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A good track record can go a long way. And it can pay off, big time. Law firms boasting a deal-making history with private equity firms Kohlberg Kravis Roberts & Co. (KKR) and Texas Pacific Group (TPG) were tapped to help the private equity firms lead the massive $45 billion buyout deal with Dallas energy giant TXU Corp. The agreement, which was announced on Feb. 26, will become the largest leveraged buyout transaction once it closes. Both main law firms for the consortium of private equity companies and investment banks, Simpson Thacher & Bartlett of New York and Vinson & Elkins of Houston, have long-standing ties with both KKR and TPG. Simpson has represented KKR for about 30 years in a wide variety of legal work and has also done corporate transactional work for TPG, said David Sorkin, a New York-based corporate partner for Simpson. Simpson’s mergers and acquisitions co-counsel, Vinson & Elkins, has also worked with the two private-equity companies on other large energy transactions, said Bruce Bilger a Houston partner who chairs the firm’s energy practice. “That’s generally why they called us,” Bilger said. Many of the legal players on KKR and TPG’s team also worked on the $3.65 billion buyout of power generation company Texas Genco Holdings Inc. in 2004 and 2005 by a private-equity group that included KKR and TPG, said Sorkin. “The KKR and TPG individuals are the same on this team,” Sorkin said. The private-equity consortium has since sold Texas Genco to NRG Energy Inc. of Princeton, N.J. 76 lawyers, and counting The TXU deal was a massive undertaking for the two main firms representing the private-equity players. About 26 Simpson Thacher lawyers, including six partners, worked full-time or “more than full-time” for the three weeks prior to the deal, but some were involved in preliminary discussions in December, Sorkin said. “The real intensive work was over the last three or so weeks, once [the parties] got fairly close in terms of a range of prices that might work,” Sorkin said. About 50 lawyers from across all of Vinson & Elkins’ five domestic offices worked on the deal at least part-time over a six-week period, Bilger said. Prior ties to the dealmakers also opened doors for law firms with a more limited role. New York-based Stroock & Stroock & Lavan’s work on the Texas Genco deal also translated into a place at the TXU deal table. A team of about a half-dozen Stroock attorneys helped the private equity buyers evaluate TXU’s trading and hedging operations, said Stroock’s lead partner on the deal, Michael Shenberg of New York. “We worked with these private equity funds when they acquired Texas Genco,” Shenberg said. The private equity team brought in two partners in Richmond, Va.-based Hunton & Williams’ Dallas office who had extensive experience advising TXU on other Texas regulatory matters. “TPG and KKR approached TXU with the idea that Hunton & Williams be allowed to represent them in the transaction,” said Richard Adams. TXU’s outside counsel, Sullivan & Cromwell, and the advisors to the company’s strategic transactions committee, Cravath, Swaine & Moore, both of New York, were mum about their firms’ work on the deal. TXU officials were not available for comment on the legal aspects of the deal. Paving the way? The deal may pave the way for other private-equity deals in the highly regulated utilities sector, Bilger said. “It introduces the concept that in certain situations the interests of those constituencies are better served by a nonpublic company that is not focused on quarterly earnings and can make long-term investments in power supply, demand-side management, environmental concerns and so on,” Bilger said. On a micro level, Simpson Thacher’s Sorkin is hopeful that the deal will spark more work for the firm. Negotiations with regulators are still ongoing, Sorkin said, and TXU’s plan to split the company into three separate businesses for generation, transmission and distribution and retail sales would also require legal help, Sorkin said. “You always hope the large prominent transaction helps develop other business,” Sorkin said. “We’d be happy to get further business from the existing clients in this transaction.”

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