Tuesday, May 22, 2007
Posted by Jeff Lipshaw
Steven Davidoff at our sister blog M&A Prof Blog has a post on the Blackstone Group IPO, which includes a disclosure in the S-1 that Simpson, Thatcher partners will buying up units that account for less than 1% of the offering. Simpson, Thatcher is counsel to the company; Skadden is representing the underwriters.
I'm not sure this bothers me particularly. Underwriters' counsel will be looking out for disclosure issues as well, and the question will be whether Simpson's judgment in advising Blackstone would be affected by some of the lawyers having a stake in the offering going forward. Certainly there would be few clients more sophisticated than Blackstone, and hence capable of a knowing consent to Simpson's continued representation of the company even in the face of a potential conflict. Moreover, I don't see that Simpson is taking the units in lieu of fee compensation; simply some of the lawyers are buying in.
Far more problematic, I think, is the question whether lawyers take stock in start-up companies in exchange for fees. We spent a day on that question in the venture capital seminar I taught at IU-Indianapolis. On one hand, entrepreneurs are unlikely to have the cash to pay standard fees and the arrangement facilitates getting a better grade of lawyer; on the other, there's a far greater self-interest issue. (HT to Peter Henning.)