Editor: We talked in our last conversation about the core practices of the Boston office of your firm and your plans for growth. Would you briefly review for our readers how you are progressing?
Westra: We initially opened our office in Boston a little over five years ago with a focus on serving the private equity community as well as pursuing a civil litigation practice. We have continued to address those markets quite successfully. Our private equity practice has grown by institutionalizing the client base we had when we opened the office as well as by attracting a number of other private equity clients and their portfolio companies. We have also expanded our corporate presence to include mainstream corporate M&A work. We have continued developing a very strong civil litigation practice, and have added to that an excellent white collar practice. Several of our attorneys are handling numerous internal and governmental investigations and are involved in defending a variety of white collar prosecutions.
Editor: When we last talked your office had about 35 lawyers. Where are you in head count today?
Westra: We have approximately 50 lawyers in Boston, which is an increase from the mid-30s number when we last spoke.
Editor: And plans for growth continue?
Westra: Yes. Our office here can accommodate approximately 55 to 60 attorneys, and we expect to reach that size in the relatively near future once we get through the current economic crisis. However, our firm works in ways that obviate the need to have a large headcount here in Boston. The Boston head count has to be big enough to provide critical mass and meet our needs, but we routinely draw upon resources elsewhere within the firm throughout the country and indeed throughout the world.
Editor: You have led multi-office teams, particularly in the private equity area. Would you care to comment on some of the more interesting transactions that you've been involved in since we last spoke?
Westra: Probably one of more interesting was a private transaction we did involving Kinder Morgan, which is located in Houston. They approached me to assist them in a 22-23 billion dollar going-private transaction. We worked with teams from our Dallas and New York offices, as well as some folks from our Washington office. We helped negotiate what was then the second or third largest going private transaction in U.S. history, taking the company private with a partnership of investors, including Goldman, Carlyle and AIG. This transaction raised lots of novel issues, and was a terrific illustration of how we work across office lines.
Editor: Personally, you have a reputation as a leading lawyer in private equity transactions. Where, in the light of the current economic challenges and credit stagnation, do you see that practice over the next year?
Westra: That's a very difficult question to answer. Certainly the pace at which private transactions occur has reduced dramatically as a result of the credit constraints. There have been very few transactions done over the last five or six months, and most of those involved either primary sponsors using all equity or seller financing or have gone to alternative credit sources. Clearly, the government continues to work hard to support the banks and encourage them to lend money. However, the secondary market is also problematic because even as banks commit to providing loans, they then seek to sell down all or a significant portion of those loans to hedge funds and alternative lenders. So, until those people develop liquidity, it will be very hard for the banks to make these large commitments. I have heard many different opinions, but I don't think anyone expects credit to be flowing freely anytime within the next five or six months.
Editor: It's a difficult time for that type of transaction. I suppose the issue is whether credit or psychology has to improve first.
Westra : It's a little bit of both. People are still concerned about catching the proverbial falling knife - not quite sure prices are at the bottom and reluctant to buy until they are confident that prices have bottomed out. The absence of credit makes that all the more difficult. We spend a great deal of time working with our private equity sponsors to help them with issues with their current portfolio companies because many of them obviously have encountered problems, being incapable of refinancing their debt due to the constriction of credit. We also work with our sponsors pursuing different sorts of transactions. For example, we have arranged "pipe" transactions - that is, private investment in a public entity - where public companies need financing; to provide that we've arranged joint ventures teaming those public companies up with strategic partners. And we are doing some significant minority investments. So, while our private equity clients clearly have not been as active as in times past, some deals are getting done.
Editor: Do you see additional opportunities for what one might call innovative financing?
Westra: I do. There are a lot of public companies in dire need of financing so I think some opportunities will be available. Historically, deals done during a recession have later proven the most successful. There's a great deal of money still sitting on the sidelines in the private equity space, and I do think there are going to be some innovative transactions done as credit markets begin to thaw out and a number of the public companies really need to de-lever, sell assets and generate cash.
