Cahill’s Wake-Up Moment Spurs Unlikely Moves After 105 Years (1)

Cahill Gordon & Reindel was weathering a historic slump in the high-yield and leveraged loans market, which it’s long dominated, that drove its revenue down 20 percent over a three-year period.

But it was the defections of roughly a dozen partners over that time, something Cahill had never experienced, that “woke us up to the realities of the legal market,” managing partner Herbert Washer said.

The more than 300-lawyer firm, not accustomed to major change in its 105 years in business, realized it was time to rely less on cyclical corporate finance markets. It’s moved into or expanded in private credit, bankruptcy, M&A, project finance, white-collar, cryptocurrency, congressional investigations, and intellectual property litigation, hiring 17 partners away from other top firms and in-house roles since 2022. Cahill also tweaked its compensation system to retain its top talent and bring aboard lateral hires.

“By all metrics—demand, value of time, billing, revenue—I think the firm is up substantially over 2023,” Washer, who took over from William Hartnett as Cahill’s sole leader in January, said in an interview with Bloomberg Law. “We’ve not just sustained the business—we’ve grown the business.”

For decades, top New York law firms like Cahill were immune to market pressures and poaching from others because of their size, culture, and enormous profitability. Cahill rarely hired laterally—Washer recalls he was “an anomaly” when he came over from Shearman & Sterling in 2012. Now top rainmakers operate more as free agents and firms are willing to pay millions to hire them, upending the status quo at many storied Wall Street legal institutions.

When Cahill lost partners to rivals such as Latham & Watkins, Paul Hastings, and White & Case, people inside the firm were mystified at first, worrying it “suggested something more serious or interesting than it actually suggested,” Washer said.

The changes also gave Cahill the chance to go on the offensive.

“If the lateral market is going to try to pull people from Cahill, well, we can go ahead and look to see if there are opportunities for us to pull partners from other law firms,” Washer said.

Cahill’s size and low overhead, with only four offices, give it the financial power to pay for top talent, he said.

“We have very high profit margins, which effectively means that we can pay our partners a greater percentage of our revenue than many, if not most, of our peers,” Washer said. “That allows us to offer competitive compensation to lateral partners because we have the profit margins.”

The firm also tweaked its compensation system to allow for more rapid ascension, so lawyers don’t necessarily have to wait until they’re a partner in their 50s to get paid top dollar, Washer said.

“It’s important to pay people what they’re worth when they’re worth it,” he said.

Beyond Leveraged Finance

Cahill’s growth plan involves moving beyond its traditional strengths in leveraged finance into adjacent practice areas like private credit.

Peter Williams, former managing director of KKR & Co.’s credit strategies team, joined the firm as co-head of its private credit practice in July. Earlier this month Cahill added Dan Amato, the former head of Orrick Herrington & Sutcliffe’s sponsor finance practice.

Private credit—an alternative to bank financing—surged as the syndicated loan market stalled, becoming a $1.7 trillion industry. The Federal Reserve cut interest rates by a half a percentage on Wednesday, a move some financial experts believe could create a headache for private credit and sap some of its returns.

“Private credit is here to stay despite lowering interest rates and will remain an important alternative to the syndicated markets, especially in industries and situations that have traditionally been difficult for the syndicated markets to finance,” Washer said.

The firm opened an office in Wilmington, Delaware, with three partners from crypto-fintech shop DLx Law. It also welcomed aboard WilmerHale partner Edward O’Callaghan, a one-time top Justice Department official under former US Attorney General William Barr, as head of its congressional investigations practice in August.

Transactional practices have typically accounted for between 60% to 65% of the firm’s revenue with litigation in the 30% to 35% range, Washer said.

Herb Washer

Photo: Cahill

Cahill has been well-known as a First Amendment firm thanks to its now senior counsel Floyd Abrams, who represented The New York Times in during the Pentagon Papers case, Judith Miller in the CIA leak grand jury investigation, and Citizen United in its 2010 Supreme Court case over campaign finance laws.

“One of our goals is to grow litigation as a percentage of the firm’s revenue over time,” Washer said.

Cahill has represented longtime client Credit Suisse—now UBS—on all matters related to the merger of the Swiss banks. It scored a victory for Credit Suisse in February in the dismissal of a class action RICO case related to the merger.

Its litigation team is also representing Tesla over driver-assistance features in California, and Microsoft in its civil suit against cybercriminals known as Storm-1152.

Top Tier

Even as questions loom over the private credit piece of its practice portfolio, Cahill’s bread-and-butter—the syndicated loan market—is picking back up.

The firm worked on more than 275 loan transactions across the syndicated and private credit space, and more than 70 securities offerings during the first half of 2024. That nabbed it a more than 25% of market share in underwriter advisory for US high yield corporate bond offerings and a nearly 33% share in lender advisory for US leveraged loans, both higher than any other law firm, according to Bloomberg data.

Cahill represented lenders in the financing commitments for Paramount Global’s recent combination with Skydance Media, valued at $28 billion. Cahill, designated as counsel to financing banks by global private equity giant Apollo Global Management Inc. in many of its largest leveraged buyouts, advised the banks on Apollo’s nearly $6 billion purchase of global auto parts maker Tenneco Inc. and related transactions.

“The last four months of the year will be even stronger than the first eight months of the year,” said Washer, citing the firm’s “momentum” in leveraged finance, traditional litigation, and other practice areas. “There’s no reason to believe that 2025 won’t be even better.”

Cahill has no designs on being another Kirkland & Ellis or Latham & Watkins, Washer said. Instead, it’s intent on remaining small but dominant in its key practice areas.

A leaner, focused model is possible, as proven by M&A powerhouse Wachtell, Lipton, Rosen & Katz and litigation-centric Quinn Emanuel Urquhart & Sullivan, said Alisa Levin, a New York-based legal recruiter who co-founded Greene-Levin-Snyder.

“These are all much smaller places, but they’ve managed to really retain a strong place in the market,” she said.

Diversification can be expensive and take time to reap rewards, which are not guaranteed. Washer said it’s a strategy Cahill must embrace.

“We want to be top tier in the things that we do,” he said. “History suggests that being very profitable and being targeted are not mutually exclusive.”