A Deeper Dive Into Scott Barshay's Move From Cravath To Paul Weiss

How major a move is this, and how much might he make at his new firm?

Scott Barshay (via Paul, Weiss; © Matt Greenslade)

Scott Barshay (courtesy of Paul, Weiss; © Matt Greenslade)

The big news in Biglaw, which we mentioned earlier today, is veteran dealmaker Scott Barshay’s lateral move from Cravath to Paul, Weiss. He will assume the role of global head of M&A at PW, as noted in the firm’s press release.

We first heard rumblings about Barshay’s move early on Sunday morning (although he actually started working at PW on Friday, as reported by the American Lawyer). Here’s what one source, a corporate partner at another leading law firm, told us:

Scott Barshay has left Cravath (his bio came down last night around 10 p.m.). He’s going to Paul Weiss.

The Cravath partners are devastated. Biggest loss since David Boies left.

It’s probably fair to describe Barshay as the most notable Cravath defection since Boies left CSM in 1997 — partly because it’s so rare for partners to leave CSM’s hallowed halls, especially for a rival firm. As noted by Michael de la Merced over at DealBook, “[t]he firm has lost top stars over the years, but usually those partners made career changes” (such as Robert Kindler, arguably the biggest M&A name to leave Cravath before Barshay; back in 2000, Kindler went into investment banking, where he’s still killing it as global head of M&A at Morgan Stanley).

Some Cravath lawyers might be sad to lose Scott Barshay as a colleague — he’s fun to talk to, the kind of person who will argue during an interview about whether the Iliad is better literature than the Bible (as Matt Levine of Bloomberg View recently recounted) — but there’s no doubt that CSM’s M&A practice remains robust. Some clients will surely follow Barshay to his new home (and we hear that he was working the phones over the weekend), but Cravath has a long list of deals being handled by other M&A stars, including department co-heads Faiza Saeed and Robert Townsend III.

At the same time, PW deserves props for its hiring coup. Scott Barshay is “one of Wall Street’s top deal makers,” according to the New York Times,” and his loss is “a blow for Cravath,” per the Wall Street Journal. The 50-year-old Barshay joined Cravath some 25 years ago, after graduating from Columbia Law School in 1991, and he made partner in 1998. He previously served as head of CSM’s corporate practice (which is why his name has graced bonus memos in years past).

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In 2015, Barshay worked on transactions with an aggregate value of almost $300 billion — enough to give him a respectable place in the league tables if he were a law firm unto himself. Many of these deals have been headline-making, such as client Starwood’s acquisition by Marriott and client Anheuser-Busch Inbev’s acquisition of SABMiller. PW’s corporate practice, led by Bob Schumer (brother of Senator Chuck Schumer, in case you’re wondering), advised on a little more than $300 billion in deals in 2015, placing it around #19 or #20 in the M&A league tables. Look for a rankings rise from Paul, Weiss in the years ahead, now that Barshay’s aboard.

Inquiring minds want to know: how much will Scott Barshay earn at Paul, Weiss? That’s been a subject of some speculation. We initially heard all sorts of juicy rumors — a seven-figure signing bonus! a guarantee in the high seven figures! an eight-figure total pay package! — but we now have it on good authority that Barshay’s deal, while very generous, isn’t quite so lavish. PW doesn’t pay signing bonuses to lateral partners, and it isn’t giving him a guarantee; instead, his compensation will depend on how well the firm fares in 2016, pretty much like every other partner at Paul, Weiss.

We understand, however, that he should fare better financially at PW than he did at CSM. Cravath has a fairly strict lockstep compensation system, under which Barshay earned between $4 million and $4.5 million, as estimated by one source of ours.[1] Paul, Weiss is also largely lockstep, but as firm chair Brad Karp told the Wall Street Journal, its “modified lockstep” system allows for “flexibility at the upper end for star performers.” In addition, as noted by Am Law, the firm has a “significant bonus pool” that can sweeten the pot.

Will other partners or associates follow Barshay from Cravath to Paul, Weiss? One early rumor suggested that he might be accompanied by others, but senior sources at both firms now tell us that he’s coming solo.

Cravath’s reaction to the news was, well, très Cravath — understated and classy. The firm’s statement, issued to Bloomberg BNA and the WSJ, wished Barshay “the best in his future endeavors.”

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With the first quarter of 2016 in the rearview mirror, will other big names of Biglaw jump into the game of musical chairs? If you have advance word of a major move, please email us or text us (646-820-8477).

[1] Estimating Barshay’s 2015 Cravath compensation at $4 million to $4.5 million seems reasonable. In 2014, according to the 2015 Am Law 100 rankings, CSM enjoyed profits per partner of $3.4 million (lower than the $3.8 million at Paul, Weiss, actually).

But 2015 should be a better year for Cravath than 2014 — the firm worked on more than $900 billion worth of deals last year, second only to Skadden — and Barshay is of above-average seniority in the Cravath partnership. (He’s 50, the firm has a mandatory retirement of 65, and the average Cravath partner makes partner before 35 — the firm has a famously short partnership track that it has kept short, even as other firms have made the quest for partnership take a decade or more.)

UPDATE (4/5/2016, 9:35 a.m.): Over at Am Law Daily, Julie Triedman has an interesting piece, Rainmaker’s Defection Could Test Cravath Lockstep Model, with more info about partner pay at CSM and PW:

Paul Weiss chair Brad Karp declined to say how much the firm agreed to pay Barshay. But a source with knowledge of the move said the amount is shy of $10 million—though not by much. The firm does not give guarantees or signing bonuses. (Top compensation levels at Cravath, by contrast, reached a bit over $4 million last year, according to two sources knowledgeable about the firm.)

Though 90 percent of Paul Weiss partners are compensated based purely on seniority, a small group of top business generators are rewarded far above the lockstep system in any given year.

“Paul Weiss will pay whatever it takes to get what they want,” said Sharon Mahn, a longtime legal recruiter and founder of Mahn Consulting in New York who frequently places top partners at elite firms.

This generally makes sense given what we’ve heard. Cravath pay topping out at $4 million might seem a tad low, but remember that CSM sets the spread between the highest- and lowest-paid partners at 3 to 1. If Barshay was earning a little more than $3 million at Cravath — imagine a system with a 3:1 spread, with junior partners making $1.5 million, midlevel partners making $3 million, and senior partners making $4.5 million (or a little less) — he might have tripled his comp in moving to Paul, Weiss.

UPDATE (5/4/2016, 12:00 p.m.): In the weeks since Scott Barshay’s departure, we’ve gotten some significant pushback on the claim that his former colleagues were “devastated” by his leaving. There were a few who were disappointed, one Cravath lawyer told us, but definitely not “devastated” — especially because, well, Barshay is a “complex” individual….

A Cravath Partner Moves to Paul, Weiss [DealBook / New York Times via Morning Docket]
Paul Weiss Hires Top M&A Partner From Cravath [Bloomberg BNA]
After Barshay Exit, Here are the Deals Cravath is Advising [Bloomberg BNA]
Cravath Loses Top Deal Lawyer Scott Barshay to Paul Weiss [Wall Street Journal]
Top Cravath Deal Lawyer Scott Barshay Jumps to Paul Weiss [Am Law Daily]
Scott Barshay Joins Paul, Weiss as Global Head of M&A [Paul, Weiss, Rifkind, Wharton & Garrison LLP]
Panama Papers and Marquee Data [Bloomberg View]
Dealmaker of the Week: Scott Barshay of Cravath, Swaine & Moore [Am Law Daily]


David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.