Private Equity

455 Central Park West

At the corner of Central Park West and West 106th Street on Manhattan’s Upper West Side, you’ll find a very distinctive building: 455 Central Park West. The luxury condominium building consists of an elegant French Renaissance chateau — a former hospital, actually — attached to a 26-story tower.

It’s a magnificent building, combining the best of the old and the new. Its beautiful apartments have been used as weapons in the law school faculty recruitment wars.

On Friday night, however, 455 CPW was the site of tragedy. A prominent M&A partner at a top law firm jumped from his 22nd-floor apartment to his death.

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The Houston legal market is hot — and a lot of the heat is being generated by Kirkland & Ellis. As we reported last month, K&E recently launched a Houston office with talent poached from a rival.

Kirkland hired Andrew Calder away from Simpson Thacher, for a reported $5 million a year for the next three-plus years. We’ve heard that these figures are a bit high — that he’s hitting the $5 million mark in his first year, thanks to a signing bonus, but not guaranteed at that level for the subsequent years — but there’s no denying that he’s being paid very, very well.

And there’s no denying that K&E will pay what it takes to break into the Houston market. Who’s the latest up-and-coming young partner to get invited into the Kirkland club?

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As the old saying goes, the best defense is a good offense. The exceedingly prestigious and profitable Kirkland & Ellis, which has seen some partner defections in the past few months, seems to be taking that lesson to heart.

Kirkland recently launched in the hot legal market of Houston — by poaching a promising young partner from a competitor. Which super-elite firm did K&E just raid for talent?

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Emily Herx

* Dewey need to send them a wedding present? Because to be honest, we really can’t afford one. Fifty of the firm’s European lawyers jumped ship to tie the knot with Greenberg Traurig in Poland. [WSJ Law Blog]

* “I don’t think there’s enough space in the legal market to absorb all the Dewey lawyers that aren’t prepackaged in a group.” When Dewey get on the unemployment line in New York City? [New York Law Journal]

* Ropes & Gray is expanding its Chinese private equity practice with plans to double its Asian-based lawyers by the end of the year. For now, the firm’s just poaching partners from Norton Rose and Paul Weiss. [Bloomberg]

* John Edwards’s legal team began his defense, and they still don’t know if he’ll be taking the stand. Not to worry, because he’ll be torturing his daughter, Cate Edwards, instead. [CNN]

* Remember the Catholic school that fired someone for getting IVF? They’re asserting the “ministerial exception” against Emily Herx — an unordained woman who doesn’t teach religion. [Washington Post]

* Apparently this only matters when top-tier schools do it, but like UC Hastings, George Washington Law will be reducing its class size in the hope of keeping new student enrollment below 450. [National Law Journal]

* California is cutting prisons. That’s step one. Step two is to shuttle all the prisoners to Los Angeles. Step three involves a series of earthquakes… [McClatchy]

* Private equity billionaire Stephen Schwarzman isn’t into 50 Shades of Grey (affiliate link). But David Lat apparently is. I dunno, if you are going to bother with that kind of stuff, you might as well hit Brazzers and get it over with. [Dealbreaker]

* I’m all for making sure that the Violence Against Women reauthorization prevents violence against women, not annoyances against women, or criticism against women. [The Volokh Conspiracy]

* Speaking of violence against women, I never blame the victim, but dating gun-toting dumbasses rarely helps matters. [Legal Blog Watch]

* @chrisdanzig: Stop bullying Obama @realjonlovitz. Leave him alone. Leave Obama alone! [Huffington Post]

* What do Vladimir Putin and former Dewey partner John Altorelli allegedly share in common? Are you sure you want to know? [New York Post]

Back in November, we told you that Thomson Reuters was looking to unload BAR/BRI, its bar exam preparation business. The news was huge, given BAR/BRI’s status as a de facto finishing school for would-be lawyers.

