Wachtell, Lipton, Rosen & Katz
Wachtell, Lipton, Rosen & Katz
Gross Billings: $317 million (2000 est.)
NAIC: 541110 Offices of Lawyers
Wachtell, Lipton, Rosen & Katz (Wachtell Lipton) is famous for serving companies involved in mergers and acquisitions. During the heyday of mergers in the 1980s, Wachtell Lipton made a major contribution by coming up with the “poison pill defense” that prevented hostile takeovers. The firm’s banking practice is particularly noteworthy. It is the most profitable law firm in the world, based on its average profits per equity partner of $3.28 million in 2000. Unlike many other large law firms, Wachtell Lipton has only one office. Yet it serves clients in many nations and thus is a major force in globalization. Although it is a relatively young law firm, Wachtell Lipton has an outstanding track record of providing top-notch legal services to clients such as Amoco, BankBoston, and AT&T.
Origins and Early Accomplishments
Herbert Wachtell, Leonard Rosen, and George Katz graduated from New York University Law School in 1954, and Martin Lipton graduated the following year. Lipton, Katz, and Rosen began their legal careers at the bankruptcy law firm of Seligson, Morris & Neuberger. Meanwhile, Wachtell helped NYU law professor Bernard Schwartz in a congressional probe of federal regulatory agencies and later defended Schwartz, his first litigation client, before starting his own New York City litigation practice.
In 1965 the four NYU Law School graduates formed their own law firm of Wachtell, Lipton, Rosen & Katz, which originally included three other lawyers, two from the Seligson law firm and one of Wachtell’s associates. The New York City partnership initially hired top graduates from their alma mater and continued to recruit a substantial number of NYU Law School graduates in the years ahead.
Although the new firm included relatively few lawyers, it soon gained a reputation for excellence. Wachtell headed its litigation team and also wrote a book called New York Practice Under the CPLR used often by both those preparing for the state bar exam and practicing lawyers. First published in 1963, its sixth edition came out in 1986.
Lipton became well known as an expert in corporate transactions, especially in mergers and acquisitions. Lipton and his wife Erica Steinberger, also a partner at the firm, wrote a twovolume M&A study called Takeovers and Freezeouts, which Erwin Cherovsky described, in The Guide to New York Law Firms, as the “the bible on takeovers and freezeouts.”
In 1970 the firm described itself in the annual MartindaleHubbell Law Directory as having a “general practice” with expertise in “corporation, securities, creditors’ rights, antitrust, motion pictures, broadcasting, tax, municipal securities, real estate, labor and probate law,” and “trials and appeals in all state and federal courts.” At that point it had seven partners, ten associates, and one “of counsel” (emeritus) lawyer. In 1980 it included 23 partners, 27 associates, and one of counsel lawyer.
The public knew little about law firms like Wachtell Lipton until the late 1970s, even though they played important roles in business and government. As Kim Isaac Eisler wrote in Shark Tank, law firms’ “… activities, their profits, their methods of operation were among the most secret in America, and everything about the so-called code of legal ethics [of the American Bar Association] was designed to insulate and protect them from public scrutiny. Many lawyers considered even answering a press call unethical.”
That situation began to change when Steve Brill in 1978 began writing a law column for Esquire and the following year began the American Lawyer. The National Law Review about the same time also began examining the operations and finances of big law firms. This rise of legal journalism, combined with 1970s court decisions that said professional restrictions on advertising were unconstitutional, opened the floodgates. Soon many law firms sought publicity and even hired their own public relations managers.
In 1980 Wachtell Lipton, along with other major law firms, helped rescue Chrysler from financial ruin as it competed with more efficient foreign car makers. A group of 15 lending institutions chose Leonard Rosen as their special counsel as they set up complicated loans guaranteed by the federal government.
In Lions of the Eighties, Rosen told about the unusual challenge that he and others faced when trying to close the Chrysler deal after six months of intensive work. On the evening of June 24, 1980, a fire broke out in the Westvaco Building where Rosen was meeting with Debevoise & Plimpton lawyers in their office just below the Wachtell office. Everyone evacuated the building that became what Rosen called a “raging inferno.” After the fire was under control, Rosen and others returned to the building to get the documents they needed. At about 1 a.m. they pushed eight carts of records up Park Avenue to the office of Shearman & Sterling, where work continued until the deal was closed in the morning. James B. Stewart in The Partners said this was “the largest corporate rescue mission ever attempted.”
Wachtell Lipton in 1980 and 1981 represented Curtiss-Wright when it successfully fought a takeover bid by Kennecott. Fought out in the court system, this protracted struggle cost Kennecott so much that it soon agreed to being taken over.
Martin Lipton played a key role in the much publicized acquisition of Getty Oil Company, the firm founded by J. Paul Getty in the 1930s. In 1983 and 1984 Lipton represented the J. Paul Getty Museum, which owned 11.8 percent of the oil company’s stock. The museum, the Sarah Getty Trust, which owned 40 percent of the stock, and the company were in the midst of an internal conflict when Lipton drew up an agreement that seemed to settle the dispute.
