The 10 Best Lawyers to Have On Your Side
from Winter 1998
by Peter Keating
All of a sudden, you’re vulnerable, and if you’re like many directors you’re reaching for the phone. “I’ve had three calls this week from companies I’ve never worked with before,” says Jim Morphy, managing partner for the mergers and acquisitions group at the New York law firm of Sullivan & Cromwell. “They all want to plan defenses against takeovers.” Explains Toby Myerson, who heads the M&A practice at New York’s Paul, Weiss, Rifkind, Wharton & Garrison: “People are worried that lower stock prices will bring unwanted acquisitors out of the woodwork.”
It’s déjà vu with a difference. Takeover strategies are more sophisticated, financial instruments more complex, regulation more intense, and ethical constraints weaker than a generation ago. Don’t count on the blue chips to keep a gentlemanly distance, either. They’ve abandoned their last compunctions about unfriendly deals—witness IBM’s seizure of Lotus.
To help you arm yourself for the coming fray, we have compiled a list of the Top 10 M&A attorneys—specialists in offense and defense—with the highest body counts in battles past. Of course, you’ll pay handsomely for good help. Firms won’t discuss their charges—“Too crass a subject,” Fried, Frank senior partner Arthur Fleischer says drolly. “I only deal with the spiritual side of the law.” But most ask for a flat fee that typically runs from $5 million to $20 million. On that note, Corporate Board Member calls the first lawyer to the stand.
Peter Atkins
Atkins, of Skadden, Arps, Slate, Meagher & Flom, is a disciple of the legendary Joseph Flom, who initiated all kinds of bare-fisted tactics. One example: In 1978, Occidental Petroleum yanked a takeover bid after the New York firm hired investigators to look into whether Oxy chairman Armand Hammer bribed a Soviet official. Later, Hammer opined, “It is a great comfort to have Joe on your side and a sore distress to have him against you.”
With some 1,200 lawyers, Skadden, Arps is the biggest and perhaps the preeminent M&A law firm. At 74, Flom acts as elder statesman while Atkins—”an impeccably groomed takeover specialist straight from Central Casting,” according to American Lawyer—handles key clients. “I’m intense, but I’m not hyperactive,” says Atkins of himself. “I advise my clients that this is a proposition that borders on a survival principle: Don’t get too high. Don’t get too low. Stay focused.”
Atkins’ unflappability served him well in his most famous role: auctioning off RJR Nabisco in 1988. Kohlberg Kravis Roberts paid a record $22 billion in a deal that earned Skadden, Arps at least $10 million. Atkins’ most interesting case? The 1994 agreement that gave United Airlines employees 55% of the company in exchange for $4.8 billion in wage concessions. “That was very complicated and produced a good result,” he says. More recent deals include NYNEX’s $22 billion merger with Bell Atlantic. Currently Atkins, 55, is helping AMP fend off AlliedSignal’s hostile bid.
Franklin Balotti
Asked why it matters that his firm, Richards, Layton & Finger, is based in Wilmington, Del. rather than New York, Balotti jokes, “Well, I don’t have to fight my way to work every day.” As Richard Clurman put it in To the End of Time, a 1992 book on the Time-Warner merger, “What Reno used to be to easy divorce, Delaware is to incorporation.” In other words, the extensive protection offered by state laws against liability complaints has made Delaware a popular destination for some 150,000 U.S. companies that set their hearts on incorporating. “If you’re going to fight Delaware law, it’s a lot easier to do it from here,” claims Balotti, 56. “And if you’re going to litigate, you better know this court system and its cases first-hand.”
Balotti advised ConAgra in its 1989 fight with Tyson Foods to swallow Holly Farms. “That involved a lot of twists and turns, because you had a target trying to play off two bidders,” he recalls. Tyson won that match, but Balotti successfully represented Disney’s directors as they fended off a class action protesting the $94.5 golden parachute given to former president Michael Ovitz.
Balotti says a takeover target needs one thing above all else: “a good, active independent board. Top-notch directors add credibility to a company under attack and help the interests of shareholders.”
Richard Beattie
Beattie, of Simpson, Thacher & Bartlett, represented KKR in its winning bid for RJR Nabisco and became a star on Wall Street—and Main Street. He was featured prominently, and for the most part positively, in Barbarians at the Gate, the bestseller about that epic takeover battle. Beattie, 59, is a former Marine Corps fighter pilot with considerable charisma. Simpson, Thacher partner Charles Kogut once observed of his colleague, “I think I’m one of his best friends, but then lots of people do.” Beattie has been involved in several of the blockbuster deals of the nineties. He advised MCI in its 1996–97 dealings with British Telecommunications (MCI ultimately went to Worldcom for $37 billion). He represented Chrysler’s directors as they foiled a takeover attempt by former chairman Lee Iacocca and billionaire investor Kirk Kerkorian in 1995–96. And he advised Glaxo in its $15 billion purchase of Wellcome in 1995. Of all his deals, Beattie says one stands out: the 1981 leveraged buyout of Harley Davidson by 13 employees. “I liked the people, I liked the company, and we took it out of a very bad situation,” he says. Yes, Beattie rides a Harley.
