firm and BLP, as we believed, it was, in fact, closer to a best friends deal. Everybody was free to go with whoever they wanted, whenever they wanted. It was an open relationship. How very modern.
Unfortunately for Pearlman, this was not how it was characterised five years ago when BLP and Kramer Levin first got into bed together. It was presented at the time as an exclusive alliance with a view to a merger – and Pearlman was there at the original briefing to The Lawyer in October 2002.
By way of evidence that his firm’s relationship with BLP was still fine and dandy, Pearlman offered this: “The level of business this year has been by far the most ever. In my view the relationship is healthier than ever.”
Naturally I asked Pearlman to give me some idea of the level of business this healthy relationship represented. Put a figure on it, Paul. £1m? £10m?
“Substantial,” came the reply. “More than it has ever been before.”
From The Lawyer, 1 October (Vol 21, Issue 38)
Credit crunch casts NY shadow
Forget corporate – it’s so last season. In New York, the field to be in if you want to get hired is bankruptcy. Now you won’t sense this from walking around Manhattan. The US may be on the brink of financial meltdown, but there’s no sign of that in the streets below Central Park.
Although the fallout from the credit crisis continues to make headlines – along with the indictment of Milberg Weiss class action stalwart Melvyn Weiss, the big legal market news in the city this month – around town the usual New York business of making as much money as possible continued non-stop.
In Bryant Park, the site of one of New York Fashion Week’s big shows last week, the construction of the $1bn (£496.13m) Bank of America Tower slowed not one jot because of the summer’s hysteria in the debt markets. When the building is completed in 2009, expect some of the city’s leading law firms to move in.
For now, however, all there is to see by the freshly laid turf squeezed between the towers is ranks of men and women bashing their laptops and barking into phones. Slowdown? Not here.
But first impressions can be misleading. None of New York’s top lawyers are going to admit it, of course, but there’s a nervousness here. Major M&A is on hold. The promised restructuring wave hasn’t arrived.
What happens next is, according to Weil Gotshal & Manges restructuring partner Harvey Miller, “the sixty million-dollar question”.
“Three months ago, if you asked someone what the effect of the sub-prime crisis would be, they’d probably say, very contained and limited, no leakage,” says Miller. “The fact that it spread so international, that BNP closed two funds in Paris, and the problems at Northern Rock, was a shock. The ability to contain the credit crunch wasn’t as strong as those so-called knowledgeable people thought.”
So New York’s law firms, like everybody else, are waiting to see whether the events of the summer will hit the real economy. Will there be a deeper recession that hits at the bricks and mortar underpinning the confidence not just of the markets, but of the consumer? And if so, shouldn’t they be hiring to reflect the market change?And as Miller says: “It seems to me the situation is less under control than anyone thought.”
But in New York the firms with the big litigation and bankruptcy groups, firms such as Milbank Tweed Hadley & McCloy, Paul Weiss Rifkind Wharton & Garrison, O’Melveny & Myers and Weil, are gearing up already. That could be via lateral hires (such as Vinson & Elkins’ hire of New York bankruptcy boutique Cronin & Vris last month), or it could be at the bottom. The September crop of associates may just have discovered that their services are more in demand in restructuring than in corporate.
Lawyers might not move the market, but the canny ones will be ready to jump when their clients ask them.
New York, new firm
There was no ticker-tape parade, but last Wednesday (26 September) two New York powerhouses, Dewey Ballantine and LeBoeuf Lamb Greene & MacRae, sealed their shotgun merger.
Shotgun because, although there is no doubt this has all the hallmarks of a great deal for both sides, it was a deal that Dewey in particular needed to get done.
“Dewey Ballantine is a sad story,” says one lawyer who prefers not to be named. “Twenty years ago it was up there with Shearman & Sterling. Now it’s a third-tier law firm.”
Not any more. The speed with which this merger was achieved is a reflection not only of the compatibility of the two sides, but of the appetite of Dewey, which is still reeling from the ravaging it suffered at the hands of Ralph Baxter’s Orrick Herrington & Sutcliffe, to get the deal closed.
