In the News Investment Dealer's Digest

Kirkland's Law

Although it is celebrating its centennial this year, Kirkland & Ellis LLP still has some catching up to do. But it's well on its way.
Last Friday, Kirkland announced it had hired David Fox and Daniel Wolf from Skadden, Arps, Slate, Meagher & Flom LLP. The M&A partners started at Kirkland's New York office on Monday. "I had been at Skadden for 25 years; it is a terrific firm and I had a successful career there," says Fox. "I'm tremendously energized to be at Kirkland & Ellis and I'm excited about the future here."
Kirkland has fewer M&A partners than Skadden, so "this is a great opportunity to build something," says Fox.
"We wish them well in this new endeavor to help develop Kirkland & Ellis' M&A practice," says a Skadden spokesman.
At Skadden, Fox joined the policy committee and worked his way up to a leader of the corporate group. He represented BHP Billiton on its withdrawn $150 billion offer to acquire Rio Tinto; the board of Toys "R" Us Inc. on its $6.6 billion acquisition by Kohlberg Kravis Roberts, Vornado Realty Trust and Bain Capital Partners; Realogy Corp. on its $9 billion sale to Apollo Management; and Cendant Corp. on the $3.4 billion sale of its Travelport business and its split into three public companies.
Wolf, meanwhile, was named to IDD's list of the top "40 Under 40" bankers last year. Fox is considered by some to be Wolf's mentor.
"Dan, who was seen as one of the future superstars, was David's protege, so it was no surprise that he's going too," says a former Skadden employee, who requested anonymity. "They worked on almost all of the same deals."
Fox says of Wolf's protege label, "He's a superstar, so if I was at some stage a mentor to a superstar, it's an honor. He stands in his own right."
Wolf, who at 30 became one of the youngest Skadden attorneys to make partner, collaborated with Fox on the BHP and Cendant assignments, and also represented Gerson Lehrman Group Inc. on its $200 million capital infusion from Silver Lake Partners and ECI Telecom Ltd. on its $1.2 billion acquisition by a private equity consortium (the first sizable private equity buyout of an Israeli company).
Fox, 51, and Wolf, 36, share a connection to the Jewish state, but that's not what cemented their bond. Fox lived in Israel from ages 9-25 and qualified to practice law in Israel in 1983, one year before passing the bar in New York. Wolf, a Montreal native, served in the Israeli army prior to studying at the London School of Economics, although Fox didn't know Wolf had lived in Israel for the first few years of their working relationship.
A friend of one of Fox's relatives says he's "a real tough cookie -- I've only met him on a personal basis but he's a totally business-focused and very intense guy. His clients love him and he obviously does great work."
Adds the source, who spoke on condition of anonymity, "I know he was a big earner [at Skadden], and [Kirkland] must have made him some fantastic deal to go because he had been at Skadden for quite a while and was doing really well there. You definitely want him on your side of the transaction, and he wouldn't leave unless he was taking a lot of business with him."
A source close to Skadden says the firm has 140 M&A partners, and given its high deal flow and partner count, the loss of two M&A partners is not considered a huge loss internally. Indeed, Skadden partner William Kunkel led the team which represented Wm. Wrigley Jr. Co. on its $23 billion sale to Mars Inc. and partner Paul Schnell headed the firm's advisory work on behalf of Anheuser-Busch Co. regarding its $52 billion sale to InBev. Skadden advised on 228 announced global deals worth $518.4 billion in 2008, and 41 announced global transactions valued at $161 billion this year to date, according to Thomson Reuters.
Jeffrey Hammes, a Kirkland partner and vice chairman of the firm's worldwide management executive committee, declined to comment on what Kirkland offered Fox and Wolf. "We're excited to have these guys on the team," he says. "By way of their leadership, experience and stature, they enhance our already growing M&A practice globally and in New York City."
The effort to hire Fox and Wolf involved a number of firm professionals, and Kirkland used an executive search firm.
"It's an opportunity for them to help lead and build out our M&A platform, which we've been continuing to invest in. We invest in existing offices and existing practice groups by finding people who can add long-term value to the firm," says Hammes.
In 2008, Kirkland advised on 179 global announced deals worth $73.7 billion, according to Thomson, and 24 global publicized transactions valued at $6.3 billion so far this year. It now has about 625 corporate lawyers, including M&A practitioners.
