The elite corporate law firm Cravath, Swaine & Moore, which almost never loses partners to competitors, is losing one of its most prominent: Scott Barshay, who is among the country’s most active M&A lawyers, is joining Paul, Weiss, Rifkind Wharton & Garrison in an effort to vault its growing corporate practice.
Barshay, 50, has accepted a position to become the global head of mergers and acquisitions for the New York City-based law firm, which has more than 900 lawyers in eight offices in the U.S., London and Asia. He began work on Friday.
The move illustrates the challenges facing Cravath’s lockstep system, under which partners are paid largely based on seniority as opposed to credit for work that they do, and thus share profits more evenly. Barshay is set to reap the benefit of a substantial raise at Paul Weiss – one source familiar with the move said he would basically double his compensation, reflecting a pay bump in the millions — although his exact figure could not be confirmed.
“I honestly never thought I would leave,” said Barshay in an interview Sunday. “At the end of the day, I couldn’t say no. I think of it as getting an invitation to join the 1984 Dream Team.”
At the same time, the move is a coup for Paul Weiss. The firm is known for its strong litigation and restructuring practices — among others — and has over the past several years been in the process of recruiting premier M&A partners. While the firm has a top private equity practice — it counts Apollo Global Management as a large client — Paul Weiss has tried to lift its profile and build business in the public company M&A space. Out of the firm’s 900 plus lawyers, the firm’s mergers and acquisitions practice counts 30 partners, 100 associates and counsel.
“We were basically in the Elite Eight or the Final Four, and I think this brings us to the championship,” said Bob Schumer, chair of the corporate department at Paul Weiss.
In Barshay, Paul Weiss taps into a steady deal flow of some of the largest mergers: In 2015 and into early 2016, Barshay represented Anheuser-Busch Inbev in its $107 billion acquisition of SABMiller, and Cameron International in its $15 billion sale to Schlumberger. And he regularly advises a who’s who of blue chip clients, such as Qualcomm, Xerox, Delta Air Line, Honeywell and IBM. His work has helped make Cravath the No. 2 M&A legal advisor in North America last year, according to data compiled by Bloomberg.
It could not be determined how many clients and which ones are coming over to Paul Weiss, but Brad Karp, the firm’s chair, said that he has an “unparalleled reputation, practice and client roster.”
Also unparalleled is the role that Paul Weiss cut out for him: global head of mergers and acquisitions is an entirely new title at the firm.
The previous M&A leader is Schumer, who said he will remain “very involved” in M&A.
A Cravath spokeswoman said in a statement: “Scott Barshay has decided to resign from the firm and we wish him the best in his future endeavors.” Other leaders — Allen C. Parker and Sandra Goldstein — did not directly respond to requests for comment.
In accepting the job, Barshay becomes the latest of a small group of partners to leave Cravath for another firm: In 2012, Kirkland & Ellis recruited one of the firm’s more junior M&A partners, Sarkis Jebejian, fueling discussion in the legal community over whether the departure represented a more meaningful shift.
Cravath’s “lockstep” system has traditionally received praise in the legal community — a statement that culture matters more than money. The firm generally doesn’t lose talent, nor does it hire from the outside as much as others. But at a time when the legal market is still grappling with the after effects of the recession, firms are paying top-dollar to capture market share and recruit stars from competitors, bringing the model under pressure, according to legal observers.
While Karp declined to comment on the specifics of Barshay’s compensation package, he spoke to Paul Weiss’s compensation model: “We have a modified lockstep system, which frankly hasn’t changed over several generations and the overwhelming number of partners are paid on a purely lockstep basis.”
“We do have flexibility to move outside of that, based on performance, and Scott fits well within our system,” he added.
Before Jebejian’s move to Kirkland & Ellis, the last partner to depart Cravath was W. Clayton Johnson, who in 2005 left the firm for Cleary Gottlieb Steen & Hamilton. Others have left for in-house positions. James Woolery, a partner at Cravath who spearheaded its business development efforts, joined JPMorgan Chase in 2011 to co-head its North American M&A department, before leaving the bank for a law firm in 2013.
As for Barshay, the corporate attorney joined the firm as a first year associate in 1991, straight out of Columbia Law School, where he was a Stone Scholar. He quickly rose the ranks and was named partner after seven years, in 1998. He later became one of the leading figures that encapsulated a shift in Cravath’s culture to a hungrier, more business development oriented firm.
Alisa Levin, a legal recruiter in New York City who is familiar with Cravath and Paul Weiss, said that she feels Barshay’s move is indicative of a broader shift in the legal market.
“It’s further evidence that partnerships are not what they used to be,” said Levin, who noted that rumors in the legal market have been swirling about the hire in recent days. “It used to be the firm above all else — above the individual.”
“I think where we’re going, it’s much more about the individual than the firm.”
— with assistance from Matthew Monks of Bloomberg News