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May 28, 2009 12:55 PM

Cravath Advises on End of AOL-Time Warner

Posted by Zach Lowe

It was the biggest deal ever, and has long been regarded as a bust for everyone involved. And today, Time Warner made it official: It is spinning off AOL, shedding the company and officially ending the combination that resulted from a $124 billion merger in 2000 that was the biggest deal ever at the time. 

Time Warner turned to Cravath, Swaine & Moore to consummate the merger in 2000, and it turned once more to Cravath to advise on the AOL spinoff, according to sources familiar with the deal. Cravath lawyers declined to comment when reached by The Am Law Daily this morning. 

The original merger, struck at the peak of the Internet boom, roped in attorneys from Cravath, Simpson Thacher & Bartlett (lead counsel to AOL), and Mintz Levin Cohn Ferris Glovsky and Popeo (AOL's longtime general counsel). We contacted some of the lead lawyers on the deal, including Cravath's Robert Joffe, Simpson's Richard Beattie, and Mintz Levin's Anne Bruno, hoping to get their reflections, but we haven't heard back yet. 

Am Law aficionados may remember this deal more than anything for the landmark fee arrangement Cravath struck with Time Warner, whose general counsel at the time was a former Cravath associate. As reported in the February 2000 issue of The American Lawyer, Cravath's partners agreed to an all-inclusive $35 million fee that would be almost entirely contingent on whether the deal went through. If it died, the lead partners would go home with nothing, the story says. (Time Warner agreed to pay for some associate document review no matter what). That $35 million fee was considered to be among the largest ever for a law firm on an M&A deal, the story says.

In any case, it's safe to say the merger did not go well. The value of AOL has plummeted from as much as $20 billion as recently as 2005 to about $6.5 billion today, and revenues from subscriptions and ads dropped by more than 20 percent in the first quarter of 2009 compared to last year, according to Bloomberg and the New York Times.

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