March 08, 2002 03:15
San Jose Mercury News, Calif., Wiretap Column
By Peter Delevett, San Jose Mercury News, Calif.
Mar. 8--Believe it or not, there's a wrinkle in the valley's biggest corporate soap opera -- the proposed merger of Hewlett-Packard and Compaq Computer -- that hasn't been beaten to death by the media.
Valley lawyers are chattering about the tens of millions of dollars HP and renegade board member Walter Hewlett are spending on legal fees. And they're placing bets about what happens to the losing side.
HP, in its corner, boasts the Rolls-Royce of valley tech-law firms, Wilson Sonsini Goodrich & Rosati. Hewlett, who's hoping to block HP's marriage to Compaq, has as his consigliere Palo Alto's Cooley Godward.
Neither one of these firms comes cheap, nor does Wilson Sonsini maestro Larry Sonsini. Sonsini confirms a report in the Wall Street Journal this week that he's personally spending four to six hours a day on HP.
"It is a very large and significant transaction, as you know, and the proxy contest has its own life and issues," Sonsini says.
According to the head of another elite tech-law firm, and to a former Wilson Sonsini insider, Sonsini commands around $650 an hour. That means HP could be paying one man a cool $3,250 a day -- more than $16,000 a week, assuming Sonsini takes the weekends off.
Rumor in the valley legal community has it that HP represents 10 percent of Wilson Sonsini's business, though Sonsini, the firm's chairman and chief executive, denies that.
"You know we have a very large and diversified practice," Sonsini admonishes, while declining to go into details of how much he's taking home or whether he's worried his firm could suffer if Hewlett wins.
That probably became less likely this week when a major domino, stockholder advisory firm Institutional Shareholder Services, fell in HP's favor. But if Hewlett does pull off his boardroom coup, Wilson Sonsini is likely to meet the fate of a Romanov backer at the hands of the Bolsheviks.
"If the deal gets voted down and there's any change in leadership, Wilson has to go. That's the first thing I would do," says one of Sonsini's former partners.
Sitting pretty in that scenario would be Cooley Godward, though CEO Steve Neal dismisses that theory. "I've had no discussions or thoughts on that," he claims. "We were retained for one thing, and that's to advise Walter" and the William R. Hewlett Trust.
Neal, for his part, is said by someone close to him to be spending between 5 and 12 hours a day on the HP battle royale, though he'll concede only that he's "putting in a significant amount of time." (Of course, that's just what his other clients would expect him to say.)
Neal also won't bite when asked how much he bills per hour, though another former Wilson Sonsini partner says nobody in the valley is on a par with Sonsini.
"If Larry Sonsini isn't at the top end of what somebody would charge in Silicon Valley, who is?" this lawyer asks. "He's the most famous, the most accomplished and certainly, for something like this, the most experienced by far."
An experienced senior partner at most other firms can expect to bill between $300 and $400 an hour, the lawyer adds.
Unlike other lawyers I spoke to, this person doubts claims that HP represents 10 percent of Wilson Sonsini's business. Typically, he says, no single client ever contributes even as much as 5 percent of the firm's billings, a rule of thumb other local firms likewise adhere to.
According to a January report on Law.com, Wilson took in $425 million in revenue last year, making it the valley's fourth-highest grossing firm. (In case you're wondering, Morrison & Foerster was at the top of the heap with just under $500 million in revenues; Cooley Godward placed sixth at around $355 million.)
Even if the 10 percent theory is off-base, the many legal niceties of the HP transaction are surely keeping plenty of Wilson staffers busy. Especially with the market for other legal services, like advising on initial public offerings, dry as a bone.
Lawyers salivating on the sidelines say the proxy fight and other merger-related costs could spin off tens of millions of dollars in billings, though one of Sonsini's former partners says in such a major transaction, it's not unusual for a firm to negotiate some kind of set fee rather than just letting the meter run. HP has in-house counsel as well, which cuts back somewhat on its fees to Wilson Sonsini. (The company declined to discuss its merger-related legal costs.)
Walter Hewlett can't match the company's resources: as Neal puts it, "There's no question that if the outcome here depended purely on who could blow through the most cash, we'd lose. Management's got the entire corporate coffers."
On the flip side, even if Hewlett loses, Cooley Godward will be licking its wounds all the way to the bank.
--Contact Peter Delevett at pdelevett@sjmercury.com or (408) 271-3638.
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