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More generally though, given that there are already a handful of (mostly boutique) firms off the big law scale + the size of individualized signing and retention bonuses thrown around this year, I wonder if Big Law will ever decide it's time to start closing the gap (looking at you DPW).

If biglaw firms ever decide to close the gap, it’s not going to be out of some abstract desire to keep up with the Joneses; it’s going to be because they simply cannot attract or retain enough people to keep their firms going. Attrition is bad right now, but it’s not that dire yet.

Also, the economics of the other V10 firms do not work if they are paying associates Wachtell-level comp. No way partners will shave a couple million off their draws just to bring first years up to $400k.

Nah, they actually get paid in exposure. It's like when you let your cousin do your wedding photography.

The answer to the first question is yes, Wachtell is doing that and has been doing that for years. Their EOY bonus is 100% of their annual base (if not more). It's been that way all years other than a few around the previous Recession. (At this point in 2021, the fact that WLRK associates sometimes aren't candid about it is like the insufferable Harvard grad who says s/he "goes to school outside Boston.")

The answer to the second question is no, other (non-boutique) firms won't ever do that. The numbers and operating mechanics just won't permit it.

ETA: I first read this question as asking about total comp. If the question is for some separate thing like signing bonuses, I don't have the insight so I may have jumped the gun on my initial response.

Speaking of exposure — it is kind of funny that, in the investment banking world, Goldman is notorious for underpaying its junior bankers relative to JPM, MS, etc. That’s akin to Cravath or SullCrom paying less than like…DLA. (Which — come to think of it — actually is occurring, based on that discretionary high bonuses thread.)

Not sure what the banking equivalent of Wachtell is. Maybe Centerview? Do they pay more than the rest?

DPW isn't going to double associate comp just to match a firm that hires ~35 associates per year. And in this climate firms are probably better off giving individualized signing and retention bonuses to meet their immediate needs.

Anonymous User wrote: ↑

Fri Nov 19, 2021 4:48 pm

Speaking of exposure — it is kind of funny that, in the investment banking world, Goldman is notorious for underpaying its junior bankers relative to JPM, MS, etc. That’s akin to Cravath or SullCrom paying less than like…DLA. (Which — come to think of it — actually is occurring, based on that discretionary high bonuses thread.)

Not sure what the banking equivalent of Wachtell is. Maybe Centerview? Do they pay more than the rest?

My brother works at centerview and comp is consistent with other banks.

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

Anonymous User wrote: ↑

Fri Nov 19, 2021 4:55 pm

Anonymous User wrote: ↑

Fri Nov 19, 2021 4:48 pm

Speaking of exposure — it is kind of funny that, in the investment banking world, Goldman is notorious for underpaying its junior bankers relative to JPM, MS, etc. That’s akin to Cravath or SullCrom paying less than like…DLA. (Which — come to think of it — actually is occurring, based on that discretionary high bonuses thread.)

Not sure what the banking equivalent of Wachtell is. Maybe Centerview? Do they pay more than the rest?

My brother works at centerview and comp is consistent with other banks.

Interesting. It has a fairly “elite” reputation so I just assumed that their comp matched that. I suppose then that the bankers’ equivalent to Wachtell-level money is just exiting to the buyside.

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

Anonymous User wrote: ↑

Fri Nov 19, 2021 5:29 pm

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

They are Wachtell, and no one else is Wachtell.

More seriously, they have a relentless focus on a specific type of bet the company M&A, and have a reputation that is essentially unparalleled in that particular unique setting. Wachtell can charge whatever it wants for its services in that specific area. That’s why it’s stays small and fairly focused, outside of a few supporting practice groups - it can’t charge any more than any other white shoe firm to do other types of transactional law, so that would dilute the model.

[*]

Anonymous User wrote: ↑

Fri Nov 19, 2021 5:29 pm

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

Because Wachtell, rightly or wrongly, is viewed as being head and shoulders above other firms when it comes to M&A and corporate governance. I'm sure a lot of e.g. Cravath and S&C people get butthurt over this, because they like to think of themselves as peers to Wachtell in M&A, but they're not.

I think several other firms could pull it off as well if they forced the issue (especially right now), but they don't have the stones to try.

Yeah I'm very curious why firms in times like this don't just keep raising rates until the demand for their services aligns with their capacity.

You don't have to dig very deep to see that Wachtell's business model is completely different from the Cravath model that generates profits from leverage. Wachtell has the highest PPP of any biglaw firm but also has a far lower leverage than any of the other firms near the top of PPP. Associate comp raises for them are simply cheaper for them than other firms.

