September 26, 2008 5:45 AM
DEALMAKER OF THE WEEK: Munger Tolles's Robert Denham
Posted by Brian Baxter
Thanks to longtime Berkshire Hathaway lawyer and Munger, Tolles & Olson corporate partner Robert Denham, there was one bright spot in the financial doom and gloom of recent weeks: Warren Buffett's decision to invest $5 billion into the investment bank formerly known as Goldman Sachs.
The business press hailed the billionaire investor and Berkshire chairman as a "white knight" whose move was a "vote of confidence in [the] crisis-stricken banking system."
No question, Buffett can negotiate his own deals. Still, the Goldman agreement is a testament to Denham, 63, and his longtime relationship with the Oracle of Omaha, one dating back decades.
According to a 1992 profile of the firm by Roger Parloff in The American Lawyer, former real estate lawyer and founding law firm partner Charles Munger worked in Buffett's father's grocery store in Omaha on Saturdays as a teenager. That friendship eventually led Munger away from the law firm he founded in 1965 to join Buffett in a business partnership that has been a valuable "business-getter" for Munger Tolles. Now vice-chairman of Berkshire, Munger has tapped his old firm as principal outside counsel for acquisitions and investments since the 1970s.
Denham has been a direct beneficiary. His work for Munger, Buffett, and Berkshire "grew organically," as he once told Janet Lowe for her 2000 book, Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger.
It developed to the point where Buffett trusted the Dallas native enough to succeed him as chairman and CEO of Salomon Inc., a decision that shocked Wall Street when Buffett announced it in June 1992. Denham, who had previously served as Munger Tolles's managing partner from 1985 to 1991, helped negotiate the company's sale to Travelers for $9.6 billion in stock in 1996. For those scoring at home, Buffett's Salomon stock was worth $38 per share when he first bought it in 1987 and $81 by the time Denham orchestrated Salomon's sale. (Denham left Salomon in 1998 after Travelers's $140 billion merger with Citicorp.)
Denham's continued as Buffett's right-hand legal man since then, advising Berkshire on the purchase of a $4.5 billion stake in manufacturing conglomerate the Marmon Group late last year.
The Goldman agreement is notable for the ironclad provisions protecting Buffet's investment. According to The Wall Street Journal, the deal's particulars were hammered out Tuesday night before it was formally announced Wednesday morning. Buffett receives "perpetual" preferred shares that pay a 10 percent dividend, along with warrants to buy Goldman shares at $115, which could net him a hefty profit if the stock continues to rise. (Goldman stock had shot up to $135.50 by the time the market closed on Thursday.)
Need we say more?