Wednesday, June 27, 2007

By the waters of Lehman’s I sat down and wept

3am. Monday morning. It’s a bank – one of the bigger ones but not so prestigious as, say, Goldmans or MS. Like Lehman Brothers, but not Lehman Brothers. The Seller's on the other side of the room, surrounded by his phalanx of flunkeys; lawyers, bankers etc. You’re a flunkey on the Buyer's side, but since the documents have to sign by close of play today a whole roomful of tired bankers are pretending to listen to you negotiating the SPA with Seller's lawyers like they care about whether the Vendor Protection lasts for 6 months or 6 decades after they get their commission on the sale. By now they’re mostly dozing off anyway. And you, you sit there thinking of your miserable salary as a 33-year-old junior partner – which is probably less than Weil Gotshal is paying its NQs – and of how much sleeping beauty (probably at least 6 years your junior) down the table is getting paid for snoozing his way through the discussion, and something dies inside you.

To an extent it’s all relative. Wage serfs outside the top 20 firms probably feel equally annoyed at the sums NQs at, say, US firms get paid, and when it comes to casting envious eyes toward Private Equity houses, bankers aren’t only as bitter as lawyers are when we contemplate their huge bonuses, they’re more bitter. Then again, with the rumours that Red Gordon is going to nationalise the PE industry now that he's got the top job, reducing the European head of Blackstones to sitting with a cardboard placard and a tin cup outside Charing Cross Station, and with former Masters of the Universe already fleeing the country concealed in the undercarriage of private jets to escape debtor's prison when tax on carried interest is raised to 99.9% , a bit of the shine’s probably gone.

But clearly something is wrong here. I mean it seems like half the scurrilous bankerblogs are written by closet lawyers (yeah, LSO, I’m looking at you – and didn't the guy who wrote FIASCO quit banking to be a corporate lawyer?) There’s bound to be a lot of crossover and plenty of friction between the two professions which can’t all be down to pay. Mostly down to pay, maybe, but not all. In fact I think the deeper rift is between two professions who see:

Lawyers (n.): losers who couldn’t make it in banking because (i) they waste time theorising about irrelevant ‘legal issues’, (ii) don’t have prestigious economics degrees, (iii) can’t count past three without getting lost, and (ix) get paid less than bankers do.

Bankers (n.): arrogant twats who (i) waste time going in circles because they can’t understand simple legal issues even when explained to them in Peter-and-Jane language; (ii) don’t have prestigious law degrees; (iii) bullshit their way through meetings because they don’t know anything about the deals they’re on, and (iv) get paid more than lawyers do.

I don’t see this divide getting bridged any time soon, even though there's a fair amount of movement between the two professions - bankers becoming lawyers and vice-versa. Before then, you've got a lot of late nights and a lot of arsey calls from 22-year-old bankers to take. Happy days.

Wednesday, June 6, 2007

(And all of the night)

All-nighters are actually pretty rare. Unless you're one of those creepy juniors who says 'yes' to every piece of work offered, in which may God have mercy on your soul because the Partners won't.

But sometimes you can't get out of them, and so it was that I and a bunch of other colleagues who'd already used up our quota of excuses for Q1-2 found ourselves sitting in front of laptops at stupid-o'clock trying to amend the SPA to work in the client's latest round of concessions to the other side. And, in my case, wondering how we got here.

Rewind a couple days:

An office, somewhere in the City, early afternoon on a Friday. A bunch of lawyers, bankers, accountants and the client are on a conference call.

Client: Hey guys, I'm paying you. Who's the daddy? Anyways, I need to justify my position in this organisation to the Board and I feel like making a pointless acquisition so that my successor has something to sell when I quit for another executive job. Banker has very helpfully identified a target. So, Banker, what d'they do?

Banker: Thanks for asking, Client! We think this is a very exciting company: they make lutenfisk deboners for export to the Latvian market. In our opinion it's a natural synergy with your financial services division. The guys in IBD (translation: team of cheap labourers packed into a cubicle just outside Bangalore) prepared overnight this set of meaningless data which on casual inspection seems to support the rubbish I'm spouting.