ExpOriental wrote: ↑

Fri Nov 19, 2021 5:39 pm

[*]

Anonymous User wrote: ↑

Fri Nov 19, 2021 5:29 pm

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

Because Wachtell, rightly or wrongly, is viewed as being head and shoulders above other firms when it comes to M&A and corporate governance. I'm sure a lot of e.g. Cravath and S&C people get butthurt over this, because they like to think of themselves as peers to Wachtell in M&A, but they're not.

I think several other firms could pull it off as well if they forced the issue (especially right now), but they don't have the stones to try.

Is the same the case re litigation regarding the above topics? They do have litigation so I'm curious how that keeps up. This seems especially tough bc like, i can imagine how doing a ton of these types of deals always at top of market can make a difference in a transaction, but like, could they really be that much better at securities lit? It's all open source material... Like why hire Wachtel to do your litigation at a huge premium over the other guys?

Anon-non-anon wrote: ↑

Fri Nov 19, 2021 5:55 pm

ExpOriental wrote: ↑

Fri Nov 19, 2021 5:39 pm

[*]

Anonymous User wrote: ↑

Fri Nov 19, 2021 5:29 pm

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

Because Wachtell, rightly or wrongly, is viewed as being head and shoulders above other firms when it comes to M&A and corporate governance. I'm sure a lot of e.g. Cravath and S&C people get butthurt over this, because they like to think of themselves as peers to Wachtell in M&A, but they're not.

I think several other firms could pull it off as well if they forced the issue (especially right now), but they don't have the stones to try.

Is the same the case re litigation regarding the above topics? They do have litigation so I'm curious how that keeps up. This seems especially tough bc like, i can imagine how doing a ton of these types of deals always at top of market can make a difference in a transaction, but like, could they really be that much better at securities lit? It's all open source material... Like why hire Wachtel to do your litigation at a huge premium over the other guys?

Just M&A, to my knowledge. Everything else bills comparably to peer firms in NYC.

A lot of biglaw firms are starting to take on contingency cases (Kirkland just landed a big one), but that's not comparable to taking a slice of a deal. Contingency cases onboard way more risk than deal work, among other distinctions.

Ultramar vistas wrote: ↑

Fri Nov 19, 2021 5:35 pm

Anonymous User wrote: ↑

Fri Nov 19, 2021 5:29 pm

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

They are Wachtell, and no one else is Wachtell.

More seriously, they have a relentless focus on a specific type of bet the company M&A, and have a reputation that is essentially unparalleled in that particular unique setting. Wachtell can charge whatever it wants for its services in that specific area. That’s why it’s stays small and fairly focused, outside of a few supporting practice groups - it can’t charge any more than any other white shoe firm to do other types of transactional law, so that would dilute the model.

Doesn't WLRK have a fee model where if they represent the BOD of a target, they get a %fee of the ultimate deal?

hoos89 wrote: ↑

Fri Nov 19, 2021 5:54 pm

Yeah I'm very curious why firms in times like this don't just keep raising rates until the demand for their services aligns with their capacity.

You don't have to dig very deep to see that Wachtell's business model is completely different from the Cravath model that generates profits from leverage. Wachtell has the highest PPP of any biglaw firm but also has a far lower leverage than any of the other firms near the top of PPP. Associate comp raises for them are simply cheaper for them than other firms.

I am in house and can offer one perspective: we wouldn’t keep retaining a firm that jumped its rates by 20%+ (or even probably 10%) a year. In any corp I can think of, including mine, legal budgets ultimately have to be justified to the business side in some form or another. 4% jump? Maybe we can say it is part of overall market rate increases and that the benefit of retaining attorneys who are already familiar with our business is worth it. But justifying significantly out of step rate increases would be a whole different story. And from the firm’s side, keeping clients you know is a heck of a lot easier than going out and finding new ones, because once a firm falls off a client’s radar, it generally isn’t going to get back on again anytime soon (so gutting your client roster during a transitory demand boom makes little long-term sense). I’d also add that rates clients pay are very often different and lower, for a number of reasons, than what a firm’s advertised rate is, and firms generally have approved rates that last for some period of time, so even if increases did occur they wouldn’t really affect things already in the pipeline.

On the Wachtell discussion generally in this thread, I’d add that they’re NYC-only, and if you took just the highest performing offices of each firm (usually but not always NYC), the PPP gap would probably be significantly smaller. In particular, international offices and non-NY(/ sometimes non-CA) offices usually weigh down a firm’s PPP (looking at you, DC offices).

Does Wachtell pay this sort of compensation to both corporate and litigation juniors, or is there a difference?