Beattie has an extensive record of public service and is chairman of the board of New Visions for Public Schools, a nonprofit group that raises funds to support schools in New York City, where his firm is based. And he recently served as President Clinton’s emissary to Cyprus. Says one observer: “I think he has more breadth of interests than a lot of lawyers in the M&A sphere.’’
Arthur Fleischer
Fleischer has led the M&A practice at New York-based Fried, Frank, Harris, Shriver & Jacobson for the past quarter century. His work on takeovers goes back to the pioneering era of Joe Flom and Marty Lipton, but Fleischer developed a reputation for learnedness rather than impassioned partisanship. In Power and Accountability, their 1992 study of corporate governance, shareholder rights activists Robert Monks and Nell Minow wrote that “it was a rare major transaction that did not involve these three.... Fleischer probably most of all gave the impression of ‘fairness,’ of a wider view, of a traditional role as counselor.”
Fleischer, who is given to wearing colorful English shirts with his three-piece suits, has collected many fans who admire his elegant speech. Among them: investment banker Bruce Wasserstein.
Under Fleischer, 65, the firm has conducted more than 150 M&A deals in the past two years. These include advising GTE in its $28 billion bid for MCI. He is currently representing AlliedSignal in its unsolicited bid for AMP.
Fleischer, who comes from a family of scientists, began his career in tax law. He took a leave from Fried, Frank to work for the SEC during the Kennedy administration and then returned to take up corporate work. He is the coauthor of the respected Takeover Defense.
Robert Joffe
“We view ourselves as generalists,” says the crown prince of the blue-blood firm of Cravath, Swain & Moore. What he means is that Cravath, Swain has never gone on a hiring binge to expand its ranks, never opened an office outside New York City, and never explicitly diversified its areas of legal practice. “If a client needs someone with FCC expertise, we’ll go get them the best available, even if it’s someone outside the firm,” says Joffe. “We’re not going to shove someone on a client who’s our in-house counsel on FCC issues and who happens to be underutilized at the moment.” For all that, Cravath is among the most profitable M&A firms in the country ($1.5 million per partner in 1996).
Joffe, 55, spent two years working for the newly independent African nation of Malawi before joining Cravath in 1969. During the 1970s, he mostly handled antitrust cases, and his work on behalf of Time Inc.’s Home Box Office led to his becoming the parent company’s chief antitrust litigator. In 1989, he scored a spectacular series of successes as Time fought off Paramount Communications to merge with Warner Bros. Joffe first convinced the Justice Department, then a Delaware chancery court, then (in a hearing broadcast live on CNN) the Delaware Supreme Court, to allow the deal to proceed.
Joffe’s pro bono work includes many civil rights cases, and he is also involved with international human rights in East Africa.
Marty Lipton
“To the extent that there is an Elvis Presley in the M&A field,” former SEC commissioner Joseph Grundfest said in 1989, “it’s Marty Lipton.” By the looks of things, it’s not a superstar mantle Lipton, a partner at Wachtell, Lipton, Rosen & Katz, is ready to remove. These days, he’s a principal figure in the movement to make outside directors more independent and effective. “Their actions are often late, after the shareholders have lost value; employees, jobs; and the corporation, its competitive market position,” he has said.
Lipton began working on proxy fights in the 1960s, but whereas Joe Flom’s Skadden, Arps developed an early reputation for advising hostile bidders, Wachtell, Lipton became strongly identified with target companies, notably through Lipton’s invention of the now-common poison pill. With about 120 lawyers, the New York firm has remained relatively small, and has focused on work related to takeovers and bankruptcies. It perpetually ranks at or near the top among M&A firms in profits per partner ($1.4 million in 1996).
To the amusement of some of his critics, Lipton, 67, moved in recent years from staunch defender to an attack role, representing AT&T in its unwelcome 1991 $7.4 billion takeover of NCR, for example.
James Morphy
Maybe it’s because John Foster Dulles once ran the place, or maybe it has something to with a compensation structure where most partners have no idea what each other earns, but the New York firm of Sullivan & Cromwell has always been regarded as the quintessential stuffy Wall Street firm. That’s a claim that Morphy, 44, the managing partner of the firm’s M&A group, is at pains to protest. “We’ve gone to casual Fridays, let me say that!” he objects. But there’s no denying that Sullivan & Cromwell ranks with Cravath, Swaine & Moore as the bluest of blue-blood firms in the M&A field. In 1996, S&C raked in more than $1.3 million in profits per partner.
