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Conspiracy theorists have their Zapruder film; UFO buffs their Area 51. But at The American Lawyer we have long searched for evidence confirming another amazing phenomenon: the legal bills submitted by New York’s Wachtell, Lipton, Rosen & Katz. Like Bigfoot, Wachtell’s fees are the stuff of campfire legend, discussed around boardroom tables in hushed whispers by awe-struck competitors. Because of the firm’s pre-eminent reputation in the M&A world, it is able to act more like an investment bank, unshackling itself from the time sheet and charging clients a premium fee based on the value of the transaction. At least that’s what everyone takes on faith. Up to now it’s been hard to confirm. But recently we were given the equivalent of a grainy videotape — a brief memo that Wachtell has been circulating to prospective clients outlining how the firm’s billing system works. First, the memo establishes the ground rules for the uninitiated, explaining that, Wachtell being Wachtell, the firm won’t be working on any routine matters. The memo also stresses Wachtell’s one-to-one partner-to-associate ratio, direct personal attention by partners, and high-quality work. These goodies don’t come cheap, of course. In order to provide such service, the memo helpfully explains, the firm’s bills are not based on lawyer time, but on the complexity of the transaction, the intensity of the firm’s efforts, and the results achieved. So what’s that going to cost you? Tut-tut. Please, the firm can’t provide exact estimates. But Wachtell will be happy to tell you that, based on prior deals, and just by way of guidelines you understand, a bill equaling one-quarter of 1 percent of the overall value of the transaction is fairly typical. This varies, of course. On dinky deals of $100 million or less, Wachtell’s fee is at least 1 percent of the value of the deal. On megadeals of $20 billion or more, the firm’s fee is at most one-tenth of 1 percent. And don’t look for a detailed invoice. The memo explains that Wachtell doesn’t give breakdowns on lawyer time or activities. Plugging that formula into some of Wachtell’s deals from last year yields some eye-catching numbers. Let’s give it a whirl: In September 2000 Wachtell represented VoiceStream Wireless Corp. when it was acquired for $53 billion by Deutsche Telekom AG. Under its own guidelines, Wachtell’s fee could have ranged as high as $53 million. The firm had two more $20 billion deals last year, possibly yielding another $40 million in fees. That’s a potential $90 million in fees on just three deals. Yowza. Of course that’s the absolute max, but you get the idea. Even setting aside these uber deals, the memo indicates that on your garden-variety $1 billion merger, Wachtell charges around $2.5 million. Last year 35 of Wachtell’s deals were valued at $1 billion or more and 64 at $150 million or more. On the flip side, Wachtell only makes its bundle if the deal gets done. Firm chairman Richard Katcher was out of the office and unavailable to comment. Partner Martin Lipton did not respond to e-mail and phone messages. But a third senior partner listened carefully to our information, then called back and went on background to say that the firm would not be commenting. He was interested in our source for the memo. Let’s just say that that’s a case for Mulder and Scully.

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