As some of you have noticed, we have an article in today’s New York Times, in the DealBook Special Section. It’s about fee arrangements in the (highly lucrative) context of mergers-and-acquisitions work. Here’s a teaser:
For some firms, billable hours are just the beginning. As the boom rolled on, law firms specializing in mergers and acquisitions increasingly engaged in premium billing, charging fees in excess of their total hourly billings. Think of it as a tip for good work. Whether a client pays a premium depends upon its satisfaction with the result, the size and complexity of the transaction, and the nature and length of the attorney-client relationship.
But since the credit market began to tighten this summer, an event that brought new deals to a crawl and has upset several old ones, many lawyers have been wondering whether the premium party is over…
And here’s one of the more juicy portions:
One firm, though, has moved beyond billable hours to the flat fee preferred by bankers: Wachtell, Lipton. A former Wachtell lawyer described a typical bill as follows: “There’s a paragraph stating something like, ‘For legal services rendered in connection with Transaction X,’ then a dot leader, then a number followed by six zeros.” He said he worked on some deals where Wachtell was paid more than the bankers.
Wachtell charged a flat fee when it advised the Bancroft family, which controlled Dow Jones & Company, during the $5 billion bid by Rupert Murdoch’s News Corporation For its work on the deal, Wachtell first submitted a bill for $10 million.