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With just 171 lawyers, Wachtell, Lipton, Rosen & Katz may be only a fraction of the size of its rivals in the M&A field, but its presence at the deal table looms large. The New York firm had a hand in five of the top 10 deals of 2004. No other law firm was involved in more than four. Wachtell Lipton has been the go-to firm for M&A for two decades, and last year’s results show that it is still a popular choice for companies facing a merger. “It’s a superb firm,” said Rodgin Cohen, the acknowledged dean of financial institution M&A lawyers, and chairman of New York’s Sullivan & Cromwell. Cohen has worked with Wachtell Lipton on dozens of deals over the years. “The most complimentary thing I can say is that on a friendly deal they are the firm I would most like to have on the other side, because they know how to get a deal done; and on an unfriendly deal, they are the firm I would least like to have there because they are very skilled.” The deals Wachtell worked on included two in banking and one each in pharmaceuticals, retail and telecommunications. Partners Edward Herlihy and Craig Wasserman represented Bank One Corp., which was acquired by J.P. Morgan Chase & Co. for $58 billion in the year’s largest deal. Herlihy also represented target Charter One Financial in its $10.5 billion buyout by Citizens Financial Group Inc., a subsidiary of The Royal Bank of Scotland Group, which ranked No. 10 on the top 10 list. Herlihy and Wasserman are household names in M&A, having built one of the nation’s most impressive practices over the last decade. They have been lead advisers on far more $10 billion-plus mergers than any other firm (10) and countless smaller bank deals and transactions in the financial services sector. What is the secret to their success? SPECIALIZATION AND CONTACTS “We’ve been in the business for a long time and developed an expertise,” Herlihy said. “It’s no more complicated than that.” Specialization is key: Lawyers in this practice area must be familiar with a Byzantine array of state and federal regulations. It also helps to be an old friend, or a friend of a friend. According to Wasserman, the firm has had a long-standing relationship with Bank One. On the Charter One deal, Silver, Freedman & Taff, the banks’ long-time outside counsel, and co-counsel on the buyout, recommended Herlihy to its client. Wachtell also had a hand in the No. 2 deal, Cingular Wireless LLC’s $47 billion acquisition of AT&T Wireless Services Inc. Partner Steven Rosenblum, who did not return a phone call for comment, represented AT&T Wireless. Like Herlihy and Wasserman, Rosenblum has old ties to his client, having represented its former parent company, AT&T Corp., in its 2001 restructuring, which included the creation and initial public offering of AT&T Wireless tracking stock. Partner Andrew Brownstein headed the Wachtell lawyers who worked on the other top 10 deals. In the year’s ninth-biggest deal, Brownstein, who did not return a call for comment, represented target Sears, Roebuck and Co. in an $11 billion merger with Kmart Holding Corp., announced in November. Wachtell worked with the retailer in the sale of its credit card business and in its early 1990s proxy battle with financier Robert Monks. A month later, the firm won a piece of the fourth-largest deal, representing Morgan Stanley, the investment bank advising Guidant Corp. in its buyout by Johnson & Johnson. As Sears’ investment bank, Morgan Stanley is on the same side as Wachtell Lipton in the Sears deal. In all of Wachtell’s deals in the top 10, it advised the target (or in the case of the Guidant deal, the target’s investment bank). The bias is no coincidence: In the firm’s early days, Martin Lipton decided to focus on defense, a tack that the New York investment bank Goldman Sachs Group Inc. had adopted with great success. Then Lipton developed the “poison pill” defense, an anti-takeover tactic that awards existing shareholders shares of stock when any one shareholder acquires a certain percentage — diluting the raider’s stake and raising the price of the target company. When the tactic was validated by the courts in 1985, it sealed Lipton’s reputation as “the Elvis Presley of the M&A field,” as former Securities and Exchange Commissioner Joseph Grundfest once said, and it sealed Wachtell’s reputation as the premier defense firm. LONG HOURS AND LARGE FEES The firm’s reputation and industry ties have found it on both sides, sometimes simultaneously. In 1998, Herlihy represented both Bank One and First Chicago NBD Corp. in their $30 billion merger. But it’s primarily known for defense work. Size and clientele are not the only ways it diverges from its rivals. Founded in 1965, it is relatively young and nonhierarchical, with a nearly even partner-associate ratio. This means that associates work brutally long hours. The firm’s first African-American partner, James Cole, told the The American Lawyer (a sister publication of the NLJ) last June that he’d billed “3,400 hours a year for the last seven years.” Cole is no anomaly: In a firm profile on vault.com, associates reported that it’s “not unusual” to bill close to 3,000 hours a year. But they are paid well. In good years, the firm has granted associate bonuses of 100 percent of salary. Those who survive also have a shot at partnership, and much more money. For seven years Wachtell has been the most profitable firm — according to an American Lawyer survey, profits per partner were reportedly $2,585,000. According to Vault, it’s also a great training ground, a place where associates have real responsibilities and meaningful contact with partners and clients. Wachtell’s dominance can come with a price. Last year, New York Attorney General Eliot Spitzer sued former New York Stock Exchange Chairman and Chief Executive Richard Grasso over his nearly $200 million pay package. Spitzer faulted Lipton for drafting documents that allegedly failed to disclose to the Securities and Exchange Commission and the public the full terms of Grasso’s compensation. He also suggested that Lipton might have had a conflict of interest in advising Grasso while representing the stock exchange. The allegations led to a somewhat critical front-page profile of Lipton in the New York Times. It also prompted the exchange to replace him with Wilson Sonsini Goodrich & Rosati’s Larry Sonsini as chairman of its legal advisory committee. Lipton did not return a phone call. The black eye hasn’t derailed the merger machine. And, given the times, criticism is perhaps not surprising. Virtually no Wall Street institution — Wachtell included — has weathered three years of corporate scandals without a scratch.

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