NYC V5 Corp Associate Taking Questions (in middle of lateraling) Forum

[Anonymous User]

OP from the LevFin question. Thanks for the above responses. Very helpful.

My next question is if this is true for debt Capital Markets as I know these are sometimes split at different firms.

And also, could you expand on why the borrower side is more “interesting” in your opinion? It seems like both sides deal with the same issues.

Do all of these criticisms of Finance hold true for Capital Markets work?

I would like to know more about this too. Also, if you're doing the lev fin variation of these types of deals, is it better or worse than was the other posters described when discussing banking. I'm fairly junion at my firm but seems a bunch of associates leave to try to get different experience or do issuer sider work at the very least.

Last post before I head out for the weekend.

I think each of you should try them all out when you summer or otherwise have an opportunity to. Once you've tried it, you can decide if you like it enough to continue (assuming that's an option... hopefully it is during your summer). It's not like other practice groups don't have drudgery and that bank finance is singularly awful.

Part of the reason I say that is that I don't think all of you have a clear understanding yet of what each is quite yet. Securities offerings and loans function quite differently. For example, in a debt offering, the SEC has rules that set the standards for what has to happen in a securities offering, and what the issuer and underwriters must abide by (their goal is to protect investors, most often via proper disclosure). You can't contract around those requirements. In a loan, you don't have that extensive regulatory framework, and it's up to the parties to declare all the parameters themselves in contracts for the most part (and the disclosure element is quite different).

As a result of functioning differently, securities offerings are very process-driven (because the SEC, FINRA, etc. have set out standards for what has to happen) while loans require much lengthier agreements to dictate what needs to happen. You'll draft plenty of disclosure along the way. There's some carryover in terms of the financing concepts, sure, but the lawyer's job is fairly different. I'm oversimplifying things greatly for the sake of this explanation, but they're plenty different.

Most firms who do a lot of lender-side work will also do some borrower-side work on loans, perhaps in the context of acquisition finance (if they don't have a couple corporate clients who need new credit facilities/etc.). Borrower-side finance isn't necessarily more interesting, but if you're at a firm where that's their bread and butter, you're probably working for sponsors like private equity firms. That has its own bag of pros and cons.

[sms18]

Is there a particular reason why sell-side public M&A work generally tend to go to top 5 law firms? (I'm not sure if the same can be said of buy-side public M&A deals?) Is part of the reason that these top law firms try to develop a specialty in sell-side public M&A work given that the pay can be more lucrative (i.e. because public company seller's advisors are ultimately on the company's payroll, even though hired/retained by the board), or is there some other reason?

It's not a function of their rank, it's just that those firms have historically made themselves available to do that kind of work. They've historically had that expertise and now they can market it.

It's extremely lucrative work for law firms. These deals can last a long time, and there's no good reason to be super budget-conscious when your company is literally at the end of its life cycle (being very budget-conscious would probably be extremely harmful to a seller). As a seller, you want your law firm doing everything you can to make sure your board's informed, that the process is sound the whole way through (because in 99% of public M&A, some shareholder will sue and challenge the process), that all the exec comp items are in order so the board and key officers/employees get paid out or move over, that everything goes smoothly, etc. It's a naturally time-intensive process, and there needs to be legal involvement from the beginning to prepare the company for sale internally, set up a clean auction process, deal with any activist shareholders or takeover defenses if needed, etc.

I'd challenge your idea that it's lucrative to law firms because the seller's advisors are on the same payroll, though. It's typically (maybe always or at least almost always, given Delaware case law among other things? not my expertise) a different law firm from the seller's that represents the financial advisor, so it's not the same law firm billing time for both the seller and the financial advisor. I might be misunderstanding your thought though.

