The defection of three prominent corporate lawyers from Cooley Godward Kronish LLP to Dewey LeBoeuf LLP on July 7 left Silicon Valley rivals puzzled. Richard "Rick" Climan and Keith Flaum are two of techland's most prominent M&A lawyers, and yet they and technology transfer partner Eric Reifschneider opted for a midtier New York firm with a modest Valley presence. Why?
Set aside the question of money -- not because it isn't important, but because there's no way of knowing what deals the trio had at Cooley and cut at Dewey. The American Lawyer reported that the average Dewey partner made $1.5 million last year, while his Cooley counterpart took home $1.42 million, but neither firm is lockstep. At the very least, it's safe to assume that Climan, Flaum and Reifschneider were very well paid relative to their colleagues at Cooley, given their prominence.
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Climan headed the M&A group at Cooley and was on its management committee; Reifschneider led its tech transfers group; and Flaum has a considerable book of business that includes eBay Inc. Dewey likely increased their compensation and gave them a multiyear guarantee. That's very appealing in a down market for both M&A and initial public offerings.
Climan said in media interviews he was happy at Cooley and believed it is on stable footing. Still, it's easy to see the move as a commentary on the firm. In the 1990s, the model for firms such as Cooley, Wilson Sonsini Goodrich & Rosati PC and Fenwick & West LLP was to represent small, venture-backed companies, take them public and hope some percentage of them matured into solid corporate clients, à la eBay.
But the tech crash dealt a brutal blow to that approach. Between 1995 and 2000, there were 1,116 tech initial public offerings worth $92 billion in the U.S., according to Dealogic; the next eight years featured only 228 such IPOs worth $42 billion -- an annualized drop of 85% in the number of deals. Cooley has a strong biotech practice, but that market has also experienced a drop in new public companies, from 190 between 1995 and 2000 to 109 between 2001 and 2008.
Meanwhile, the national competitors that never figured out how to do venture work are competing effectively for large public-company M&A assignments.
Cooley responded to this in part by acquiring Kronish Lieb Weiner & Hellman LLP, a New York litigation boutique, but chairman Stephen Neal's quest to find a merger partner came to naught. Instead, the firm has remained focused on technology. In July 2007, it opened a Boston office with 10 lawyers who'd all spent time at Testa, Hurwitz & Thibeault LLP, a tech and life sciences firm.
Later that year, Cooley chose as its CEO Joseph Conroy, an emerging company lawyer in its Reston, Va., office. And last fall, Cooley hired a team of lawyers in Seattle from Venture Law Group, a unit of Heller Ehrman LLP, which itself folded. Five years earlier, Cooley had closed its Seattle office.
With 1,200 lawyers on four continents, Dewey does offer Climan, Flaum and Reifschneider a broader platform. But only about 30 of those lawyers are in Silicon Valley and San Francisco, so the defectors won't be able to provide tech clients a full-service presence locally. They also won't be able to sell clients on a top M&A practice, since Dewey lags far behind firms such as Davis Polk & Wardwell LLP; Latham & Watkins LLP and Skadden, Arps, Slate, Meagher & Flom LLP that have Silicon Valley beachheads and strong New York offices. According to Corporate Control Alert, neither Dewey nor Cooley acted as company counsel on any of the 20 largest U.S. deals of last year or the 20 largest in the first six months of this year.
Furthermore, no Silicon Valley M&A lawyer, not even Larry Sonsini, has built a practice that extends much beyond tech and biotech. And Climan and Flaum's expertise in those areas would seem to be of little help in winning business from the insurance and energy companies that form much of Dewey's client base, since such entities tend to prefer deal lawyers with industry expertise.
Whatever Dewey's liabilities, it no doubt offered Climan & Co. a good deal, or at least a better one than they could get elsewhere. That they took it implies only a modest demand for even top Silicon Valley corporate talent and, perhaps, a rift at Cooley, one of the Valley's top firms.
David Marcus is a senior writer at Corporate Control Alert.
