Superstar lawyers: the poaching war between Paul Weiss and Kirkland

One scoop to start: CVC Capital Partners has revived plans for a multibillion-euro stock market listing that could come before the end of the year, according to people familiar with the matter.

In today’s newsletter: 

Paul Weiss pilfers Kirkland’s private equity ranks

Earlier this month, highflying private equity lawyer Roger Johnson was terminated from his job at the world’s highest-grossing law firm Kirkland & Ellis after it was discovered that he was in talks to join a rival.

Now, it appears that Johnson’s departure was part of a high-stakes international raid by US law firm Paul, Weiss, Rifkind, Wharton & Garrison on its larger peer. 

The details of the poaching spree came to light on Monday after DD’s Will Louch, Arash Massoudi and James Fontanella-Khan revealed that multiple lawyers from Kirkland’s London and Los Angeles offices are leaving the firm to join Paul Weiss. 

The Kirkland defectors include debt finance lawyer Neel Sachdev, who played an important role establishing Kirkland’s dominant dealmaking business in Europe over the past two decades. 

His fellow London-based partners Kanesh Balasubramaniam, Matthew Merkle and Deirdre Jones have also made the switch, according to people familiar with the details. Eric Wedel, a US-based Kirkland lawyer, will also be making the move.

For Paul Weiss, the European hires are a statement of intent in London, a market it has largely sat out even as many of its North American peers have expanded into territory traditionally occupied by British “magic circle” firms. 

They also come a matter of weeks after Kirkland snatched up a team of lawyers from Paul Weiss, including the firm’s London office head Alvaro Membrillera, who himself had joined from Simpson Thacher only a few years ago. 

The tit-for-tat hiring underscores the ferocity of demand for leading private equity lawyers, who can fetch annual pay packages of up to $20mn, rivalling top bankers. 

Law firms, including Kirkland and Paul Weiss, have benefited from the emergence of private equity as a big source of dealmaking, building deep relationships that give a consistent flow of work even if the pace of new transactions slows. 

Kirkland made an industry-leading $6.5bn in net revenues in 2022, in part thanks to a business that has catered to the rapid expansion of the private equity industry over the past three decades. Paul Weiss, meanwhile, counts private equity giant Apollo Global Management as one of its best clients. 

The firms’ big bets on talent come when private equity dealmaking has slowed and some influential industry executives are predicting that a higher-interest-rate environment will put an end to the golden age of buyout groups. 

BDO trades partnership for a private capital windfall

Last month accountancy firm BDO USA took a rare step in abandoning its traditional partnership model — a long-held industry norm in which a chosen few get to divvy profits among themselves, in search of tax benefits and greater flexibility.

It also unlocked a big windfall for the firm’s top ranks, the FT’s Stephen Foley revealed late on Friday, thanks to a $1.3bn debt deal with Apollo.

Under the deal with Apollo, which marks one of the largest deployments of private capital into professional services, ownership of BDO USA will remain in the hands of employees, but now shared among the partners and a new tax efficient retirement savings vehicle known as an employee stock ownership plan, or ESOP. 

The ESOP is using some of the new debt to buy a minority stake in the company from existing partners. The rest of the Apollo money will be used to refinance BDO’s existing line of credit.

The deal comes at a time of great transition for the accounting industry, as firms grapple with the limits of their current governance structures (see: EY’s bungled attempt to spin off its consulting business and float it on the stock market). 

“While most firms boast about their love for the partnership model, they often get frustrated with the dysfunctionality of decision making,” Allan Koltin, an accounting sector M&A adviser, told the FT in June. 

Corporations, on the other hand, are able to retain more annual profits and are better able to attract capital, he added.

The accounting sector, which has typically shied away from piling on leverage, will be watching Apollo’s $1.3bn debt injection closely.

The more partnerships morph to resemble typical companies, the more opportunities private capital will have to fuel the transition.

Retail investors rally behind Buffett

Berkshire Hathaway is no meme stock, but it owes some of its recent rally to retail investors. 

