In three short decades, the M&A firm founded by four guys from NYU Law School has become one of the most prestigious and sought-after tickets in law. "We don't do a lot of green-grocer legal chores," says an insider. "We are a small firm that takes on super-elite matters," explains another Wachtell lawyer. Wachtell is tiny compared to its competitors (about 165 attorneys and a nearly even partner-associate ratio) but very profitable - and generous. The firm is known as a compensation leader, and it has doled out extravagant bonuses in recent years.
Young firm with interesting work
For the elite corps of lawyers at Wachtell, Lipton, Rosen & Katz, history isn't a melange of mustachioed clerks and railroad baron bailouts. Of the four name partners - Herbert Wachtell, Martin Lipton, Leonard Rosen, and George Katz - three are still alive and have their names on the door. (George Katz has passed on to his eternal reward, and Leonard Rosen is now of counsel.) The four graduated from New York University Law School, where they worked together on law review, and started their own firm in 1965. Ironically, the firm's founders at first sought "interesting work," not necessarily lucrative work.
The primary goal of the partners was to create a non-hierarchical law firm. Lawyers would write their own first drafts of briefs and do their own research. The firm's partners agreed that they would do all their work through transactions; they would not have "retainer relationships" or serve as general counsel. (This policy means that Wachtell has fewer conflicts of interest.) The young firm attracted mostly Jewish and other ethnic lawyers at a time when the large New York firms were not open to them.
Startling early success
Wachtell attracted a lot of notice from the start, especially after its handling of Loews Corporation's nine-month struggle to take over CNA Financial Corp. in 1974. By 1980 Wachtell was the preferred M&A ally of those defending against corporate raiders. Wachtell, in fact, was known for its constant avowal that hostile takeovers were an evil that destroyed companies and ruined the economy. Brilliant innovator Marty Lipton invented the "poison pill" defense against takeovers in 1982, which more than 250 leading corporations quickly adopted. (This defense discourages a hostile takeover by allowing current shareholders to acquire shares of the target or the would-be raider at a discount, thereby diluting the would-be raider.) In 1984 Phillips Petroleum hired Wachtell to defend against takeover attempts by both famed corporate raider T. Boone Pickens and TWA chairman/hostile bid aficionado Carl Icahn. In 1986 the firm represented Beatrice Companies in its dazzling $6.2 billion takeover by Kohlberg, Kravis and Roberts (KKR).
In the 1980s, the golden decade of the hostile takeover, Wachtell began discounting its M&A work to attract clients. Wachtell, along with Skadden, was one of the first law firms to begin to charge firms involved in takeovers on a contingency-fee basis. Fees were based on the result achieved and the firm's contribution to the ultimate result. (This is now the payment scheme followed by many New York firms.)
Takeover targets: your last resort
Hostile bidders breathing down your neck? Who you gonna call? Most likely, Wachtell. Wachtell is mainly known as a mergers and acquisitions firm - but, oh, what an M&A firm it is! Because the firm traditionally represents a lot of M&A targets Wachtell does not have a long list of constant clients. This forces the firm to rely on its expertise alone for new business. "It is a risky business model, but so far it has paid off," claims a Wachtell lawyer.
In an industry where pay scales and fees tend to move, if not in lockstep, then in a closely aligned fashion, Wachtell busts all barriers. The firm typically charges as much as 1 percent of the total dollar value of a deal, depending on the complexity of the transaction and the result. Don't like paying tens of millions of dollars, as happy clients such as Banc One and Kraft (in its merger with Philip Morris) have done? Then take a pass on Wachtell. It's not as if Marty Lipton and his cohorts will miss the business - one insider estimates that the firm turns away five engagements for each one it accepts. Similarly, associates garner huge bonuses that bring them far above their peers at law firms of comparable prestige.
The cigarette-smoking men
Wachtell has been helping tobacco firm and popular lawsuit target Philip Morris navigate the cloudy landscape of tobacco litigation. In November 1999, Herbert Wachtell, Peter Hein, and Barbara Robbins protected the tobacco company from a suit by union trust funds and health insurers. The plaintiffs had tried to bring a RICO and antitrust case against the tobacco company. But Wachtell successfully argued before the 7th Circuit that the damages to those plaintiffs were too remote. (Wachtell has also succeeded before four other federal courts of appeals on this same point.) The court agreed and held that allowing the suit to proceed would risk double recovery because the smokers could file their own suits. In 1995 Herbert Wachtell spearheaded the attack on ABC's Day One news program for broadcasting a misleading report on alleged manipulation of nicotine by the tobacco industry.
Big banking deals
Wachtell is the happy home of one of the most sought-after lawyers in the business, Edward D. Herlihy a member of its M&A group. Herhily has led the firm to prominence in the area of large-scale bank mergers. In April 1998, BankAmerica turned to Wachtell as its advisor in its $60 billion merger with NationsBank. NationsBank used its own counsel. But as a longtime Wachtell client, the bank was happy to see its old firm involved as well. That same month, the firm scored a coup when Banc One and First Chicago opted to merge. Wachtell, led by Herlihy, represented both Banc One and First Chicago in the $30 billion merger, netting upwards of $10 million in fees. Though even a first-year law student could discern that representing both sides in a deal normally howls "conflict of interest," both First Chicago and Banc One agreed jointly to use Wachtell because of the firm's expertise.