Thanks for the insight. Any views on how WLRK (unlike any other law firm mentioned here) is able to continue charging a percentage of the purchase price for its legal fees (as opposed to by billable hour)? It's obvious that Marty Lipton is an exceptional figure in the history of M&A advisory work (and has historically been a strong advocate of the board/critical of "corporate raiders") but I've never received a satisfactory explanation as to why clients continue to pay WLRK under this fee arrangement while Cravath, Davis Polk, Skadden etc. charge by the hour per industry standard. Not sure if there is a clear cut answer but would be interested in hearing others' thoughts.

[Anonymous User]

I would like to know more about this too. Also, if you're doing the lev fin variation of these types of deals, is it better or worse than was the other posters described when discussing banking. I'm fairly junion at my firm but seems a bunch of associates leave to try to get different experience or do issuer sider work at the very least.

Last post before I head out for the weekend.

I think each of you should try them all out when you summer or otherwise have an opportunity to. Once you've tried it, you can decide if you like it enough to continue (assuming that's an option... hopefully it is during your summer). It's not like other practice groups don't have drudgery and that bank finance is singularly awful.

Part of the reason I say that is that I don't think all of you have a clear understanding yet of what each is quite yet. Securities offerings and loans function quite differently. For example, in a debt offering, the SEC has rules that set the standards for what has to happen in a securities offering, and what the issuer and underwriters must abide by (their goal is to protect investors, most often via proper disclosure). You can't contract around those requirements. In a loan, you don't have that extensive regulatory framework, and it's up to the parties to declare all the parameters themselves in contracts for the most part (and the disclosure element is quite different).

As a result of functioning differently, securities offerings are very process-driven (because the SEC, FINRA, etc. have set out standards for what has to happen) while loans require much lengthier agreements to dictate what needs to happen. You'll draft plenty of disclosure along the way. There's some carryover in terms of the financing concepts, sure, but the lawyer's job is fairly different. I'm oversimplifying things greatly for the sake of this explanation, but they're plenty different.

Most firms who do a lot of lender-side work will also do some borrower-side work on loans, perhaps in the context of acquisition finance (if they don't have a couple corporate clients who need new credit facilities/etc.). Borrower-side finance isn't necessarily more interesting, but if you're at a firm where that's their bread and butter, you're probably working for sponsors like private equity firms. That has its own bag of pros and cons.

Anon user here who asked about lev fin question above. Thanks for the input but wanted to see if you had thoughts on doing just lev fin and how that translates to what you said earlier about exits, type of work, how it is perceived by the broader market, etc. Some firms do both and have a combined group (i.e. debt capital markets and banking) though as you mentioned, the deals are very different between a bond offering and a syndicated bank loan. In the context of high yield, non investment grade work, I suppose it would be doing high yield 144A deals a lot and on the banking side would be the same as what you mentioned in a previous post (i.e. dealing with security and collateral, drafting commitment letters and the actual credit agreement) but would lev fin be MORE or LESS interesting from doing other banking deals given the more complex(??) covenants?

[Anonymous User]

I’m at one of the non-WLRK firms you’ve mentioned and we get our fair share of “success fee” payouts ala WLRK so it definitely happens. With that said, WLRK absolutely dominates public sell side representation (where you’re most likely to get a $10mm+ fee). They also happen to be very focused on this extremely profitable type of work and it shows.

[oblig.lawl.ref]

Is there a particular reason why sell-side public M&A work generally tend to go to top 5 law firms? (I'm not sure if the same can be said of buy-side public M&A deals?) Is part of the reason that these top law firms try to develop a specialty in sell-side public M&A work given that the pay can be more lucrative (i.e. because public company seller's advisors are ultimately on the company's payroll, even though hired/retained by the board), or is there some other reason?

It's not a function of their rank, it's just that those firms have historically made themselves available to do that kind of work. They've historically had that expertise and now they can market it.

It's extremely lucrative work for law firms. These deals can last a long time, and there's no good reason to be super budget-conscious when your company is literally at the end of its life cycle (being very budget-conscious would probably be extremely harmful to a seller). As a seller, you want your law firm doing everything you can to make sure your board's informed, that the process is sound the whole way through (because in 99% of public M&A, some shareholder will sue and challenge the process), that all the exec comp items are in order so the board and key officers/employees get paid out or move over, that everything goes smoothly, etc. It's a naturally time-intensive process, and there needs to be legal involvement from the beginning to prepare the company for sale internally, set up a clean auction process, deal with any activist shareholders or takeover defenses if needed, etc.

