M & A Law Prof Blog

Pritzker nominated for Commerce

Penny Pritzker was just nominated to be Secretary of Commerce.  I post this for the corporate geeks amongst my readers (Smith v van Gorkom; Pritzker family tree; 2006 Marmon Group breakup; ).  The rest of you can move along. 

-bjmq

Milken Institute Private Equity Panel

Another interesting panel from the Molken Institute conference:

Speakers:

Leon Black, Founding Partner, Apollo Management, LP

David Bonderman, Founding Partner, TPG Capital

Jonathan Nelson, CEO and Founder, Providence Equity Partners

Jonathan Sokoloff, Managing Partner, Leonard Green & Partners

Scott Sperling, Co-President, Thomas H. Lee Partners, L.P.

 

MAW

Outlook on M&A

The always interesting Annual Milken Institue Global Conference is happening now.  Here is the panel on the outlook for M&A.

Speakers:

Anthony Armstrong, Co-head, Americas M&A, Credit Suisse

Maria Boyazny, Founder and CEO, MB Global Partners

James Casey, Co-Head of Global Debt Capital Markets, JP Morgan Securities LLC

Tilman Fertitta, Owner, Chairman and CEO, Landry's Inc.

Raymond McGuire, Global Head, Corporate & Investment Banking, Citi

Moderator:

Robert Harteveldt, Global Co-Head of Fixed Income and Global Head of Fixed Income Origination, Jefferies & Co. Inc.

 

MAW

NYT on Legal Education (yet again)

Yesterday’s New York Times carried another in a long line of articles (which go back at least to the 1980’s) complaining that law schools emphasize the theoretical over the useful and, as a result, don’t teach law students how to be lawyers. As is typical, the author concludes that law schools need to increase their emphasis on skills training.

The article starts off with (and seems to rest on) an example that is pretty lame. Apparently, three first year associates at Drinker Biddle didn’t know that you file a certificate of merger with the secretary of state to effectuate a merger.

Let’s assume for arguments sake that this lack of knowledge is representative of the typical law school graduate going into a transactional practice. So what?

As I have discussed before, law schools have a comparative advantage of teaching certain competencies; law firms have a comparative advantage of teaching others. Each should do what they do best.

Among other things, law schools have a comparative advantage over law firms in teaching deep substantive knowledge of complex subjects necessary to practice law. For example, law firms simply cannot teach securities law the way a law school can (if at all). A thorough understanding of complex material like this requires voluminous outside readings and in-class lectures for a concentrated period of time.

On the other hand, you know what law firms can teach pretty quickly? How to call an outside service to file a certificate of merger.

Of course law schools also may have a comparative advantage in teaching certain practical skills. I’m all for courses in contract drafting and negotiation, and I teach a transactional skills course myself. But the issue is a little more complex than the NYT article suggests. 

For more of my thoughts on this perennial topic, see What Law Schools Should Teach Future Transactional Lawyers: Perspectives from Practice.

MAW

Is this unlawful?

According to this story from Bloomberg, the SEC

sued a Michigan man, claiming he traded on information he learned from a houseguest about the impending acquisition of Brink’s Home Security

Apparently, the

investment banker for Tyco International Inc., the buyer, inadvertently left behind a draft presentation on the deal.

According to the SEC, months later, the homeowner discovered the draft. Another month or so after the discovery, the homeowner intuited from changes in the banker’s travel schedule that the transaction was imminent.

According to the SEC, the homeowner profited from trading in Brink’s stock after the public announcement of the deal caused its price to jump 30 percent.

The homeowner's lawyer said his client has settled the case and will turn over his profits and pay a fine.

Obviously the facts are incomplete, but I wonder if Professor Bainbridge would have advised the homeowner to fight the case.

MAW

Ribstein on "The Cloudy Future of Big Law"

Yesterday, over at Ideoblog, Larry Ribstein had another in a series of thoughtful musings on the future of Big Law. His post, "The Cloudy Future of Big Law" responded to this post at Above the Law, which primarily focused on the unprecedented layoffs in 2009 and went on to suggest that "[t]here is reason to be hopeful that 2010 will be much better than 2009."

Professor Ribstein is somewhat more pessimistic, pointing out that "there are also reasons not to be hopeful." Indeed, he believes that, although the economic "crisis may be over and there may be a lot of regulatory and other work for lawyers, . . . that doesn't necessarily translate into a rosy future for Big Law."

This is territory Professor Ribstein has covered before—here he is in the abstract from his article on the subject, The Death of Big Law:

Large law firms face unprecedented stress. Many have dissolved, gone bankrupt or significantly downsized in recent years. These events reflect more than just a shrinking economy: the basic business model of the large U.S. law firm is failing and needs fundamental restructuring.

I’d like to focus on just one of the trends Professor Ribstein believes to be "very relevant to the future of Big Law." In his post he points to:

The pressure on hourly billing, which has been a major profit generator for big firms. Although I keep hearing that reports of its demise are premature, don't bet on that.

Professor Ribstein may be right. Perhaps the recent push to replace the billable hour reflects more than just a shrinking economy and will continue even after economic conditions improve. If so, it could certainly be a blow to the current Big Law business model.

