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Wall St. turmoil spurs an uptick in legal business

Bloomberg News / October 9, 2008
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NEW YORK - As the financial crisis worsens, top New York and London law firms are experiencing a boom in work advising banking clients in mergers and acquisitions, bankruptcies, and lawsuits.

H. Rodgin Cohen, chairman of New York's Sullivan & Cromwell, is leading hundreds of attorneys from his firm representing seven financial firms, including JPMorgan Chase & Co., Goldman Sachs Group, Lehman Brothers Holdings Inc., and the mortgage firm Fannie Mae. A lawyer at another firm said he worked 450 hours last month, 15 a day.

The frenzy of deal business may be bittersweet, said Jonathan Lindsey, managing partner of the New York office of the legal recruiting firm Major, Lindsey & Africa. "It's good news and it's bad news," Lindsey said. "The good news is there's a lot of deal work. The bad news is because the deals are so compressed in time the fees tend to be lower. You can't have 100 lawyers working on a deal for a year."

Deal volume, down 36 percent at midyear according to data compiled by Bloomberg, rebounded with the financial crisis and is now down just 27 percent for the year. The torrent of work may dry up as lawyers help clients go out of business or consolidate, Lindsey said.

Other firms handling major work stemming from the crisis include Simpson Thacher & Bartlett; Davis Polk & Wardwell; and Wachtell, Lipton, Rosen & Katz.

Simpson Thacher is representing Lehman in issues arising from the company's bankruptcy.

"It's a nice problem to have," Andrew Johnman, head of the professional services team for US banking business at Barclays Capital in New York, said of law firms' wealth of work.

"All of a sudden you've got a load of business for M and A teams that were running short of 100 percent," he said. "When this boom is over, they'll be running less than 100 percent again, but they might as well make hay while the sun shines."

The spate of work began in March with the collapse of investment bank Bear Stearns Cos., and its government-brokered sale to JPMorgan.

Bear Stearns is being advised by the New York law firms Cadwalader, Wickersham & Taft and Skadden, Arps, Slate, Meagher & Flom. Sullivan & Cromwell advised Bear's board of directors. Wachtell and London-based Linklaters counseled JPMorgan.

For some large firms that haven't picked up work in the recent boom, the year has been a struggle. The quick pace of deal work mostly favors top-tier Wall Street firms, Lindsey said.

"Corporate lawyers, except the ones that are working on matters directly related to the rescue plan, are in general much less busy," Lindsey said. Securities offerings, securitizations, and real estate lending, which often fuel firms' corporate practices, are "dead," he said.

"2008 has been a horrible year for the top firms," law firm consultant Peter Zeughauser said.

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