What killed Weil Gotshal?

{"text":[[{"start":9.234,"text":"On Wednesday afternoon, Weil, Gotshal & Manges’ management committee gathered in a conference room on the 25th floor of Manhattan’s General Motors Building, where the elite law firm has been based for nearly 60 years. They were there to deliver news that would have been unthinkable just weeks earlier."}],[{"start":25.622,"text":"The firm’s lawyers watched on Zoom as Barry Wolf, its longtime chair, delivered remarks announcing that Weil had exhausted its options and would be dissolved after 95 years in business. Going into the meeting, partners did not know what verdict had been reached. Some in the room began to cry."}],[{"start":43.28,"text":"Weil’s leaders did not take questions."}],[{"start":45.297,"text":"The absence of M&A rainmaker Michael Aiello, who was away in court that afternoon, loomed large. His decision to depart for rival Cravath, Swaine & Moore had delivered Weil to the brink of crisis. Aiello, who told the firm’s leadership of his plans to leave in September, was the highest-profile person among dozens of departures since the start of the year."}],[{"start":null,"text":"

"}],[{"start":65.397,"text":"Many of those on Wednesday’s call were astonished: how could a firm with a pristine balance sheet, more than a thousand lawyers, and $2bn in annual revenue be felled by the departure of a series of individual partners? The answer sheds light on the risks at the heart of many law firms’ business models."}],[{"start":82.308,"text":"This account of the turmoil at Weil is based on conversations with more than 20 current and former Weil lawyers, rivals, advisers and others affected by its collapse."}],[{"start":92.108,"text":"Weil is the first major firm to be brought down by the mercenary culture that has emerged in Big Law in recent years, where a white-hot market for lateral partners has replaced a system in which most stayed with one firm for an entire career."}],[{"start":105.28,"text":"“These firms are just people,” said one senior lawyer at a competitor. “It’s not like there are hard assets or other widgets or intellectual property. They can be pretty fragile.”"}],[{"start":114.8,"text":"Rival firms now offer huge sums to scoop up rainmakers, and hopefully their clients. Salaries in the industry can top $30mn, helped by hefty fees from private-equity groups, and a small number of firms grew rapidly by snapping up top partners and their teams."}],[{"start":132.32,"text":"But Weil had largely missed out on this bonanza. Aiello lobbied against rapid growth while Wolf marvelled at how the market for legal talent had evolved. “The idea of how much time is spent attracting new talent and making sure you keep your talent at the partner level was something that 15 or 16 years ago when I started really didn’t exist,” Wolf said on a Weil podcast in July."}],[{"start":155.331,"text":"He also said Weil’s best days were “yet to come”."}],[{"start":158.96,"text":"The most consequential departures from Weil started this summer. Private equity partners Christopher Machera and Brian Parness, whose clients included Wall Street giants TPG, Brookfield and Goldman Sachs, had been talking about leaving for much of the year. Within weeks of each other, Machera moved to Paul Weiss, where colleagues would follow, and Parness went to Simpson Thacher."}],[{"start":181.096,"text":"Soon after came the biggest blow: Aiello’s plans to leave for Cravath, taking a group of M&A partners with him. Together with his team, Aiello had been responsible for between $100mn and $150mn of revenue a year — roughly 5-7 per cent of the firm’s total. Machera, Parness and their teams accounted for a further $100mn or so."}],[{"start":null,"text":""}],[{"start":203.001,"text":"Behind closed doors, the firm was facing yet another problem. Ramona Nee, a Boston-based private equity specialist, had been picked as Weil’s next leader and was set to take over from Wolf in January 2027. But in August she had told a handful of top leaders she no longer wanted the job, a decision that raised questions about her future at the firm and its own stability."}],[{"start":224.619,"text":"The wider management committee was told the following month, but equity partners were left in the dark while the firm’s leadership decided what to do. Weil had already hired Jon Henes, a former Kirkland & Ellis bankruptcy partner, for so-called law firm optimisation advice within its restructuring practice — an assignment that morphed into crisis management. It brought in Davis Polk, whose lawyers had experience in law firm combinations."}],[{"start":249.338,"text":"The firm’s leadership decided it needed a merger and landed on Willkie Farr & Gallagher as its best bet. They discussed a plan to announce Nee’s decision alongside the successful announcement of a deal. Had it become public sooner, they feared, it could precipitate a crisis."}],[{"start":264.451,"text":"Weil had trumpeted several “boomerang” hires over the summer — lawyers who had returned after having departed years before. But the overwhelming flurry of departures had created a prisoner’s dilemma. Each employee began to think of their own interests instead of the firm’s, and each departure made another more likely."}],[{"start":282.808,"text":"Weil continued to work on blockbuster matters — including the bankruptcy of car parts maker First Brands and Fox’s acquisition of streaming platform Roku, which is being probed by the US Department of Justice."