But I wonder if this is really a trend rather than a temporary response to current circumstances. Here are a few headlines—guess what they have in common:

• The Vanishing Hourly Fee, ABA Journal

• The New Value Billing, The American Lawyer

• The Rise and Fall of the Billable Hour, New York State Bar Journal

• Time to Question the Billable Hour, Connecticut Law Tribune

• Value Pricing: The Billable Hour Death Knell, Accounting Today

• Preparing a Requium for the Billable Hour, New York Law Journal

The first 3 were written following the economic slowdown of 1991-1992 and the last 3 were written following the bursting of the tech bubble in 2000, in each case following the unprecedented stress faced by law firms at the time. In hindsight we now know that, in each instance, the death of the billable hour was greatly exaggerated. Once demand for lawyers recovered there was less pressure on fees and, consequently, less focus on how they were calculated.

I’m not saying this time will be the same.  I just think it’s a little too early to tell.

MAW

The Warning

This is worth watching if you missed it when it ran earlier this week.

Forstmann on Future of Wall St.

Teddy Forstmann and Charlie Gasparino on the financial crisis, executive compensation, corporate risk taking and the future of Wall St.

Proskauer on Pay to Play

On August 3, 2009, the SEC proposed for comment a new rule under the Investment Advisers Act designed to address alleged “pay to play” practices by investment advisers when seeking to manage assets of government entities.

 

 

If adopted in its current form, the new Rule would prohibit investment advisers from

 

 

• providing advisory services to a government entity for compensation for two years after the adviser or certain of its associates make a contribution to a government official who can influence the entity’s selection of investment advisers.

• making any payment to a third party to solicit investment advisory business from a government entity.

The proposed Rule will affect virtually all private investment fund managers.  It takes aim at alleged “pay to play” abuses in New York and New Mexico and is intended to address policy concerns that such payments (i) can harm government pension plan beneficiaries who may receive inferior services for higher fees and (ii) can create an uneven playing field for advisers that cannot or will not make the same payments.

 

 

Proskauer has the full story here.

 

MAW

Deals from Hell, cont

For the sake of completeness Time Warner announced the spin-off of AOL this morning.  Either the board meeting started really early, or they didn't have much to talk about.  Here's the press release.

- bjmq

Back to the Future

The N.Y. Times today has an article on SPACs -- the acronym stands for special purpose acquisition companies.  These are blank check companies making initial public offerings specifically for the purpose of a to-be-determined and unknown acquisition  There are all sorts of special SEC regulations which apply to them, mainly because the SEC has never favored the vehicle. 

With good reason.  The rise of SPACs has been a discussion point and concern among M&A practitioners for almost three years now and many white shoe firms still refuse to be involved with them, so it is surprising that the N.Y. Times is only now picking up on it.  SPACs were big in the 1970s but fell into disfavor due to a number of high-profile implosions and complaints over the quality of their acquisitions.  But like Frankenstein arisen from the dead, the Times reports that SPACs represented 26 percent of the 73 initial public offerings this year, and 15 percent of the money raised.

The rise of SPACs is a derivative effect of the private equity bubble.  The Investment Company Act of 1940 effectively makes impossible the public listing of a private equity fund.  And Investors shut off from private equity are turning to SPACs as a substitute.  Given the past troubles with SPACs this is a dubious effect at best.  There is also no real reason to permit SPACs yet shut-off private equity funds from the public markets.  It is yet another reason why the SEC should take steps to fully revise the Investment Company Act to bring it into the modern era.      

Barclays offers to acquire ABN AMRO/Bank of America agrees to acquire LaSalle

Dutch bank ABN Amro today announced its backing for the largest-ever banking takeover, an offer lodged by U.K.'s Barclays valuing the bank at $91.2 billion. In a related transaction, ABN Amro has agreed to sell LaSalle Bank Corporation to Bank of America for $21 billion in cash.  After a return of $5 billion in excess capital, Bank of America reports that its net cost will be $16 billion.  Bank of America will need the usual bank regulatory clearances for the transaction and so it will likely not close its purchase until late 2007 or 2008. 

The LaSalle transaction is likely an attempt to influence the course of bidding for ABN Amro.  Speaking at a press conference, ABN Amro's CEO Rijkman Groenink repeated an invitation to a rival group of bidders, which includes Royal Bank of Scotland, Banco Santander and Fortis, to meet later on Monday to explore a competing offer. He also stated that ABN Amro had negotiated an "out" for possible other bidders for LaSalle.  If successful, the consortium has announced it would break up ABN Amro, with Royal Bank of Scotland taking LaSalle. But the Bank of America agreement clearly places an obstacle in front of the consortium bid.  And this was likely ABN Amro's intentions despite its CEO's words this morning.  For the sale of LaSalle, ABN Amro does not need the permission of its shareholders under Netherlands law (where ABN Amro is organized) because LaSalle represents less than 30% of the bank's total assets. In addition, the Netherlands does not place restrictions on crown-jewel lock-ups.  The documents for the sale have not been made public yet, but one would guess that Wachtell, counsel for Bank of America on the deal, fought hard to make this "out" as narrow as possible, and likely received the cooperation of ABN Amro in the process.  I'll post more on this once the agreement is made public.