I'd challenge your idea that it's lucrative to law firms because the seller's advisors are on the same payroll, though. It's typically (maybe always or at least almost always, given Delaware case law among other things? not my expertise) a different law firm from the seller's that represents the financial advisor, so it's not the same law firm billing time for both the seller and the financial advisor. I might be misunderstanding your thought though.

Sell-side M&A is extremely lucrative because the sell-side law firm receives a "success fee" or "losing you as a client going forward fee", in addition to the fees racked up on the hourly rates. Depending on the size of the transaction, the former type of fee itself can be a 8-figure payout.

Wait what? I work on the west coast at a firm that does mostly sell-side (tech companies) but I don't think we get any kind of success fee. We do bill a ton because the buyer is paying for it but I don't think I've ever heard of any kind of success fee. It's a different market but I think in the Bay Area buy-side is actually considered more prestigious because if you're on the sell side you're just constantly losing your best clients. Also it's mostly strategic out here and buyers tend to set the terms and have the leverage. Also, based on my experience here, my understanding was that Cravath and Wachtell were more often buy side and Skadden was sell side, no?

[Anonymous User]

considering a lateral move as well. what are your thoughts on capital markets practice at PE heavy firms like Deb, KE, PW, etc.? you mentioned that working for PE sponsors has its own pros and cons. would love it if you can expound on that!

[Anonymous User]

Is there a particular reason why sell-side public M&A work generally tend to go to top 5 law firms? (I'm not sure if the same can be said of buy-side public M&A deals?) Is part of the reason that these top law firms try to develop a specialty in sell-side public M&A work given that the pay can be more lucrative (i.e. because public company seller's advisors are ultimately on the company's payroll, even though hired/retained by the board), or is there some other reason?

It's not a function of their rank, it's just that those firms have historically made themselves available to do that kind of work. They've historically had that expertise and now they can market it.

It's extremely lucrative work for law firms. These deals can last a long time, and there's no good reason to be super budget-conscious when your company is literally at the end of its life cycle (being very budget-conscious would probably be extremely harmful to a seller). As a seller, you want your law firm doing everything you can to make sure your board's informed, that the process is sound the whole way through (because in 99% of public M&A, some shareholder will sue and challenge the process), that all the exec comp items are in order so the board and key officers/employees get paid out or move over, that everything goes smoothly, etc. It's a naturally time-intensive process, and there needs to be legal involvement from the beginning to prepare the company for sale internally, set up a clean auction process, deal with any activist shareholders or takeover defenses if needed, etc.

I'd challenge your idea that it's lucrative to law firms because the seller's advisors are on the same payroll, though. It's typically (maybe always or at least almost always, given Delaware case law among other things? not my expertise) a different law firm from the seller's that represents the financial advisor, so it's not the same law firm billing time for both the seller and the financial advisor. I might be misunderstanding your thought though.

Sell-side M&A is extremely lucrative because the sell-side law firm receives a "success fee" or "losing you as a client going forward fee", in addition to the fees racked up on the hourly rates. Depending on the size of the transaction, the former type of fee itself can be a 8-figure payout.

Wait what? I work on the west coast at a firm that does mostly sell-side (tech companies) but I don't think we get any kind of success fee. We do bill a ton because the buyer is paying for it but I don't think I've ever heard of any kind of success fee. It's a different market but I think in the Bay Area buy-side is actually considered more prestigious because if you're on the sell side you're just constantly losing your best clients. Also it's mostly strategic out here and buyers tend to set the terms and have the leverage. Also, based on my experience here, my understanding was that Cravath and Wachtell were more often buy side and Skadden was sell side, no?

Not OP.