Soon, however, the quarrel resumed and Pennzoil bid to take over Getty Oil. A $10 billion handshake between Lipton and Pennzoil’s lawyer Arthur Liman seemed to seal that deal, but it was blocked by lawsuits. Ultimately Texaco came in as a “white knight” and made a higher offer of $10.2 billion that was accepted. Robert Lenzer, in a 1985 book, called Texaco’s purchase “the largest corporate acquisition in American history.”
According to Cherovsky, Wachtell Lipton in the 1980s dealt “almost solely in transactional work” such as defending companies against hostile takeovers. One of its major contributions to recent business history was developing in the 1980s the “poison pill defense” against unwanted takeovers. Cherovsky said Wachtell Lipton was not interested in becoming a “full service” law firm representing corporate clients continually on a wide range of legal matters. In other words, its lawyers did not seek to become general counsel to corporations.
Although Wachtell Lipton had only about 90 lawyers at the time, in 1987 it led the nation’s law firms with profits per partner of $1.4 million and in 1988 was number one with $1.09 million in revenue per lawyer. Cherovsky attributed the firm’s financial success mainly to its “top-to-bottom, across-the-board strength” of both partners and associates. He also cited Wachtell Lipton’s internal cohesiveness and “true firm identity.” Unlike many large American law firms, Wachtell Lipton opened no domestic or international branch offices.
“In a relatively short time,” concluded Cherovsky, “[Wachtell Lipton] has reached almost legendary status for its proficiency and achievements.” That reputation for legal excellence continued into the next decade.
Law Practice in the 1990s and Beyond
In 1992 the New York law firm of Kaye, Scholer, Fierman, Hays & Handler hired Wachtell Lipton partner Bernard Nussbaum to help defend itself against a lawsuit filed by the federal Office of Thrift Supervision (OTS). The federal government charged that Kaye, Scholer had knowingly helped Lincoln Savings & Loan defraud its bondholders before it collapsed in 1989, in return for a total of $13 million in legal fees received between 1985 and 1989. The government eventually paid out about $3 billion in the biggest bailout in the history of savings and loan institutions. The OTS sought $275 million in fines from Kaye, Scholer, but the law firm, with Nussbaum’s help, settled the lawsuit by paying the government $41 million and agreeing that two of its partners would no longer serve financial institutions insured by the government. Five other law firms also paid huge fines to the government because of their roles in the savings and loan scandal. None of these six law firms admitted to or were convicted of breaking any laws.
Based on Wachtell Lipton’s 1994 gross revenue of $108 million, it was ranked as the United States’ 62nd largest law firm in the American Lawyer’s July/August 1995 issue. It had just 109 lawyers, far less than most big law firms.
In the late 1990s Wachtell Lipton continued as one of the few large law firms that dominated the mergers and acquisitions field. Citing research firm Securities Data Company, the Wall Street Journal’s Richard B. Schmitt said in an April 22, 1998 article that Wachtell Lipton had done “more giant bank mergers during the past two years than any other law firm.”
Our preeminence in the fields of corporate and securities law means that we regularly handle some of the largest, most complex and demanding transactions in the U.S. and around the world; we are involved in merger and acquisition and other major corporate transactions of every variety; we invent new financial products and participate in the most sophisticated financing transactions; and we counsel companies and their boards with respect to the most difficult and sensitive corporate disclosure, governance and policy issues.
In April 1998 Wachtell Lipton’s Edward Herlihy represented BankAmerica Corporation when it merged with NationsBank Corporation, a longtime client of the New York law firm. About the same time, Herlihy also represented both Banc One Corporation and First Chicago NBD Corporation when they merged, a controversial arrangement because of the possibility of a conflict of interest. According to Fortune on May 25, 1998, Herlihy and H. Rodgin Cohen of Sullivan & Cromwell had represented principals in 18 of America’s 25 major bank mergers.
Business Week on February 28, 2000, reported that Wachtell Lipton was ranked as the world’s ninth largest mergers and acquisitions firm, based on total 1999 acquisitions worth $405.8 billion. That came from just 84 deals, far less than most of the top ten M&A law firms.
In 2000 Wachtell Lipton advised AT&T in its plans to organize four new companies: AT&T Wireless, AT&T Broadband, AT&T Consumer, and AT&T Business. AT&T intended that the four companies would become public entities by 2002 and would cooperate through intercompany agreements. The law firm also represented AT&T when it acquired Media One for $60.5 billion.
The firm in 2000 served as cocounsel, along with Greenberg Traurig, to Madrid’s Terra Networks, S.A. when it acquired Lycos, Inc. This $12.5 billion deal resulted in one of the world’s major Internet businesses. Wachtell Lipton’s corporate division also advised VoiceStream Wireless Corporation when it was acquired by Deutsche Telekom AG for $50.7 billion, Motorola in its $17 billion acquisition of General Instrument, Warner-Lambert in its $93.4 billion transaction with Pfizer, and Vivendi when it acquired Seagram for $33.8 billion. According to Wachtell’s web site, in 2000 it participated in announced acquisitions worth almost $425 billion.
