Askhanar wrote: ↑
Sun Aug 28, 2022 11:58 am
I'm curious to understand how Wachtell became the #1 law firm in NY and what made them remain so.
- What they are doing right?
How do they operate (business model)?
What's unique in them?
What do lawyers do differently at Wachtell compared to other law firms?
How do they reach out and retain clients?
Other things that you could add about them?
To my awareness, I remember reading that Martin Lipton's father was preparing him to be an Investment Banker but he was more interested in law. So I assume that when he started the firm he implemented an IB culture which can be felt even nowadays (especially based on their areas of expertise).
If anyone could give an extensive response to those questions I would appreciate it.
I can't answer all of these questions, as I haven't worked there, but I've been across from them as an M&A associate.
What makes them special/unique vs. every other firm is their unique billing practices. You've probably heard that they "take a percentage of the deal" similar to bankers. From what I've heard, I believe they bill their hours, and if the deal doesn't go through, they get paid for the hours worked like any other firm. If the deal goes through, they get a set "percentage" of the deal that is greater than they would have earned from billable fees. I'm sure this is more complicated and there's all kinds of caps/limits etc.
No other firm really does this - for 2 reasons:
1. Practically not all firms can pull this off. Wachtell is more of a boutique than it is a biglaw firm. They are small and choose the matters they want to work on. They just have more market power than a true biglaw firm that will mostly take in whatever comes the door and are competing with other firms for volume of work. Wachtell has the reputation and the size/nimbleness to go out and say "we're Wachtell, we're very busy, if you want the best, here's how much it's gonna cost".
2. Many firms disagree with their billing practices on a fundamental, values level (or so they claim at least). The argument goes, when your compensation is dependent upon closing a deal, there are perverse incentives to close that deal above all else. This is why bankers are often the biggest pushers of signing M&A transactions - they don't get paid for their work until closing. As lawyers, our job is to mitigate risks and protect our clients which may mean advising our clients to fight for things that may delay or risk closing. The fear is that if our comp is tied to closing the deal, our incentives may not always align with giving clients sound legal counsel or at least there would exist a perception of such.
What do their lawyers do differently? As far as I can tell, nothing really. They are extremely leanly staffed and their junior lawyers are given a ton of responsibility early on. In my opinion/experience, a few excel in that environment and many more flounder/struggle.
However, because of their unique billing structure, it actually works out even if their first-year associate is struggling as the only associate on the deal because they're happy to push the majority of the work on other firms. They get paid well if the deal closes, not if they rack up the hours. On the flip side, I'm sure they tell themselves it's okay to push work on the other firm because we're getting paid by the hour and it allows us to rack up the bill (which is sorta fair). So this weird, symbiotic relationship works.
I caveat all this by saying that my experience is limited to PE M&A. Their true bread and butter is public M&A, so I'm sure my perception is colored by the fact that I've probably never worked on a deal that they really really cared about.