Endeavor Buyout Arbitrage Fuels Court Fight Over Lawyer Fees

A court fight is brewing among law firms gunning for the chance to earn a potential nine-figure fee challenging Silver Lake’s $13 billion acquisition of Endeavor Group Holdings Inc.

At stake is the right to lead the case second-guessing a buyout that allegedly undershot the value of just Endeavor’s majority stake in TKO Group Holdings Inc., parent company of UFC and WWE. Dozens of funds say the entertainment conglomerate must be worth more than its flagship asset alone, while Endeavor says the sale only looks underpriced after a stampede of arbitrageurs turbocharged its stock.

The number of appraisal petitions—by funds holding 150 million shares worth $4 billion at the deal price—guarantees the dispute will be among the largest ever of its kind in Delaware’s Chancery Court, the leading US forum for corporate cases. The legal fees could rival record recent paydays, including $267 million in a lawsuit involving Dell Technologies Inc. and two totaling $521 million in cases against Elon Musk.

Each side of the law firm battle is accusing the other of taking a heads-I-win-tails-you-lose approach at the expense of clients—on the one hand by billing hourly, on the other by taking a cut of the interest that could accrue during the case, while deal dissenters forgo a payout.

The maneuvering may look like a sideshow compared to the billions in exposure confronting Silver Lake, the private equity giant. But by including the potentially huge pool of accumulated interest within their percentage-based fee, attorneys involved in the case could earn hundreds of millions even if they lose.

Interest-Rate Arbitrage

Two firms that moved to take charge of the litigation right after it was consolidated are now drawing fire from funds over their fee structure and allegedly aggressive client engagement tactics.

Although the court filing making those claims is heavily redacted, a person involved in the lawyer-client negotiations described the concerns laid out in the document to Bloomberg Law. The person asked not to be named because they aren’t authorized to speak about the dispute.

That June 4 filing targets the firms representing the biggest bloc of shares, Rolnick Kramer Sadighi LLP and Heyman Enerio Gattuso & Hirzel LLP, which are handling the case on contingency. The arrangement means they’ll get a percentage of any winnings but nothing if they lose—apart from the same cut of any interest that accumulates.

The interest is the catch, according to funds that signed with Abrams & Bayliss LLP, which wants a share of the lead counsel assignment. Abrams & Bayliss is billing hourly, backstopped by two funds pledging to foot the whole fee unless the damages are enough to cover it. Those billings could reach $50 million—still a steal compared to a percentage-based windfall, the June 4 filing said.

The litigation stems from a statute authorizing wide-ranging valuations by judges tasked with setting a transaction price from scratch. With appraisal petitioners sitting out the transaction as the proceedings play out, interest tallied at a highly favorable rate—currently 10%—can start to add up immediately.

Arbitraging the interest is a major part of the draw for hedge funds that couldn’t do better in the open market, no matter how their actual price challenge fares.

Risky Cases

RKS co-founder Lawrence Rolnick rejected the idea that statutory interest is inevitable, saying acquirers usually opt to mitigate their exposure by prepaying.

Silver Lake hasn’t yet. But other companies that initially took similar stances—to avoid bailing out overleveraged arbitrageurs or having to fight for the excess if a judge rules they overpaid—nearly all eventually caved, according to Rolnick.

“If Silver Lake persists in not paying, and clients feel the accrual of statutory interest is becoming an issue, we’re free to revisit it,” he said.

Whether Silver Lake will change course is anyone’s guess, according to the person involved in the case who has criticized RKS. But the interest already comes to $77 million, and the litigation is barely underway, that person said.

Rolnick, however, said hourly billings could drive a wedge between Abrams & Bayliss and its clients. Delaware law favors contingency arrangements because they get lawyers and shareholders pulling in the same direction, especially in risky situations, he said, citing the chance of an entity-level insolvency by Endeavor.

“What happens in that case?” he said. “Investors lose, our firm loses, and who’s the only one making up to $50 million? Abrams & Bayliss.”

Rolnick also cited potential conflicts between the backstoppers and the other funds, particularly if those footing the bill settle early.

Abrams & Bayliss declined to comment.

Carrot and Stick

The June 4 filing also accuses the RKS-led group of carrot-and-stick tactics that raise ethical questions, according to the person describing the document. They’re dangling price breaks for early sign-ups while threatening to drag along other funds for full freight, the person said.

A separate filing by Reid Collins & Tsai LLP—a firm allied with Abrams & Bayliss that’s not seeking the lead role—referred to allegations of “improper conduct by RKS prior to the filing of petitions.” Abrams & Bayliss and Reid Collins challenged the June 4 redactions Monday, saying fee structures and client acquisition methods shouldn’t qualify as confidential.

Meanwhile, there’s a parallel class action against Silver Lake and billionaire Hollywood mogul Ari Emanuel. Coordinating the cases will reduce billings for Abrams & Bayliss clients, while RKS will take the same percentage anyway, according to the June 4 filing.

Those proposed synergies reflect “pie-in-the-sky fantasy,” according to Rolnick, who said appraisal disputes get swiftly into the expensive stuff—depositions and document exchanges—while a fiduciary breach lawsuit takes months or more to reach that point.

He dismissed the idea that it’s a “stick” to suggest a judge could assess fees against funds lacking a contract with the lead firm. That’s just how Delaware’s appraisal statute works, and “Abrams & Bayliss is planning to make the exact same request,” Rolnick said.

The case is In re Appraisal of Endeavor Grp. Holdings Inc., Del. Ch., No. 2025-0317, 6/2/25.