Editor: You have taken a lead in your firm in establishing a Middle Eastern presence. Can you tell our readers how that is developing and what challenges you see in the foreseeable future?
Westra: We always try to stay abreast of strategic opportunities. There really are four large pools of private capital in the world - private equity funds, hedge funds, centralization banks and the so-called sovereign wealth funds. Sovereign wealth funds are funds that have been organized by countries that derive significant revenue from commodities, primarily oil. These funds have been established to diversify the economy. The largest sovereign wealth funds are in the Middle East. Abu Dhabi has the largest sovereign wealth fund in the world - tantamount to the size of all private equity funds put together. We view the Middle East as a very important source of capital for the long term. We opened an office in Dubai in December and will likely open an office in Abu Dhabi sometime next year. These are relatively modest-sized offices, each of which will be staffed by several lawyers who will deal with some of our existing clients from the area and develop new clients drawing upon the resources of other lawyers throughout the firm.
Though the Middle East has its own issues today, we continue to view our presence there as strategically important to the firm.
Editor: That's certainly a pool of capital that must be drawing a great deal of attention from many of your corporate clients.
Westra: It is. For example, General Electric, one of our principal corporate clients, has a very large joint venture in the area. That is the kind of work that we're looking to do - representing U.S. clients as well as the sovereign wealth funds and other investors.
Editor: Your firm has an honorable history in terms of corporate governance. Would you care to comment on the current state of play?
Westra: I'd be happy to. Ira Milstein of our office has long been regarded as one of the real deans of corporate governance. We have had a very active corporate governance practice in our firm for a number of years. Many people in both the private and public sectors have expressed concern about the failure of corporate boards to provide proper oversight with respect to compensation packages. A number of people are looking to work with us as they revisit their own corporate governance policies and consider what changes may be needed for the future. Corporate governance is going to remain a very topical and active area. Editor: Certainly, with the current psychological climate it appears that most corporations would be well advised to turn some of their attention to the question of governance as a prophylactic concern rather a public relations issue with white collar criminal implications.
Westra: That's exactly right. There are a number of people looking to deal with problems that already exist, including those that have led to private suits and governmental investigations. There are also corporations looking to put into place appropriate prophylactic measures to demonstrate their commitment to good corporate governance and to ensure that accidents in the past are not repeated.
Editor: Given the renewed emphasis on cost control on the client side, have you experimented with alternatives to the billable hour?
Westra: As our clients have encountered difficult times, they are certainly looking to trim expenses in all areas, including legal services. We view ourselves as partners with our clients and we are willing to work with them during these difficult times to try to manage their legal budgets effectively. Sometimes that does entail a modification of our normal billing practices. We still generally bill on an hourly basis but in some cases we are now quoting project costs or going into other alternative billing arrangements.
Editor: Weil places a high emphasis on both pro bono work and diversity. Our readers would be interested in knowing more about how those issues are encouraged, managed and rewarded.
Westra: We spend a great deal of time on these areas, with administrative staff and lawyers dedicated to pursuing both objectives.
Diversity within our firm in all respects - ethnicity, religion, sexual preference - is strongly encouraged. Affinity groups enable lawyers from various groups to spend time together discussing matters of mutual concern. Diversity makes us a stronger firm - it enables us to draw upon many different perspectives and backgrounds, and makes Weil a more interesting place to work. It's also good for business because we have a diverse group of clients, and we feel that our commitment to diversity will enable us better to serve those clients.
We also feel very strongly about pro bono work. Our firm has been a leader in the pro bono area, in terms of both philanthropy as a firm and our commitment to pro bono efforts by our lawyers. Each lawyer is expected to spend a minimum of 50 hours a year on pro bono efforts. They are encouraged to view these pro bono commitments as every bit as important as their client commitments. While I have not seen the most recent figures, I believe we spent well over $45 million of time last year providing pro bono assistance to various clients. We feel it is the right thing to do, and it also helps our lawyers in their career development and helps our recruiting as well, since many of the best and brightest associates for whom we are competing view pro bono opportunities as a very important part of their work experience.