Hard to make generalizations especially when CSM/WLRK only do a “handful” of deals every year (at least relative to other firms, check Bloomberg’s legal advisory league tables if curious) so it can vary from year to year. With that said, if I were to generalize I’d probably flip the way you had it.

For public M&A work, I think sell side is generally more “prestigious” both because of the fees as covered above but also because of the board advisory work, shareholder vote/proxy fights, lawsuits, etc., there’s just a lot more fiduciating that needs to be done. Since a lot of what informs our analysis is “what worked before in the past” having a lawyer who executed a similar deal is key for this. So that’s why you see a lot of the same repeat players. Rich get richer sort of thing.

[anonbanker]

Sellside assignments have always been seen as more prestigious

At least from the banking perspective, though, that has shifted somewhat as the economics have moved to getting paid on the financing rather than the advisory piece

If I pull a recent M&A league table, Cravath / WLRK did 70+ deals per year each which is not a "handful"?

WLRK has traditionally prided themselves as being sellside focused, although (like GS) they have left that and work on the buy as well--I'm sure when the economics works for them

[Anonymous User]

Why would anyone do any other transactional area?

I know some people who like lev fin because it's often very international and they speak multiple languages. But only bank exits for the most part. Structured finance is terrible cookie cutter deal and repetitive stuff. Very little, if any exits. Fund formations is still quite mindless with a lot of technical stuff - difficult to exit except to a fund doing the same long hours.

What do you like about the job, what do you dislike? Why do you prefer it over other transactional areas? Way I see it is that is that the day to day can vary between mindless, tedious and quite interesting - same as most transactional areas - except the market is generally way more buoyant than other areas, accordingly easier to lateral and easier to move into general roles in-house - greater availability and variety.
Given that no one can predict the future - 5-10 years time with kids and family grinding in private practice is an ask - why would anyone go with a practice area other than corporate which is more or less the same with respect to interest of work, number of hours etc. when their exit options would be way more limited?

[Anonymous User]

Sellside assignments have always been seen as more prestigious

At least from the banking perspective, though, that has shifted somewhat as the economics have moved to getting paid on the financing rather than the advisory piece

If I pull a recent M&A league table, Cravath / WLRK did 70+ deals per year each which is not a "handful"?

WLRK has traditionally prided themselves as being sellside focused, although (like GS) they have left that and work on the buy as well--I'm sure when the economics works for them

“handful” relative to their peers who usually do a multiple of those deals a year

[sms18]

I’m at one of the non-WLRK firms you’ve mentioned and we get our fair share of “success fee” payouts ala WLRK so it definitely happens. With that said, WLRK absolutely dominates public sell side representation (where you’re most likely to get a $10mm+ fee). They also happen to be very focused on this extremely profitable type of work and it shows.

Interesting, I wasn't aware that non-WLRK firms also used a fee structure that would be based on a fixed percentage of the purchase price/EV/whatever metric - thought this was unique to WLRK (https://dealbook.nytimes.com/2015/01/09 ... for-deals/) but maybe not so much these days.

[almondjoy]

I’m at one of the non-WLRK firms you’ve mentioned and we get our fair share of “success fee” payouts ala WLRK so it definitely happens. With that said, WLRK absolutely dominates public sell side representation (where you’re most likely to get a $10mm+ fee). They also happen to be very focused on this extremely profitable type of work and it shows.

Interesting, I wasn't aware that non-WLRK firms also used a fee structure that would be based on a fixed percentage of the purchase price/EV/whatever metric - thought this was unique to WLRK (https://dealbook.nytimes.com/2015/01/09 ... for-deals/) but maybe not so much these days.

Success fee doesn’t necessarily mean a percentage of purchase price, etc. it can also be a percentage of whatever the billables are. e.g. 115% of what the firm would have otherwise billed for.

[Anonymous User]

Oh damn. There's a lot more activity on this than I thought there'd be on the weekend.

