Simpson, Cads steal a march on Sullivan
It was a case of wheels within wheels in Silicon Valley and beyond last week. One story – Microsoft’s $44.6bn (£22.76bn) unsolicited bid for internet search business Yahoo! – dominated the business headlines, but in US legal circles it was the heavyweight roster of advisers that raised the most eyebrows.
The plum M&A advisory role was snared by Simpson Thacher & Bartlett, which is fielding a three-partner team led by global head of M&A Casey Cogut and including the former head of Simpson’s London office Alan Klein. Partner Kathryn King Sudol completes the trio.
Arguably the most surprising appointment, however, was Microsoft’s nod to Cadwalader Wickersham & Taft head of antitrust, Rick Rule. Both the antitrust and the M&A appointments would appear to be a snub to longtime Microsoft favourite Sullivan & Cromwell.
At Cadwalader Rule and his team will spearhead the advice on the antitrust implications of a merger that would see two of the three largest players in the online search market combine.
As one New York partner puts it: “I’m very surprised Sullivan isn’t on it. It’s Microsoft’s longtime adviser on antitrust and this deal is going to be filled with antitrust. It’s also a huge plus for Simpson. [Microsoft general counsel] Brad Smith never used to speak a word without his colleagues from Sullivan & Cromwell right next to him.” Sullivan did not comment.
As reported last week on www. thelawyer.com (5 February), Rule joined Cadwalader only last April from Fried Frank Harris Shriver & Jacobson. Microsoft, however, has been a client stretching back years to when Rule was a key member of the team battling the US Department of Justice on antitrust matters.
More recently, he advised the software giant on antitrust issues relating to Google’s $3.1bn (£1.58bn) acquisition of advertising outfit Doubleclick.
As one partner at another firm puts it: “Rick’s supplanted Sullivan & Cromwell in the pecking order as [Microsoft’s] antitrust lawyer of choice. He’s very tight with Brad Smith, very tight with [Bill] Ballmer and with [Bill] Gates.”
Speculation as to the reason for the switch has centred on the change of general counsel at Microsoft five years ago, when Smith took over from incumbent of 17 years Bill Neukom.
Neukom’s career at Microsoft began in 1979 when he joined from the Seattle law firm then known as Shidler McBroom Gates & Lucas, then headed by the father of one Bill Gates. That firm, later known as Preston Gates & Ellis, was acquired in January 2007 by Kirkpatrick & Lockhart (now K&L Gates). And one of its highest-profile partners? Bill Neukom. (Neukom, who was travelling last week, was not available for comment at the time of going to press.)
The changing of the guard at Microsoft appears to have given both Cadwalader and Simpson the chance to benefit at Sullivan’s expense, although as one wag puts it: “When it comes to antitrust, Microsoft doesn’t need to fire anybody – they have plenty of work to go round.”
For its part, Yahoo! has turned to Skadden Arps Slate Meagher & Flom Palo Alto-based partner Ken King. Yahoo! is also a longstanding client of Skadden, while general counsel Michael Callahan was a Skadden associate between 1995 and 1999.
Besides the advisers, market gossip has focused on Microsoft’s chances of success in the year’s first megadeal – and the defensive strategies Yahoo! might employ.
One New York corporate partner describes the bid as “a classic strategic deal, where Microsoft wins unless Yahoo! can find a better bid”.
Much of the speculation has focused on whether the Yahoo! board would use its ‘poison pill’ – a technique in which a major dilution of shareholder value would block Microsoft’s chances of success in the deal. The betting is, however, that this strategy would not survive a proxy contest.
“If you’re a Yahoo! board member and Microsoft offers X million and you say no, you need a plan B that’s better for your shareholders,” the lawyer adds. “You can’t just say, ‘No, because I say so’. Even if you wanted to act capriciously, without regard to negligence, you’ll get your head handed to you.”
The smart money is on Yahoo!’s days as an independent company being numbered, although it is likely to hold out for a better offer from Microsoft. That is, unless the regulators choose to step in first.
Cads’ cuckoo land?
With Cads still smarting from the negative press generated by its laying off of 35 associates last month, a fistful of Microsoft dollars in the pipeline will be very welcome. And Rick Rule, such a recent arrival, will no doubt be celebrating.
Still, he’s going to have to work for his money. As one New York partner said last Monday (4 February), “[Microsoft general counsel] Brad Smith has been smoking dope if he really thinks this will complete by the second quarter of this year. That’s preposterous. This will take at least a year to 18 months, if it gets done at all.”
And what’s most likely to derail the deal? Antitrust. Over to you, Rick.
All aboard the big dipper
Talk about a rollercoaster week. Cadwalader began it by confirming that its head of antitrust Rick Rule had scooped a role on one of the deals of the year – Microsoft’s $44.6bn (£22.95bn) bid for Yahoo!
Cadwalader’s public yahoos lasted 24 hours. The next day (Tuesday 5 February) it released its year-end figures. They showed a drop in profit of 6 per cent, giving Cads the distinction of becoming the first US firm to post a fall in the bottom line for 2007. (It has since been joined by Heller Ehrman and Howrey, the latter of which ‘bettered’ Cadwalader with a 17.5 per cent fall in profit.)
Twenty-four hours after that, Cads was back in the news. This time the firm known for having bet and eventually lost on capital markets and structured finance was taking another punt – on private equity. As we reported on Wednesday (6 February), Cadwalader made an audacious raid on Latham & Watkins, snaring that firm’s global co-head of private equity Ron Hopkinson and vowing to build a “top-tier” practice. We can barely wait for the next instalment.
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