Law Firms Experience “Bailout Boom”
As the financial crisis worsens, top law firms are experiencing a boom in work advising banking clients in mergers and acquisitions, bankruptcies and lawsuits. The spate of work began in March with the collapse of Bear Stearns and its government-brokered sale to JPMorgan for about $2 billion, according to Bloomberg. Deal volume, down 36% at midyear according to data compiled by Bloomberg, rebounded with the financial crisis and is now down just 27% for the year. Since then, Bloomberg lists Sullivan & Cromwell, Simpson Thacher & Bartlett, Davis Polk & Wardwell, and Wachtell, Lipton, Rosen & Katz among the growing number of firms handling major work stemming from the crisis. And for the attorneys lucky enough to have a piece of the Lehman Brothers bankruptcy pie, including Weil, Gotshal & Manges (representing Lehman) and Milbank, Tweed, Hadley & McCloy and Quinn Emanuel Urquhart Oliver & Hedges (representing creditors), these are good times, reports the Financial Times.
Meanwhile, “task force” is the latest law firm buzzword thanks to the economic crisis, reports Law.com. Firms are creating task forces as uncertainty stemming from the economic crisis mounts and apprehension over anticipated regulatory changes grips investors around the world. According to Law.com, though their names vary, all of the groups offer essentially the same service: attorneys who can offer clients expert advice on issues stemming from the financial meltdown and the massive $700 billion bailout bill.
Executive recruiting firm, A.E. Feldman, says legal jobs are opening up as law firms focus on pending legislation and regulatory actions to help their clients make sense and survive one of the most significant events in the history of the U.S. economy. A.E. Feldman’s President, Mitch Feldman, also notes, “The issues these task forces seek to address can dramatically impact their clients’ bottom lines. This is critically important in today’s business climate.”
Bailout Boom
Lehman Brothers’ bankruptcy (the largest in U.S. history, which it filed Sept. 15 with debt of $613 billion) has been a boon for several law firms, reports the FT. New York- based Milbank, Tweed, Hadley & McCloy and Quinn Emanuel Urquhart Oliver & Hedges, based in Los Angeles, represent creditors. Simpson Thacher is representing Lehman in issues arising from the company’s bankruptcy. New York-based Weil, Gotshal & Manges also has more than 100 lawyers representing Lehman.
According to the FT, Weil, Gotshal & Manges is seeking up to $950 an hour to represent Lehman. In court documents filed by Lehman seeking to retain the firm, the FT says Weil Gotshal listed its customary hourly rates in the U.S. as $650 to $950 for members and counsel, $355 to $595 for associates and $155 to $290 for paraprofessionals. The firm also listed toll calls, overtime meals and travel as among other reimbursable expenses. Meanwhile, restructuring specialist Alvarez & Marsal is seeking hourly payments of up to $850. The FT reports that by one estimate from Lynn LoPucki, a Law Professor at UCLA School of Law and Harvard Law School, total fees for lawyers will hit $900 million. (That compares with $760 million for the Enron case and $630 million for WorldCom, the FT notes). The $900 million includes billable hours for all professionals paid by application to the court, including lawyers, financial advisors, consultants and auditors.
The List Goes On…
Cleary, Gottlieb, Steen & Hamilton is counseling Barclays on its acquisition of the North American investment banking and capital markets division of Lehman, according to Bloomberg. The report notes the firm is also working for the Fed Bank of New York and the SEC, on matters relating to the Lehman bankruptcy, and Morgan Stanley in its conversion to a bank holding company.
Meanwhile, Bear Stearns is being advised by the New York law firms Cadwalader, Wickersham & Taft and Skadden, Arps, Slate, Meagher & Flom. Sullivan & Cromwell also advised Bear’s board of directors, notes Bloomberg.
Wachtell, Lipton, Rosen & Katz was called upon in September to help the U.S. government take over Washington-based Fannie Mae and Freddie Mac, reports Bloomberg. Sullivan & Cromwell represented Fannie Mae and Cravath, Swaine & Moore its independent directors. Davis Polk took the lead for Freddie Mac.
The report adds that Wachtell has also advised Bank of America in its acquisition of Merrill Lynch, Wells Fargo in its Wachovia bid which just received Fed approval, and Morgan Stanley in Mitsubishi UFJ Financial Group’s equity investment for a 21% interest in the bank.
Litigation & Securitization
Meanwhile, law firm, O’Melveny & Myers’ announced it has expanded its ranks. A Partner in the firm, Daniel Passage, says the firm is expanding to keep up with client demand for “more assistance with completing, analyzing, and in some cases, unwinding very complex transactions.” Passage adds that, “Adding partners on the East Coast, as well as in Asia and Europe, who have deep experience with distressed debt, derivatives, and complex securitizations has been one aspect of our broader effort to enhance the depth and diversity of our firm-wide finance practice, and a top strategic goal for some time. This has only become more important for us as the recent crises have been generating client needs in all of the key financial centers in the US, Europe, and Asia.”
Litigation lawyers at top firms also report increased business stemming from the financial turmoil, according to Bloomberg. The report quotes Bruce MacEwen, a New York-based legal consultant as saying, “There is going to be a ton of litigation. All these financial assets now have no discernable market value, and that will go on for a long time, particularly to the extent that the federal government ends up owning a lot of them. They have very deep pockets for litigation.”
Task Force the New “Buzz Words”
Right now, as details of the financial crisis and Congress’ bailout plan continue to unfold, law firms are taking action to address their clients’ concerns. Patton Boggs announced it is among the law firms to add what they call a Rapid Response Team to the financial crisis. The firm says it has established a multi-disciplinary task force focused on guiding clients though the upheaval on Wall Street as well as Congress’ $700 billion rescue plan.
“Navigating the intersection of politics and the turbulent financial markets is exactly the type of complex, multi-disciplinary situation in which the firm is often tapped to handle,” said Charles Miller, Deputy Managing Partner of the firm, who will head up the 30-member task force.
A.E. Feldman’s legal and finance divisions are also on top of the latest developments in the financial markets and is constantly researching industry and economic trends. The recruiting firm invites both corporations and law firms to contact its President, Mitch Feldman, its CEO, Carol Schwam, and its highly specialized team of executive recruiters directly to open up a dialogue about the array of issues they face and those they anticipate in the future. According to Mitch Feldman, “Our lines of communication are open.” Contact Mitch Feldman, and the firm’s expert recruiting teams here.