Just a couple of months later, Herlihy and Wachtell duplicated the feat by serving as counsel to both Wells Fargo and Norwest Corp. in their $34 billion deal. The firm continued its dominance of the field in 1999, representing Bankers Trust in its $10.1 billion sale to Deutsche Bank AG.
Because of its tiny size, prestige, and high pay, getting an offer at Wachtell may be more difficult than at any other firm. The ratio of partners to associates is almost even, and the firm fully expects that every associate it hires will become a partner. Wachtell is small enough that the firm can afford to be extremely selective. The small size is a deliberate decision - larger firms make most of their money on their "excess" associates, most of whom have no chance at making partner.
Wachtell recruits from "the usual suspects," including Harvard, Yale, Columbia, Chicago, Penn, Stanford, and NYU. "Occasionally the firm will hire someone from the second tier but it's uncommon. They usually need to stand out for one reason or another," says one insider. The firm places the most emphasis on grades when making its hiring decisions, according to Vault.com's sources. "No one has surmounted bad grades with their personality or interesting background," explains one Wachtell lawyer. Another contact says a typical Wachtell hire is "the nerdy guy in law school who was managing editor of law review." The firm also wants candidates who seem committed to their practice area. "We are looking for people who want a lot of responsibility - not people who are looking to hide for a couple of years and get out."
Two or three partners and two associates typically handle call back interviews at Wachtell. Even if you get an interview, it is far from a foregone conclusion that you will get an offer. During the interview, anything on your resume is fair game, insiders report. Sometimes interviewers will ask an applicant's opinion on a recent development in the law. "The type of person we're looking for is intelligent and can think on their feet. [The interview] can be pretty grueling and you have to be able to handle it. You need to be more than just friendly," warns one Wachtell attorney. An insider who received an offer from the firm reports that Wachtell interviews "were the hardest I had." The same insider reports receiving substantive legal questions during one of his interviews. Interviewers don't mind candidates asking about hours "but we'll tell them it's a lot of hours. We want people who aren't willing to work to select themselves out."
One contact says: "It's very important to do a summer internship at Wachtell, and it's extremely difficult to get an offer here if you turn one down for the summer. We wonder, if you wanted to work here, why wouldn't you take our offer the first time?" But another source says the summer associate prerequisite is just a "myth." Cravath and Sullivan & Cromwell are the firm's favorite sources for its few lateral hires, according to associates.
The philosophy at Wachtell is that "it's a team" or "an extended family." Deals and cases at Wachtell are often staffed with just one partner and one associate. This close relationship avoids the hierarchy that exists at many other firms, associates report. "You're basically treated as equals," one source tells Vault.com. "Partners see you as colleagues and they want to hear what you think," says another Wachtell lawyer. Partners both ask for and value associates opinion, insiders say. "You very much feel on an equal footing with the partnership," boasts one Wachtellian. "Because the ratio between partners and associates is basically even, you work very closely with partners."
An old-fashioned meritocracy
Associates continually point out that Wachtell was founded as a meritocracy. Insiders describe Wachtell as "professional," "formal," and "a bit old fashioned." "Formality is the way of Wachtell," according to an attorney. "Let's put it this way - I can't see the firm going casual," says another associate. In fact, women associates first started wearing pants to work only two years ago. But others point out that Wachtell is "not a typical white shoe firm" and the firm is "not necessarily prim and proper." "There are few distinctions between partners and associates or even associates and our staff," raves a Wachtell attorney. Another associate explains, "Collegiality at the firm crosses partner/associate lines." But others say the firm is hierarchical in that it treats its senior partners with a great deal of veneration, even adoration.
Not a rah rah social scene
Insiders say lawyers at Wachtell are "pretty focused on their work and don't have much of a life outside the firm." (Then again, how much of a social life can you have in 68 hours a week outside the office?) "There is not a rah rah social scene," shrugs one lawyer. "People pretty much work hard and then go home to their family and friends outside the firm. They aren't standing in the hall and talking about the Yankees," according to another associate. "The dearth of massive gala events and general hobnobbing is due to the fact people are working very late and many lawyers have families waiting at home," one source opines. But life at Wachtell is not completely devoid of human interaction. Attorneys often eat lunch or even dinner together as part of a large group. Partners will invite summer associates and new permanent hires out to dinner.