Morphy has represented all sides of major deals. A highlight: his 1985–86 defense of Union Carbide from a hostile takeover bid by GAF. Morphy helped Union Carbide to sell its consumer products businesses, including the Eveready battery division. Union Carbide then bought back 55% of its stock. The $3 billion in debt incurred had the desired effect of driving GAF away. Morphy also handled AIG’s attempted acquisition of American Bankers Insurance Group in 1998 (AIG was outbid by Cendant but got a $100 million consolation fee) and the $4 billion merger of Santa Fe and Burlington Northern in 1995.
Currently, Morphy says most of his work involves “giving advice to companies on how to prevent takeovers.”
Toby Myerson
For years, Paul, Weiss, Rifkind, Wharton & Garrison was known more for its public service litigation rather than its corporate practice. Indeed, the late Arthur Liman, a partner who served as chief counsel to the U.S. Senate’s Iran-Contra investigation, once called it “the country’s oldest poverty law firm.” In recent years, however, Myerson has led New York-based Paul, Weiss to prominence in the M&A field. Myerson, 49, is admired for his international work and expertise in complex financial structures. In the eighties, he helped open up Japanese business to Paul, Weiss. He managed the Tokyo office for investment bankers Wasserstein Parella for a year before returning to Paul, Weiss in 1990. Since then, he has handled several extraordinarily complicated transactions, including the 1996 merger of Simon Property and DeBartolo Realty to form the nation’s largest real estate investment trust.
Myerson also represented British Telecommunications in its bid to buy MCI. BT failed—but got a rich payoff. “We were brought in to save the deal in the summer of ‘97, when MCI had just announced an $800 million loss,” Myerson recalls. “The solution was to renegotiate the price downward, which led to an offer by Worldcom.” Myerson ultimately devised a three-way agreement by, among other tactics, arguing that Worldcom couldn’t sign a merger agreement with MCI without triggering a poison pill. Result: Worldcom acquired MCI, and British Telecom collected $7 billion. He is currently working for Goldman Sachs, advising in AlliedSignal’s offer for AMP.
Larry Sonsini
No wonder Sonsini rules Silicon Valley. Since 1961, his firm, Wilson, Sonsini, Goodrich & Rosati, has been helping clients find venture capital. And those he has helped go public—Apple, Netscape, and Sun among them—comprise a Who’s Who of high tech. So many of these corporations have kept WSGR as their chief outside legal counsel that the firm now represents about half of the 150 biggest public companies in the Valley. As a result, Sonsini has handled some of the largest takeover deals in the industry, such as Cisco Systems’ 1996 $4.8 billion merger with Stratacom, a Sonsini client, and Hewlett-Packard’s $1.2 billion purchase of VeriFone in 1997.
Friendly, calm, and partial to dark suits, Sonsini’s influence is so pervasive that sometimes he has found himself on both sides of a takeover bid. In 1995, Seagate Technology, the nation’s second-largest maker of disk drives, announced it would acquire Conner Peripherals, the industry’s number-three firm, to create a new company that would end up bigger than Quantum Corp., then number one. All three were Sonsini clients. In this case, Conner signed a waiver permitting Sonsini to represent Seagate in the deal, although some critics have raised eyebrows at the way Sonsini’s firm navigates possible conflicts of interests.
Sonsini, 57, has a strong belief in the individualist values of Silicon Valley, and its future. “The desire for individual achievement doesn’t change because the market is down,” he told Business Week. “We’re not doing initial public offerings, but maybe what we’re doing is acquiring companies. The market is a wonderful impetus for this country’s industrial situation.”
Stephen Volk
“Gentlemen don’t sue gentlemen’’ was the rule at this firm until Volk joined in 1960, and Volk, 62, remembers his senior partner saying those very words. How things change! Under Volk, Shearman & Sterling has built a 100-lawyer M&A group that handles as many big deals as anyone, particularly in the international arena. Volk represented Sandoz in its $30 billion merger with Ciba-Geigy. He also advised Bell Atlantic in its $21 billion merger with NYNEX.
Volk’s skills during the high-tension, 24-hour days that lead up to closing a deal have kept a number of big ones from falling apart. For instance, he worked around the clock for a week in January 1997 to wrap up Morgan Stanley’s $10.2 billion merger with Dean Witter, Discover—one step ahead of reporters who were ferreting out Morgan Stanley’s plans. “He listens better than anybody else and cuts to the chase very quickly,” according to Jack Welch, chairman of General Electric. GE hired Volk in 1991, when NBC, a subsidiary, acquired Financial News Network.