Anonymous User wrote: ↑

Fri Nov 19, 2021 6:21 pm

I am in house and can offer one perspective: we wouldn’t keep retaining a firm that jumped its rates by 20%+ (or even probably 10%) a year. In any corp I can think of, including mine, legal budgets ultimately have to be justified to the business side in some form or another. 4% jump? Maybe we can say it is part of overall market rate increases and that the benefit of retaining attorneys who are already familiar with our business is worth it. But justifying significantly out of step rate increases would be a whole different story. And from the firm’s side, keeping clients you know is a heck of a lot easier than going out and finding new ones, because once a firm falls off a client’s radar, it generally isn’t going to get back on again anytime soon (so gutting your client roster during a transitory demand boom makes little long-term sense). I’d also add that rates clients pay are very often different and lower, for a number of reasons, than what a firm’s advertised rate is, and firms generally have approved rates that last for some period of time, so even if increases did occur they wouldn’t really affect things already in the pipeline.

On the Wachtell discussion generally in this thread, I’d add that they’re NYC-only, and if you took just the highest performing offices of each firm (usually but not always NYC), the PPP gap would probably be significantly smaller. In particular, international offices and non-NY(/ sometimes non-CA) offices usually weigh down a firm’s PPP (looking at you, DC offices).

And when the alternative is some combination of (1) turning down work altogether, (2) causing outsized attrition among your associates and (3) delivering sub-par work product because your associates are all overstretched? Still seems weird to not let market forces sort this out, especially for non-core clients. But there's partners out there still drumming up new business as we speak.

And while other firms may have NYC-only PPP that is closer to Wachtell's...their leverage is still massively different. It's also tough to truly isolate NYC for most firms. An NYC-based M&A group might be supported by a Tax group in the Houston office, for instance.

Anon-non-anon wrote: ↑

Fri Nov 19, 2021 5:55 pm

ExpOriental wrote: ↑

Fri Nov 19, 2021 5:39 pm

[*]

Anonymous User wrote: ↑

Fri Nov 19, 2021 5:29 pm

Sackboy wrote: ↑

Fri Nov 19, 2021 5:13 pm

Wachtell has a different economic model that gets them a % of each deal and relies much less so on amassing associate armies to pump up PPP. The fact that firms like DPW have 5 associates per 1 partner and still can't match Wachtell PPP ($6.3 million vs $7.5 million) despite it only having 1.66 associates per partner tells you that the models are wildly different. It would absolutely break the rest of the V10 to attempt to catch up. They are not on the same tier as Wachtell.

How do they get away with this model and why can't other firms do this?

Because Wachtell, rightly or wrongly, is viewed as being head and shoulders above other firms when it comes to M&A and corporate governance. I'm sure a lot of e.g. Cravath and S&C people get butthurt over this, because they like to think of themselves as peers to Wachtell in M&A, but they're not.

I think several other firms could pull it off as well if they forced the issue (especially right now), but they don't have the stones to try.

Is the same the case re litigation regarding the above topics? They do have litigation so I'm curious how that keeps up. This seems especially tough bc like, i can imagine how doing a ton of these types of deals always at top of market can make a difference in a transaction, but like, could they really be that much better at securities lit? It's all open source material... Like why hire Wachtel to do your litigation at a huge premium over the other guys?

No. WLRK's litigation department is good, but there are plenty of firms that are comparable if not better. It's litigation dept doesn't have anywhere near the space between itself and other elite firms as its core transactional practices do. In fact, you can arguably say litigation boutiques (Susman, Kellogg Hansen, etc) are better for lit. And a lot (though people debate how much) of WLRK's lit is driven by its corporate work. The firm's shine really comes from the corporate side.

links54 wrote: ↑

Fri Nov 19, 2021 6:39 pm

Does Wachtell pay this sort of compensation to both corporate and litigation juniors, or is there a difference?

Currently, all associates are lockstep (as are all partners which is more astounding when you think about it). It's been a point of some contention at times, but the litigation(/non-corp more generally) partnership are willing to throw their weight around to maintain the status quo and in aggregate they're indispensable. Being willing and able to defend ambitious transactional/governance decisions in court is a key part of the sales pitch and a point of pride; litigation can work as a sales funnel for transactional or vice-versa.

The litigation department is small compared to peer firms, obviously, so it's easy to keep associates super busy. And aside from deal litigation (justification above) there's a relative emphasis on practice areas with less cost sensitivity, like white-collar and investigations. I don't know this for sure, but I'm fairly confident that the RPL of litigation associates is still more than enough to be profitable.

Anon because I have specific personal knowledge about some of the above.

Anonymous User wrote: ↑

Fri Nov 19, 2021 7:47 pm

links54 wrote: ↑

Fri Nov 19, 2021 6:39 pm

Does Wachtell pay this sort of compensation to both corporate and litigation juniors, or is there a difference?

Currently, all associates are lockstep (as are all partners which is more astounding when you think about it). It's been a point of some contention at times, but the litigation(/non-corp more generally) partnership are willing to throw their weight around to maintain the status quo and in aggregate they're indispensable. Being willing and able to defend ambitious transactional/governance decisions in court is a key part of the sales pitch and a point of pride; litigation can work as a sales funnel for transactional or vice-versa.