}],[{"start":null,"text":""}],[{"start":295.6,"text":"Under the surface, however, it was struggling to manage its own instability. After negotiations and the exchange of financial term sheets, discussions with Willkie ended at the beginning of last week. Weil could have tried to persist as a smaller standalone firm, but the risk was that the lawyers who stayed could not bring in enough revenue to cover costs."}],[{"start":315.01,"text":"All the time, the threat that Weil’s remaining significant generators would leave was climbing. In the US, on the principle that people have a right to hire a lawyer of their choosing, ethics rules in effect prohibit non-compete arrangements. Three more lawyers from the firm’s management committee — Drew Tulumello, Chantale Fiebig and Caroline Zalka — defected."}],[{"start":335.545,"text":"For some partners who had stayed calm and trusted that the firm would stabilise, this was a turning point. Last year, Weil set up a six-person “global leadership and strategy committee” to focus on how to make it fit for the future. By last week, three of the six — Aiello, Machera and Fiebig — had announced their departures."}],[{"start":354.099,"text":"“It’s not comforting to know the people in charge of the future stability of the firm are themselves packing up and leaving,” one equity partner told the FT at the time."}],[{"start":362.81,"text":"The biggest law firms “are not firms that are defined by a sense of partnership, of fealty to the law or to clients”, the equity partner reflected this week. “It’s a completely transactional relationship.”"}],[{"start":374.491,"text":"On Sunday, as leaders met to discuss the firm’s viability, partners told them other key groups of lawyers were planning to depart. Those rumoured departures were so significant that, if completed, Weil would not survive. At that moment, dissolving the firm became the likeliest option. That evening, the FT reported Nee’s decision not to take the top job."}],[{"start":395.936,"text":"Rivals reported a flood of CVs from Weil lawyers at all levels after that, a sign in their eyes of a deepening crisis of confidence. Recruiters stepped up attempts to poach Weil partners. One partner told the FT he was fielding more than a dozen calls a day from recruiting agencies during a “feeding frenzy” at the peak of the turmoil. He received three while on the phone to the FT."}],[{"start":418.269,"text":"At the firm, deliberations were cloaked in secrecy even as Davis Polk brought its restructuring experts into the fold and AlixPartners entered the picture. One Weil partner said associates kept asking them what was happening. The partner was not convinced that the associates believed them when they said they knew just as little as everyone else."}],[{"start":null,"text":""}],[{"start":437.607,"text":"Since Wednesday’s announcement, shock has given way to anger for some current and former lawyers of the firm. Several floated the idea that Weil’s leadership could face a lawsuit over strategic blunders in recent years. Others pinned Weil’s demise on Aiello and others for abandoning ship, and on Nee for walking away from her duties. Others disagree. “Ramona worked around the clock and tried to do everything she could to have a viable firm going forward,” one Weil partner said."}],[{"start":467.2,"text":"Advisers with expertise in euthanising businesses will seek to collect outstanding fees and use them to pay off liabilities — among them the rent for roughly 380,000 sq ft it occupied in the General Motors Building."}],[{"start":479.304,"text":"Weil will owe money too to current and former partners with capital accounts at the firm. Lawyers often use their equity in a firm as collateral for holiday-home mortgages, and Weil’s demise is likely to reverberate financially even for multi-millionaire lawyers. For support staff — paralegals, assistants, researchers — the prospects appear bleaker."}],[{"start":500.32,"text":"Weil has said it will continue to work on client matters during the wind-down process."}],[{"start":505.04,"text":"Even as the firm was teetering, its biggest names were still in the midst of high-profile client work. Aiello was testifying on Wednesday in a Delaware court about the failed $24.6bn merger between Albertsons and its rival grocery chain Kroger, a case where Weil litigators were also in court."}],[{"start":522.734,"text":"Matt Barr, Weil’s restructuring head, was representing pro golfers hit by the bankruptcy of the Saudi LIV Golf league. Barr’s assignment, taken on a month ago, was to help prevent a liquidation of the sports group. Ironically, LIV’s survival hopes remained alight on Wednesday night even as Barr’s law firm had perished."}],[{"start":541.68,"text":"At about 4.30pm on Wednesday, two associates who had started their Weil careers just a week earlier as part of this year’s class walked out of its Manhattan office. One told the FT he had spent the summer at Willkie and wished he had gone there instead. “How could we have known?” the other said. They were told they would be paid for 90 days."}],[{"start":563.68,"text":"That same afternoon, a lawyer at a rival firm was interviewing Weil lawyers. The applicant asked how he could be sure that the same thing would not happen to this firm. The interviewer said that, as far as he knew, things were fine."}],[{"start":574.73,"text":"“We were told the same thing at Weil,” the candidate answered."}],[{"start":578.22,"text":"Additional reporting by Michelle Chan, Julia Rock, Ramsay Hodgson and Antoine Gara"}],[{"start":587.38,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793429044_3726.mp3"}