Who?s who among the wreckage
Published: Sep 23, 2008
Wall Street watering holes fill daily with investment banking’s walking wounded. Meanwhile, in a land far away (or a skyscraper just across town), their legal brethren are frantically drafting Plan B. Let us not forget that 2006 and the first half of 2007 saw record M&A activity, a cornucopia of transactions that benefited the entire corporate food chain. But as M&A and transactional matters slowed, law firms that built their fortunes catering to the Lions of the Street are now grateful to serve as clean up crew, pursuing the countercyclical mandates of bankruptcies and bailouts. Sky falling, you say? Here’s my card.
When giants fall …
At 1:35 AM on September 15th, following the U.S. government’s refusal to extend the august institution a transfusion of taxpayer funds, 158-year-old investment bank Lehman Brothers gave up its fight and filed Chapter 11. Barclays swooped down to scoop up the bank’s investment banking operations, saving some 10,000 jobs, while Japanese bank Nomura agreed to purchase Lehman’s Asian investment division, sheltering another 3,000 employees. Advising Barclays are Cleary Gottlieb (the firm is also advising the Federal Reserve Bank and the SEC during the Lehman bankruptcy proceedings), Clifford Chance and Sullivan & Cromwell, led by firm legend H. Rodgin Cohen.
The fall of America’s fourth largest investment bank dwarfs all previous “largest bankruptcies in history,” including that of WorldCom in 2002 and Drexel Burnham Lambert in 1990. Helming debtor proceedings is Weil Gotshal Chairman Stephen Dannhauser; creditors will be led by Milbank Tweed Also advising Lehman is Sullivan & Cromwell; the bank’s board is being counseled by Simpson Thacher.
Lynch mobs
On the same day that Lehman ceased to exist, Merrill Lynch scrambled madly to avoid a similar fate. The bank agreed to a desperate $44 billion tie-up with Bank of America, a maneuver that will create the country’s largest brokerage house and consumer banking franchise. 17,000 Merrill brokers will combine with BofA wealth managers to form Merrill Lynch Wealth Management.
Wachtell is overseeing M&A matters for BofA, while Debevoise & Plimpton carries on as advisor to JC Flowers and Co., BofA’s financial advisor. Merrill Lynch itself called upon the varied expertise of Shearman & Sterling, while its board looks to corporate and litigation partners from Cravath.
Big Gov makes it A-OK for AIG
Just days after the Lehman filing, the U.S. government stepped in to take over insurance behemoth American International Group (AIG). In exchange for an $85 billion federal loan (footed by—guess who—you and me), the feds demanded an approximately 80 percent stake. Representing the Federal Reserve and the Treasury Department is Davis Polk; also weighing in on behalf of the Treasury is Wachtell.
As for AIG, once again it’s H. Rodgin Cohen and a Sullivan & Cromwell team stepping in with sage advice, with Simpson Thacher advising the insurance giant’s board. Restructuring matters are being handled by Weil Gotshal.
Fannie and Freddie went down a hill…
David Sedaris has observed that Sallie Mae sounds like “a naïve and barefoot hillbilly girl” but in fact is a “ruthless and aggressive conglomeration.” Sallie’s even more imposing ma and pa, Fannie Mae and Freddie Mac, took a good-ol’- fashioned nosedive earlier this month when the Treasury Department took over the ailing duo. Sullivan & Cromwell’s omnipresent (and perhaps omnipotent) Cohen advised Fannie Mae during its governmental takeover less than two weeks before lending his services to both Lehman Brothers in the aforementioned Chapter 11 filing and AIG during its latest travails.
The Bear Stearns harbinger
Bear Stearns’ fire sale to JPMorgan Chase is now generally regarded as merely the first major casualty of the crunch. As is to be expected of a deal that called for a $30 billion line of credit courtesy of the Federal Reserve, the involved parties spared no expense in hiring BigLaw talent, with Bear tapping Sullivan & Cromwell and Skadden to line up behind Cadwalader stalwart Dennis Block and JPMorgan’s Simpson Thacher yielding the lead role to Wachtell. However, it takes way more than two to dance the meltdown tango: dozens of other firms, including Dechert, Thacher Proffitt, Sidley Austin and Orrick, counted both JPMorgan and Bear as clients at the time.
-posted by anu rao