The litigation department is small compared to peer firms, obviously, so it's easy to keep associates super busy. And aside from deal litigation (justification above) there's a relative emphasis on practice areas with less cost sensitivity, like white-collar and investigations. I don't know this for sure, but I'm fairly confident that the RPL of litigation associates is still more than enough to be profitable.

Anon because I have specific personal knowledge about some of the above.

+1 on the comment about how mind-boggling it is for Wachtell to still have lockstep partnership comp. I know people who have worked/summered there (hence anon) and at least a few of the big shot partners truly seem to be kind of unique - at least in NYC elite BigLaw. Unique as in, they really seem to want to stay at Wachtell for the "culture"/collegiality of the firm (apparently it's supposed to be a wonderful work environment, outside of the insane workload). Andy Nussbaum has said that other firms have approached him in the past offering "silly amounts of money" lol (his words). I don't know how on earth they select partners - but they must be doing something right from a culture/personality standpoint, since a majority of the corporate partners (and especially the younger ones) could probably pull a Schiele/Barshay and rake in $7-10+ million per year at the likes of Kirkland. But they've only lost Ed Lee in recent years, asaik. So, yes, as the above poster said, it's astounding they haven't felt the need to change lockstep yet.

I think part of the reason Wachtell has such low leverage is that they specialize in M&A, which seems to have lower leverage than other practices. For example, at Davis Polk's NYC office, they have 30 M&A partners to 46 M&A associates/counsel. At STB's NYC office, they have 47 M&A partners to 73 M&A associates/counsel. Both M&A practices are sub-2:1 leverage, but their funds and finance/banking practices have leverage amounts of 3:1 to 5:1.

Also, because Wachtell pays more, they can be more selective with their summer associates and they do not need to weed through classes of 150 associates to find 7 partners. They can take on 35 summers to find 3 partners. Additionally, if the culture is to work an average of 2,600 hours versus 2,000 hours, you can reduce your leverage even more. And, you will probably have more efficient and effective associates because they have had more deal reps per year.

Regarding the business model, unlike the rest of the V10, Wachtell does not do capital markets work or other corporate specialties like funds. According to some Law.com article, Wachtell does this because other law firms with a conflict will feel more comfortable giving Wachtell a referral if they know that Wachtell is not going to try to steal their lucrative banking relationships. So, Wachtell, as principal rep, can pick and choose among a greater variety of higher dollar deals.

Does anyone know how Wachtell's NYC M&A partner pay compares to the NYC M&A partner pay of other firms? They have lock-step of 6M or so, but what is the NYC M&A partner pay of other firms? Is it really better? Asking because it seems like every single firm may have to ditch lock-step.

Also, based on recent league tables, it seems like Wachtell is doing more PE work. Does anyone know if they are changing their model and trying to horn in on PE work, or is the a temporary thing?

Ultramar vistas wrote: ↑

Fri Nov 19, 2021 5:35 pm

They are Wachtell, and no one else is Wachtell.

More seriously, they have a relentless focus on a specific type of bet the company M&A, and have a reputation that is essentially unparalleled in that particular unique setting.

ExpOriental wrote: ↑

Fri Nov 19, 2021 5:39 pm

Because Wachtell, rightly or wrongly, is viewed as being head and shoulders above other firms when it comes to M&A and corporate governance.

I’m not in M&A so perhaps the nuances will be lost on me, but can somebody explain how or why WLRK built this reputation? Is it the size of their deals, the complexity of the issues, the level of client service (I assume 24/7/365), or something else entirely?

It just seems that -- for any mega-deal Wachtell is working on -- there’s going to be at least one (but usually a handful) of other BL firms on the same deal. If that’s the case, what is Wachtell doing that those other firms are not able to do?

Anonymous User wrote: ↑

Sun Nov 21, 2021 6:26 pm

I’m not in M&A so perhaps the nuances will be lost on me, but can somebody explain how or why WLRK built this reputation? Is it the size of their deals, the complexity of the issues, the level of client service (I assume 24/7/365), or something else entirely?

It just seems that -- for any mega-deal Wachtell is working on -- there’s going to be at least one (but usually a handful) of other BL firms on the same deal. If that’s the case, what is Wachtell doing that those other firms are not able to do?

"It's an M&A boutique, the only M&A boutique" is a gross oversimplification but explains fairly elegantly how they defend their reputation and why other V10s can't just reverse-engineer the model. Rightly or wrongly they're considered cutting-edge, and if eleven figures were on the line why wouldn't you pay a premium for that? And then there's a virtuous feedback loop between that reputation and getting the biggest/sexiest matters as well as having first dibs at OCI.