Client: Awesome! I've got authorisation: let's buy it on Monday.

Banker: No problemo. We have negotiated you thirty minutes access to an electronic data room: the Accountant will put together a full financial DD report by 4pm.

Accountant: We might need a bit more time...

Client: No! Want! Want Now!

Accountant: We'll need to check it with our Latvian offices - we'll get you a report first thing Monday.

Client: Banker, how long should it take them?

Banker: Well, I guess financial DD is pretty tough. They can prepare it for later this evening.

Client: Later this evening it is.

Banker: Coolio. Oh, and you'll need a due diligence report from the lawyers saying that the target's perfect.

Client: Why?

Banker: So it's their fault when it turns out to be a dog.

Client: Uh-huh. Don't see the need really. How long will that take them?

Banker: 'Bout ten minutes.

Lawyer: We'll do it in five. (To juniors) Sort it out. 

Client: Thanks. You lawyers (laughs), you're such tough negotiators. But I'm not so easy to fool - I want it in two.

Midnight Friday

Client: Where's my report? Want! Want NOW!

Partner: The senior associate's on it. (Sotto voce) Senior, where's my report? Want! Want NOW!

Senior: The junior's running my changes into it. Can't think what's taking so long. (Sotto voce) Junior, where's my report? Want NOW!

Junior: Trainee's proofing the changes in. Trainee? WANT!

Trainee: (contemplates suicide on discovering that the night secretary has accidentally converted the whole document into Arabic and that it now reads from right to left.)

..and then the same thing repeats for the SPA.

The worst thing about nights like this is that you can see tragedy in action - and I use the word tragedy with care, in the sense of a flaw gradually flowering into a fatal blow that ruins an entire enterprise. For Othello, it was jealousy; for Macbeth, ambition; for a client relationship partner, it is the faith in your and your colleagues' skills that leads you to promise unrealistic deadlines. Then, like a cruise-ship sailing majestically toward an iceberg, the problem slowly unfolds.

The commercial meeting goes on for what seems like weeks, and suddenly you're five hours from the deadline for the SPA, but there are still a number of - say three - major commercial points undecided. But hey, you promised. So you start marking up a clean version of the SPA. The senior looks over your shoulder, sees you making notes, and does the same. Shit! Someone's talking again. So you take your ten or so pages of notes, and the senior does the same, and they call in the junior and he or she takes them out to the secretary and says 'put these into the document', and you keep marking up the next ten pages, rinse and repeat. Halfway through you realise you'll have no time to proof this stuff, so you fake a toilet break and go find a trainee who doesn't look too exhausted whom you order to proof in the changes. Since you didn't have time to tell the trainee what to do, he agonises for ten minutes before starting and then prepares his own mark-up based on what his lecturer at law school told him made a good SPA and the 1997 precedent he found on Then you start making changes to a totally clean version of the SPA (because the client resolved one of those commercial points) and ask the junior to go run that in too. Then the meeting is extended, and suddently everyone's looking at you and asking "where's the SPA?", so you go shout at the junior and trainee for a bit and tell them it's needed NOW.

So they take shortcuts, cobble something together, bring it in at about ten to midnight, and surprise surprise, it bears no resemblance to what's wanted. You go scream at them a bit more, and do your own markup in the meeting, finally preparing a half-decent SPA, and hand it to them with dire threats of what will happen if every change doesn't go in perfectly. The junior and trainee, sweating profusely, now make even more mistakes, even more slowly, in their terror and it has to be done again.

2 am

3 am


...and slowly, it comes to resemble what's been agreed between the parties. Or, more likely, the principals are so tired that they would sign anything by this point. Once the commercials are actually agreed, the process of preparing the SPA becomes straightforward, although since the coffee ran out hours ago your team are now licking caffeine off the bottom of their empty mugs to stay awake. Final versions are put together, rejected, amended, proofed, printed again, and again, and by final version number 12 (around 9am), you finally have something everyone can sign without feeling too embarassed.

This is how the fate of billions of pounds - and thousands of employees - is decided every day. Champagne, anyone?