Meanwhile, the firm’s antitrust lawyers served Phillips Petroleum in its $6 billion joint venture with Chevron and Reynolds Metals in its $6 billion merger with Alcoa. Its real estate lawyers also were busy serving clients such as Security Capital, Lend Lease, Taubman, and Avalon Bay in various merger and acquisition transactions. Wachtell Lipton’s creditors’ rights lawyers advised Montgomery Ward’s official creditors’ committee, the senior lenders to Breed Technology, and Integrated Health’s bondholders. According to its web site, the firm’s litigation practice participated in several landmark corporate governance cases in Delaware, including those involving Household, Revlon, Macmillan, Time Warner, and Paramount. Other litigation clients were AT&T, Philip Morris, and National Semiconductor.
To help its 170 lawyers keep up with the rapid pace of legal developments, Wachtell Lipton in 2001 purchased access to Law.com. The web site provided 24-hour access to decisions, papers, and seminars in corporate law, intellectual property, employment law, litigation, and technology law.
Although Wachtell Lipton did not have offices in the World Trade Center when terrorists destroyed its twin towers on September 11, 2001, it provided office space for its longtime client Keefe, Bruyette & Woods Inc., a securities firm that reported losing 67 of its employees from its offices in the north tower. Back in 1993 Wachtell Lipton had given Keefe, Bruyette & Woods free use of a conference room and secretarial assistance for a month after the World Trade Center bombing.
In October 2001 the American Lawyer published an interesting article about the law firm’s operations and finances. Writer Douglas McCollam said the firm’s legal bills were an “amazing phenomenon” that were “the stuff of campfire legend, discussed around boardroom tables in hushed whispers by awestruck competitors.” A Wachtell Lipton memo obtained by the magazine indicated to potential clients that the firm did not deal with routine legal concerns. It emphasized its quality service provided by partners working directly with clients. Instead of using lawyers’ hours in its billing, Wachtell Lipton charged a percentage of overall transaction values. Its flat fees ranged from one-tenth of 1 percent on larger deals to a full 1 percent of deal value on smaller transactions worth only $100 million. These bills only applied to completed transactions.
According to the American Lawyer’s listing of “The Global 100” in its November 2001 issue, Wachtell Lipton was rated as number 46 with 2000-2001 gross revenue of $317 million. With just 72 equity partners, fewer than most firms on the list, its average profits per equity partner were $3.28 million, the highest in the world. Such profitability was part of the firm’s heritage as it entered the new millennium.
Principal Operating Units
Corporate; Litigation; Creditors’ Rights; Tax; Executive Compensation and Benefits; Antitrust; Real Estate.
Cleary, Gottlieb, Steen & Hamilton; Skadden, Arps, Slate, Meagher & Flom; Sullivan & Cromwell.
- The firm is founded in New York City.
- As part of its growing banking practice, the firm serves 15 lending institutions that loaned money to save Chrysler.
- The firm ranks fourth in the nation for serving bidding companies in 16 acquisitions and second for representing targeted companies in 17 deals, typical of their leadership in mergers and acquisitions.
Cherovsky, Erwin, The Guide to New York Law Firms, New York: St. Martin’s Press, 1991, pp. 205–08.
Eisler, Kim Isaac, Shark Tank: Greed, Politics, and the Collapse of Finley Kumble, One of America’s Largest Law Firms, New York: St. Martin’s Press, 1990, pp. 82–83, 117.
Hoffman, Paul, Lions of the Eighties: The Inside Story of the Powerhouse Law Firms, Garden City, N.Y.: Doubleday & Company, Inc., 1982, pp. 94–97, 280-81.
Lenzer, Robert, The Great Getty: The Life and Loves of J. Paul Getty—Richest Man in the World, New York: Crown Publishers, Inc., 1985.
Liman, Arthur L., with Peter Israel, Lawyer: A Life of Counsel and
Controversy,New York: Public Affairs, 1998. McCollam, Douglas, “Wachtell’s Secret Formula,” American Lawyer, October 2001, pp. 20–21.
McNatt, Robert, “Top 10 M&A Law Firms,” Business Week, February 28, 2000, p. 6.
Nader, Ralph, and Wesley J. Smith, No Contest: Corporate Lawyers and the Perversion of Justice in America, New York: Random House, 1996, pp. 41–48.
Sapsford, Jathon, and Paul Beckett, “Keefe Bruyette Goes on Despite Awful Toll of Attack,” Wall Street Journal, September 25, 2001, p. 11.
Seigel, Matt, “The Bank Merger Masters,” Fortune, May 25, 1998, p. 44.
Schmitt, Richard B., “All the Way to the Bank: Wachtell Is an Omnipresent Mergers Firm,” Wall Street Journal, April 22, 1998, p. B6.
Stewart, James B., The Partners: Inside America’s Most Powerful Law Firms, New York: Simon and Schuster, 1983, pp. 201, 225-27, 267-82.
—David M. Waiden