Today, it appears that BAR/BRI has found a home. According to various reports, BAR/BRI will be acquired by Leeds Equity Partners. Leeds is a private equity firm that specializes in educational products and services.

Above the Law just spoke with Jeffrey T. Leeds, the co-founder and president of Leeds. He called BAR/BRI a “jewel” for the firm. And since the man is a graduate of Harvard Law School (Class of ’83), he knows just how important BAR/BRI is to our system of legal education… .

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Cerberus Capital Management v Paul Hastings Janofsky Walker.JPG‘Tis the season for… litigation between law firms and their ex-clients? What happened to the holiday spirit of peace and good will for all?
First Simpson Thacher (malpractice), then Debevoise (last item — unpaid fees), and now, Paul Hastings (malpractice). From the New York Law Journal:

A financing unit of Cerberus Capital Management L.P. has sued Paul, Hastings, Janofsky & Walker, claiming the law firm gave it bad advice in connection with a loan the private equity firm made last year to a company looking to bring retailer Steve & Barry’s out of bankruptcy.

Ableco Finance LLC, a unit of Cerberus with more than $6 billion under management, filed an amended complaint Friday in Manhattan Supreme Court against its former lawyers seeking more than $55 million it said it lost because of the $125 million loan. Ableco claims it would never have made the loan last year if the Paul Hastings team had advised it that the buyer would not have rights to all of Steve & Barry’s inventory, which Ableco understood would back the loan.

“No competent, diligent finance lawyer would have put his client in such a vulnerable position,” Ableco’s complaint reads in part.

Ouch. We agree with Ashby Jones of the WSJ Law Blog: “It’s never good for a law firm to get sued by one of its clients. But when the client is a deep-pocketed heavyweight like private-equity giant Cerberus, the news is probably especially unwelcome.”
But Paul Hastings is fighting back, with the help of high-powered counsel.

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Incisive Media American Lawyer Media ALM.jpgGawker reports that Incisive Media — the legal media giant behind the American Lawyer magazine, Law.com, and many other excellent and influential print and online publications — is taking back its old name: American Lawyer Media (ALM).
ALM adopted the Incisive moniker back in 2007, after being acquired by Incisive Media for $630 million. Incisive itself was acquired in 2006 by Apax Partners, a private equity firm.
The full memo about the ALM rebranding appears after the jump. Here’s the most interesting part:

While we will continue to be majority-owned by funds advised by Apax Partners, our lender, Royal Bank of Scotland, will swap a portion of its existing ALM debt for a 49% equity stake in the company and become a minority owner of ALM.

Turning over almost half of the equity in the company to a lender — that doesn’t sound good, does it?
But there’s more to the story here.

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(Or: Which industry is more troubled, law or media?)”

DealBook special section merger lawyers AboveTheLaw Above the Law blog.jpgAs 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.

You can read the full piece here (or here). Feel free to email it liberally to friends and family. Thanks!
When $1,000 an Hour Is Not Enough [Dealbook / NYT]

sinking ship Above the Law blog.jpgThat seems to be the theme of this very interesting article, by Ben Hallman and Aruna Viswanatha, in the current issue of the American Lawyer. It echoes the problems we discussed back in this post, concerning the $70 million malpractice suit filed against Cadwalader, in connection with the firm’s mortgage-backed securities practice.
Here’s an excerpt from the American Lawyer piece:

Even scarier for Debevoise, and for all firms with big private equity practices, was the fact that no new deals were popping up to take the place of those that were stuck. Those fears are shared by lawyers who work on mortgage-backed securities, a market that has completely shut down.

The fears are well justified for both groups, and for any lawyer whose business is linked to the availability of easy credit. In June there were nearly $100 billion worth of private-label mortgage securitization issuances. The next month, they were half that. “There’s always an element of cyclicality,” says Paul, Weiss, Rifkind, Wharton & Garrison structured finance partner Jordan Yarett, “but the implosion of credit is somewhat shocking.”

Indeed. More depressing discussion, after the jump.

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