Small accounts were among the bidders this past week that helped send shares of the railroad-to-confectioner conglomerate to a record high, DD’s Eric Platt reports.

That’s according to trading data analysed by both JPMorgan Chase and Goldman Sachs, which shows the buying very often has been in the lower- priced B shares Berkshire has (the company’s A shares stood around $544,000 a pop on Monday).

It was an interesting bet by retail traders considering that the conglomerate led by Warren Buffett posted results that revealed the negative effects of the cooling US economy on some of its biggest portfolio companies, and few new investments.

Buffett continued to sell stocks in the second quarter, ploughing that capital into the relative safe haven of Treasury bills (not to be confused with longer-dated Treasury notes and bonds that wreaked havoc on the banking industry this year).

Buffett is sitting on a near-record $147bn cash pile — plenty of ammunition to load up on stocks or pay for an acquisition. But the rally in stocks this year has kept him firmly on the sidelines.

It hasn’t mattered much to some investors. Given his record, many shareholders hold Buffett to a far different standard than they do other portfolio managers.

“Berkshire has a strong retail shareholder base and they are much more loyal and willing to hold the stock,” said Christopher Rossbach, chief investment officer of J Stern & Co, a longtime shareholder. 

“I think its resilient performance last year has given those shareholders all the more confidence in holding it this year and they don’t really care whether it over or underperforms over the short term.”

Berkshire did build on its exposure to the housing industry after the relatively quiet period, unveiling an $814mn investment in three US housebuilders on Monday.

Job moves

• Fox Corporation’s top lawyer Viet Dinh, a close confidant of chief executive Lachlan Murdoch, will exit the company this year following the media group’s $787.5mn settlement of defamation claims by Dominion Voting Systems.

• Evercore has named Barclays financial sponsors veteran Carolyn Crooks as a senior managing director in New York.

• PayPal has named senior Intuit executive Alex Chriss as its new chief executive. He’ll take over from Dan Schulman, who previously announced plans to step down by the end of the year.

• Kraft Heinz CEO Miguel Patricio is stepping down at the end of the year. He’ll be succeeded by North America head Carlos Abrams-Rivera.

• Qatalyst Group, the boutique investment bank founded by Silicon Valley banking legend Frank Quattrone, has hired Adam Meister as a managing director in San Francisco. He was previously chief financial officer of software group Clari.

• Freshfields has hired Schulte Roth & Zabel’s Gayle Klein as a litigation partner in New York.

• IVP, one of the oldest US venture capital investors, is opening an office in London led by general partner Alex Lim.

• Alvarez & Marsal has hired five managing directors from KPMG to form a new transaction advisory team in Australia, led by KPMG Australia’s former head of private equity David Willis.

Smart reads

The ‘jerk’ The deluge of bad press against Goldman Sachs boss David Solomon, an exodus of partners and tanking morale within the firm have reached a tipping point, New York Magazine writes.

VC and misogyny DN Capital founder Nenad Marovac made a name for himself in Europe’s venture scene. But allegations of sexual harassment from former employees, which he denies, paint a darker picture of his success, Sifted reports.

Working overtime Carl Icahn should be handing over the reins to his empire and enjoying a lush retirement, the Wall Street Journal writes. Instead, he’s picking up the pieces after a short seller attack.

News round-up

Leon Black sues law firm behind abuse accusers’ cases (FT)

US imposes sanctions on four Russian tycoons connected to Alfa-Bank (FT)

FCA begins probe into banks and ‘politically exposed persons’ rules (FT)

Mastercard to take minority stake in fintech arm of South Africa’s MTN (FT)

Daily Mail owner confirms interest in Telegraph auction (FT)

Esmark becomes second US Steel suitor with $10bn offer (FT)

Billionaire Agnelli family takes 15% stake in Philips (FT)

Credit Suisse retail investors plan lawsuit challenging UBS takeover (FT)

Amazon’s leader on Alexa, Echo and other devices plans to leave (Wall Street Journal)