Thanks for the insight. Any views on how WLRK (unlike any other law firm mentioned here) is able to continue charging a percentage of the purchase price for its legal fees (as opposed to by billable hour)? It's obvious that Marty Lipton is an exceptional figure in the history of M&A advisory work (and has historically been a strong advocate of the board/critical of "corporate raiders") but I've never received a satisfactory explanation as to why clients continue to pay WLRK under this fee arrangement while Cravath, Davis Polk, Skadden etc. charge by the hour per industry standard. Not sure if there is a clear cut answer but would be interested in hearing others' thoughts.

I'm no expert on Wachtell, so I don't pretend to know the answer to this one.

Anon user here who asked about lev fin question above. Thanks for the input but wanted to see if you had thoughts on doing just lev fin and how that translates to what you said earlier about exits, type of work, how it is perceived by the broader market, etc. Some firms do both and have a combined group (i.e. debt capital markets and banking) though as you mentioned, the deals are very different between a bond offering and a syndicated bank loan. In the context of high yield, non investment grade work, I suppose it would be doing high yield 144A deals a lot and on the banking side would be the same as what you mentioned in a previous post (i.e. dealing with security and collateral, drafting commitment letters and the actual credit agreement) but would lev fin be MORE or LESS interesting from doing other banking deals given the more complex(??) covenants?

If you're talking about leveraged finance in the sense of acquisition finance and/or secured loans, yes, that's what I'm talking about. It's rougher than unsecured loans, as you (1) need to worry about potentially extensive collateral packages that are almost uniformly a pain in the ass to deal with, (2) if you're on an M&A timeline, it will always make your life worse in terms of quick deadlines, the need to turn things over immediately and so on and (3) commitment papers, a phenomenon tied to acquisition finance, will ultimately clog up most of your weekends.

I'm not aware of any big firms in New York that focus on just loans that aren't "leveraged finance."

Wait what? I work on the west coast at a firm that does mostly sell-side (tech companies) but I don't think we get any kind of success fee. We do bill a ton because the buyer is paying for it but I don't think I've ever heard of any kind of success fee. It's a different market but I think in the Bay Area buy-side is actually considered more prestigious because if you're on the sell side you're just constantly losing your best clients. Also it's mostly strategic out here and buyers tend to set the terms and have the leverage. Also, based on my experience here, my understanding was that Cravath and Wachtell were more often buy side and Skadden was sell side, no?

Cravath and Wachtell do their fair share of buy-side representations, absolutely, but Wachtell built its reputation off of sell-side public company representation. Cravath has always done its share of sell-side work as well (Time Warner and Dreamworks in recent memory, I'm sure there's more).

Why would anyone do any other transactional area?

I know some people who like lev fin because it's often very international and they speak multiple languages. But only bank exits for the most part. Structured finance is terrible cookie cutter deal and repetitive stuff. Very little, if any exits. Fund formations is still quite mindless with a lot of technical stuff - difficult to exit except to a fund doing the same long hours.

What do you like about the job, what do you dislike? Why do you prefer it over other transactional areas? Way I see it is that is that the day to day can vary between mindless, tedious and quite interesting - same as most transactional areas - except the market is generally way more buoyant than other areas, accordingly easier to lateral and easier to move into general roles in-house - greater availability and variety.
Given that no one can predict the future - 5-10 years time with kids and family grinding in private practice is an ask - why would anyone go with a practice area other than corporate which is more or less the same with respect to interest of work, number of hours etc. when their exit options would be way more limited?

I'm not sure I'm understanding this post. Is there a question here for me to answer, or is this is a "yay corporate" or "yay leveraged finance" post?

There's always been a huge lateral need for finance associates, because there's a huge amount of financing deals happening and not everyone wants to do it. Based on my observation, though, it's not that it's easy for these same people to get in-house jobs, which (outside banks) tend to prioritize those with more general experience or other types of corporate backgrounds. People do it all the time, sure, but it's more of an uphill grind in my experience.

There are also plenty of great reasons to do litigation rather than corporate. People care about different things, why are you trying to pass judgment on them?