At your desk around the clock
Wachtell is notorious for brutally long hours, and the insiders contacted by Vault.com did nothing to discredit that reputation. Associates describe the hours at Wachtell as "unbelievable." "I love what I do, but I do it too much," gripes one lawyer. Insiders report that it is not unusual for attorneys at Wachtell to bill perilously close to 3,000 hours per year. "Not everyone is billing 3,000 hours, but it is not a shock here if you do," according to an associate. Many Wachtell lawyers take their extraordinary workload in stride. "There are long hours, but people come here expecting that there will be long hours," states a third-year attorney. On the other hand, Wachtellians say their hours are not filled with drudgery. "You don't get a lot of document-intensive matters, so they're substantive hours," explains one attorney. While all Wachtell associates bill long hours, "the corporate associates are the ones who really suffer." Associates do say that they "retain a great amount of control over assignments." "As a first- or second-year associate you'll be reporting to a partner, but really your work is dictated by the clients, not the partners," says one associate. Another contact says that despite the intense hours, people do take vacations and are even encouraged to do so.
Lavished with goodies - healthy and otherwise
Wachtell spends some of its impressive profits on making the lives of its associates a bit easier. "Anything you need, you get," at Wachtell. When it comes to giving perks, the firm "doesn't nickel and dime you," a contact notes. Wachtell associates are treated to a "full breakfast spread every morning." When the evening rolls around, "there is a catered dinner." "Anyone who is around comes to the cafeteria and has dinner together," explains one source. What kind of food do attorneys at Wachtell eat for dinner? Not the pizza and sub dinners some of their attorney friends are having. "They order from a good, fatty restaurant or one of the healthy restaurants. There's always a healthy option," reports one insider. "One of the restaurants is Hatsuhana, which is one of New York's top sushi restaurants. I've gone there by myself and it's like $60 to $70 a night. I hate to think about how much they're spending." The firm also sponsors bi-weekly lunches, which increase to once a week in the summer. The food at the luncheons is not quite at the same level as the catered dinners, Wachtell associates say. "You go up to the buffet and it's either a chicken product or a fish product," says one insider. "It's one step above the high school cafeteria."
Wachtell outfits its lawyers with laptops and an extra phone line at home to dial into the office (soon to be replaced by super-speedy DSL lines). Additionally, Wachtell "provides all associates with a cell phone and 600 minutes paid for by the firm." But the high tech gadgets do not end there: "A Palm Pilot is given to any associate who asks for one." The tech perks should come in handy during the few hours a week Wachtell insiders actually leave their office. "Wachtell is a little bit more generous about everything," says a source. "The car service is paid for from an earlier hour. We fly first class. The firm spends extra money to make associate life comfortable."
Insiders report that Wachtell has a "Jewish family culture." For example, "kosher food is always available" for luncheons and catered dinners. Religious associates "have no problem taking Saturdays off." And on Fridays "everyone clears out." But there are few other minority lawyers at the firm. Wachtell attorneys say that has nothing to do with the atmosphere at the firm. "The firm would never look down on someone of a different race or religion," insists an insider. The firm reportedly has some openly gay attorneys, and Wachtell partners "publicly support hiring gays and lesbians."
Sharing the (considerable) wealth
Though clearly some departments (like M&A) are much bigger moneymakers than others, associates in all departments receive the same pay and the same bonus (calculated as a percentage of salary). "Everything is lockstep," reports one insider. Wachtell reportedly matches the highest New York base salary (as of June 2000, set by Skadden Arps at $140,000 for first-year associates). However, in addition Wachtell pays its associates a bonus that puts the firm at the very top of the compensation heap. Associates says the firm tries to treat associates almost like partners by sharing a good chunk of the firm's earnings. In 1996 the bonus was 50 percent of salary; in 1997 it was a titanic 80 percent. Bonuses at Wachtell over the last two years have been 100 percent of the base salary. The greedy beware - one lawyer warns, "Don't come for money because if that is your only motivation it won't be enough. You have to want to work this hard."
Howdy, (future) partner
The party line at Wachtell is that the firm only hires associates they believe will make partner. Indeed, insiders believe the chances of making partner at Wachtell are better than anywhere else. "The hiring decision is usually a decision that this person is partnership material," says one Wachtell lawyer. "You have about a 50 percent chance if you stick it out," estimates another attorney. "You just have to do the job right." Another source says that in order to make partner you have to take on even more responsibility than the average workaholic Wachtellian. "You really have to act like you want to make partner from the get-go," he advises.
The few, the proud, the summer associates
Wachtell hires "four or five" 1Ls every summer as well as a 2L summer associate class. Summer associates typically rotate through at least three of Wachtell's departments. Because most of these departments are small, associates spend four weeks each in two departments, then a week or two in the third department. Some summer associates may opt to spend a four-week rotation in a smaller department like real estate or creditors' rights (bankruptcy). Each department has a partner who gives out summer assignments. Summer associates say they get an enormous amount of responsibility. "What we do here is like what a fourth or fifth-year does at other firms," reports one insider. "Summer associates write briefs here on their own. It is incredibly satisfying."
By most accounts, the 20-odd summer associates at Wachtell are treated well during their brief stay. A former summer associate estimates he was taken out to lunch "maybe twice a week." Other events include a picnic at a partner's home in Larchmont (a suburban town near New York City) and another event at a partner's house in the Hamptons.
51 West 52nd Street1
Cravath, Swaine & Moore;Davis Polk & Wardwell;Simpson Thacher & Bartlett;Skadden, Arps, Slate, Meagher & Flom;Sullivan & Cromwell
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