Sell-side M&A kind of sucks (unless you’re Wachtell). You do the deal, your client gets acquired, and you don’t get a whole lot more work.
(Wachtell just gets all sellers, so it doesn’t matter if they don’t do another deal for that client; there’s always another seller)
The government bailout, on the other hand, is the best kind of work. Lawyers get paid on the investment, the compliance, and the exit. Plus, the clients stick around, so there’s more work going forward.
Three firms just took a ride around that circle for Citi, but one has a unique spot – and the other two got to switch sides to keep the fees coming.
Details after the jump, plus a glimpse at how government work pays.
From Am Law Daily:
The government retained Morgan Stanley to prepare the sale and place the initial batch of 1.5 billion Citi shares on the market, according to The New York Times and an SEC filing. Davis Polk & Wardwell and Cleary Gottlieb Steen & Hamilton split the job of advising Morgan Stanley, public filings show. The two firms have taken the lead advising Citi in its bailout-related negotiations with Treasury, including representing Citi in Treasury’s deal to acquire an equity stake in the ailing bank and Citi’s subsequent move to repay the government $20 billion in bailout funds. The SEC filing acknowledges that the two firms, longtime counsel to Citi, are advising Morgan Stanley on the coming stock sale: “Cleary Gottlieb Steen & Hamiton and Davis Polk & Wardwell have each from time to time acted as counsel for Citigroup and its subsidiaries and may do so in the future.”
Catch that? Davis Polk and Cleary represented Citi on getting the TARP bailout and again on repaying the money. Then they turn around and represent the underwriter in the government’s sale of Citi stock.
Remember, we always say that notice provisions are important because they reveal a lot of hidden information.
Jeffrey Karpf, who leads the Cleary team, gets a copy of all notices to the government, and his firm will be delivering the closing opinion. Andrew Keller leads the Simpson team and he gets notice, too.
Davis Polk, on the other hand, must be waiting for Karpf to forward the correspondence. The firm doesn’t appear anywhere in the actual distribution agreement.
Citi is handling the work inhouse (there isn’t really much work for the company to do in this sort of sale). Michael Tarpley, Associate General Counsel – Capital Markets, is responsible. Anyone know where he came from?
Citi’s GC, by the way, is Michael Helfer – who was a WilmerHale partner, but his alma mater didn’t get any of the work.
Simpson, meanwhile, should be getting used to this. They’re the government’s counsel on these TARP deals, but it’s not as lucrative as you’d think.
Also of note: It’s difficult to tell how much Simpson Thacher has made for its work advising Treasury–a job it won early in the bailout process after Treasury went through a six-firm beauty contest in late 2008. Four firms told Treasury they weren’t interested in the work; that group included Davis Polk and Cleary, according to our reporting. At first, it was easy to understand the lack of interest. Experts considered Treasury’s conflicts requirements especially strict, and Simpson’s initial contract called for it to be paid just $300,000 over its first six months of work. Richard Beattie, the firm’s chair, dismissed the concern over Treasury’s rules for conflicts and called the assignment “an honor.”
Simpson’s subsequent contracts do not outline precise compensation terms. The two most recent ones we could find–you can view them here and here–call for the firm to be paid anywhere between $50,000 and $5 million over six-month periods. Treasury also redacted the hourly rates it would pay Simpson lawyers. Lee Meyerson and Andrew Keller, the lead Simpson lawyers on the matter, did not return messages seeking comment.
$50,000 here, $5 million there and pretty soon we’re talking about real money, right?