On a sunny Wednesday afternoon in Manhattan, only hours after the deal was sealed, there was no sign of any Orrick-related hangover from former Dewey head Mort Pierce.
“I’m feeling fine,” Pierce said. “I’m sitting here working; it’s a day like any other.” LeBoeuf’s genial chairman Steve Davis today (1 October) takes the reins as the full-time manager running the combined firm. It’s a luxury Dewey didn’t have before, with Pierce running the show as well as clocking up 3,000-plus chargeable hours. And while he is a phenomenal lawyer and deal-doer, by all accounts he is less skilled at running a law firm. Now it’s a job he’ll no longer have to worry about.
“For something as complex as a law firm of this size you need to have a full-time manager,” says Davis. “Dewey didn’t have that before.” LeBoeuf London chief Peter Sharp sees the merger as a New York play. In an interview in September’s edition of The Lawyer Podcast (www. thelawyerpodcast.com) he says: “The merged firms’ US office will be the fifth-largest law firm office in New York City.”
On paper that could bring problems. Cultural issues are always among the thorniest in any law firm merger, yet in this one, so far, there appears to have been remarkably little fallout.
“Culturally it’s a fantastic mix,” says Davis. “The metrics, finance and productivity are similar and there are very few conflicts. That’s one reason we’re so excited. It’s a very complementary merger in terms of practice areas and skill sets.”
It looks good for Dewey & LeBoeuf. But Davis admits: “Now we have to make it work”.
The hard work starts now.
Living life to the MAC
It was still hot in the city last week, while the final days of what may prove to be one of the most significant deals of the year were played out.
But you can bet on it having been even hotter in the air-conditioned offices of Simpson Thacher & Bartlett, where the $8bn (£3.97bn) leveraged buyout of Harman International Industries by Kohlberg Kravis Roberts (KKR) and Goldman Sachs appears to have died.
The collapse of the deal centred on KKR’s and Goldman Sachs’ decision to “call a MAC”. This means that, as a result of alleged deteriorated financial conditions at Harman, the pair claimed a material adverse change (MAC) clause had been triggered, allowing them to walk away.
The use of this technique is extremely rare in the US, as is the case law relating to it (as indeed it is in the UK: remember Allen & Overy‘s (A&O) attempts on the part of WPP to claim a MAC on its offer for Tempus just after 9/11?). But unless the parties return to the table to renegotiate, or Harman somehow finds another buyer, there may soon be considerably more case law pertaining to calling a MAC. But in the short term at least, if KKR ditches the deal it could be considerably better off than Harman.
“Everybody knows what’s going on,” claims one New York M&A partner. “It’s a tactical decision to reduce exposure.”
Under the merger agreement, seen by The Lawyer, KKR and Goldman Sachs face incurring a break fee of $225m (£111.63m) if they walk away. In the current market, with the other option being going ahead with an $8bn deal, they may just think that’s peanuts. And if they do exit permanently, as seems likely, the only real option left to Harman and its lawyers Jones Day will be to litigate.
“It’s possible you’ll see more people using this claim now you’ve seen it used effectively,” says M&A partner Burt Haimes of Orrick’s New York office.
The thinking among corporate lawyers in New York is that a lot more of these deals will go down this route, which means a lot more of them will go to trial. As A&O New York corporate partner Mike Gilligan says: “For M&A lawyers it’s exciting because we’ll likely see new developments in an area where there’s not a lot of case law and learn more about what courts think of a clause that we’ve all spent a lot of time drafting and negotiating.”
Neither side’s lawyers would comment on the Harman deal, but if it does reach a Delaware court, expect M&A lawyers to be watching the outcome very closely indeed.
By now Linklaters global head of finance John Tucker will be settling in to his semi-permanent New York home. Even we have to admit that Linklaters’ decision to relocate one of its divisional global practice heads to the US for the first time ever, in the same week that The Lawyer launched its first-ever permanent US coverage, was a coincidence. Probably.
But the two events are linked. The New York-London axis is increasingly important to most of the largest law firms on the planet. Just as it is vital for firms such as Linklaters to have what Tucker called “mobility”, so it is vital for the magazine that covers that market to have informed comment on both sides of the Atlantic.
From today, we do.