Hammes assumes some clients will follow Fox and Wolf, but explains, "We didn't hire them for their book of business -- we hired them because they're high-quality attorneys." Hammes says Kirkland doesn't have expectations one way or the other about the amount of clients that come with Fox, Wolf or other new employees. A lot of business, in fact, usually doesn't transfer over from attorneys' previous firms. It often depends on how long the clients have been affiliated with the law firms and whether attorneys signed them up on their own and are close to them.
Last month, Kirkland relocated its Chicago headquarters to a newly constructed, 60-story high-rise at 300 North LaSalle, where the law firm will occupy 26 floors and about 650,000 square feet of office space. The firm had been based in Chicago's Aon Center, where it was the second-largest tenant, since 1972.
Besides the Windy City and the Big Apple, Kirkland also has offices in Washington, Los Angeles (where Kenneth Starr is of counsel), San Francisco, and Palo Alto, Calif., as well as London, Munich and Hong Kong. The partnership that would later become Kirkland & Ellis was established in Chicago in 1909 by Robert McCormick, the grandson of Chicago Tribune founder Joseph Medill, and Stuart Shepard.
McCormick left in 1920 to become Tribune publisher, and retained his prior employer to defend the newspaper against defamation lawsuits. Weymouth Kirkland, who joined in 1915, became chief counsel to the Tribune and other newspapers, and worked closely with Howard Ellis, who also joined in 1915 as an associate. Ellis later pioneered the "fair comment" defense for free speech cases.
In The American Lawyer's 2009 Am Law 100 rankings, Kirkland was seventh on the list of highest-grossing law firms for 2008, with gross revenue of $1.4 billion, a 6.9% increase from its 2007 revenue (Skadden was No. 1, with $2.2 billion). Kirkland, which according to The American Lawyer had 1,333 lawyers and 235 equity partners at year-end 2008 and has more than one partnership tier, generated $1.05 million in revenue per lawyer and $2.47 million in profits per partner in 2008.
As for overall growth, Hammes says, "We tend to grow a little more slowly and focused, and mostly do one-off hirings. It usually takes time to integrate people and cross-market them to our clients." He says the firm does not have specific goals related to personnel or practice expansion. "We're not looking to get real big, but we're definitely always looking to add people who can enhance our already strong core groups."
Hammes works in Kirkland's Chicago headquarters but also spends time in the firm's bases in San Francisco, where he is a founding partner, and Palo Alto, which recently opened. As for whether Kirkland will open additional offices in the U.S. or elsewhere, Hammes says, "We'll probably focus on strengthening each of our existing offices as opposed to starting new ones."
Kirkland's four core practices involve transactions, restructuring, commercial litigation and intellectual property litigation. On the restructuring front, it rehired James Sprayregen as a partner in December. Sprayregen had spent 16 years at Kirkland prior to leaving for Goldman, Sachs & Co., where he was co-head of U.S. restructuring, in 2006 (see related story). He resumed his role as leader of the restructuring group upon his return, although Kirkland does not have formal titles.
"There's not a metric strategy for growth, but we continue to desire to have one of the best, if not the best, restructuring practices in the world," Sprayregen says. "We want to continue to deliver first-class creativity and results for our clients, and if personnel needs come with that, then we'll hire, and that's what's happened."
Sprayregen hit the ground running when he came back to Kirkland. "I left on good terms and they welcomed me back with open arms. There were a number of situations where I had been the investment banker for a company while at Goldman where the client asked me to take off my banker hat and continue representing the company when I went over to Kirkland."
One of those clients was General Growth Properties, and Sprayregen is also working on several non-public restructuring mandates.
He says Kirkland is unusual because, as one of the 10 largest law firms in the U.S., it only has eight offices, including six domestic branches. "Geographic expansion in the U.S. is not a big goal of ours -- we don't mind getting on an airplane and going where clients need us."
Kirkland & Ellis has restructuring attorneys stationed in its London, Munich and Hong Kong offices and wants to grow those practices.

This article appeared in the May 22, 2009 edition of Investment Dealer's Digest.