Two in the hand

Simpson Thacher & Bartlett doesn’t need a long list of clients. The New York white shoe firm’s two top private equity clients alone can make any lawyer turn green with envy: Kohlberg Kravis Roberts and The Blackstone Group. Now these relationships have been extended to another business – IPOs involving their clients.
Blackstone appointed Simpson Thacher the sole law firm to advise it on its planned $4 billion (€3 billion) IPO of its management company.
According to Securities and Exchange Commission (SEC) registration documents, the legal advisors on Fortress Investment Group’s IPO, regarded as a precedent for Blackstone’s, earned $14.5 million. Fortress’ offering in February 2007 raised $634.5 million. Any fees Simpson Thacher earns will have to be shared with Skadden, Arps, Slate, Meagher & Flom, the law firm advising Blackstone’s underwriters, led by Morgan Stanley and Citigroup. Simpson Thacher was also sole advisor to KKR’s Euronext offering, which raised $5 billion in May 2006.
That these two private equity relationships alone contribute 15 percent of Simpson Thacher’s gross revenue now is the result of long relationships. Jerome Kohlberg, Henry Kravis and George Roberts first started working with Richard Beattie in 1972, when the trio were associates at Bear Stearns; Beattie is now Simpson Thacher’s chairman. Robert Friedman, then M&A partner at Simpson Thacher, started working with Blackstone since it was founded in 1985. In 1999, Friedman joined Blackstone full time as its chief legal officer and chief administrative officer.
Simpson Thacher’s relationships with these two places it as the only law firm that has advised buyers on four of the largest buyout deals in history to date—the $45 billion acquisition of TXU Corp, $38.9 billion acquisition of Equity Office Properties, $31.4 billion acquisition of RJR Nabisco and $33 billion acquisition of HCA Corp.
No doubt the high flying prospects of the private equity pair is lending swagger to their legal advisor. In 2006, Simpson Thacher did not make Legal Week’s top 10 law firms by per partner equity (PEP), the industry’s measure for partner profitability. But it recently sparked debate by raising associate base salaries by 10 percent to $160,000, prompting other law firms to follow suit.