February 23, 2011 7:26 PM

Joseph Flom, Pioneering M&A Lawyer and Skadden Name Partner, Dies at 87

Posted by Victor Li

 

It might seem strange that a Harvard Law School graduate who ranked in the top 5 percent of his class and served as an editor of the Harvard Law Review would fail to land a job at any of New York's top law firms upon graduation.

But that's just what happened to Joseph Flom after he earned his law degree in 1948. And in most instances, it was the anti-Semitic mindset that prevailed at the city's leading firms that cost Flom the opportunities his academic achievements seemed to guarantee. 

Shunned by the establishment, Flom instead joined a small firm then called Skadden, Arps & Slate, a four-lawyer shop that he helped transform into a legal powerhouse with 24 offices in 13 countries known as Skadden, Arps, Slate, Meagher & Flom.

Over the course of his six-decade career, Flom not only added his name to the firm's, but also--thanks to particular expertise in mergers and acquisitions--carved out a singular niche in the history of the legal industry.

Flom died Wednesday morning of heart failure at the age of 87. Reflecting on his life and his outsize influence on the business of law, his peers and colleagues remembered him as a visionary on the subject of hostile corporate takeovers at a time when many top firms looked askance at such work. 

"He was prescient in recognizing that change-of-control transactions would be a major area of legal practice," said Flom's celebrated rival and contemporary, Martin Lipton of Wachtell, Lipton, Rosen & Katz in a statement. "After honing his great skills on proxy fights, he graduated to tender offers and hostile takeover bids. He so dominated the field that in 1973 I wrote, 'The first question an arbitrageur asks is, Which side has Joe?'"

In the 1970s, Flom--seeing growth potential in work that others considered unsavory--began to establish himself as the preeminent takeover attorney.

"[Flom] made the mergers and acquisitions practice a mainstream practice," Cravath, Swaine & Moore's Allen Finkelson told The American Lawyer in 1999. "Hostile takeovers were viewed by major law firms as something you didn't touch...We were all representing blue-chip America and viewed it as dirty business...[Now] there are thousands of lawyers making hundreds of millions of dollars because of the practice Joe made respectable."

As an associate and partner at Simpson Thacher & Bartlett, John Finley had a chance to work with Flom. Finley, now the chief legal officer of The Blackstone Group, recalls that Flom always seemed to have a good sense of the situation and context of a deal, beyond the strict doctrine that the law might provide. "I always felt very privileged to be working with him," Finley says. "Working with him was like working with one of the original Hall of Famers, like Babe Ruth or Ty Cobb. He was one of the giants who basically built the legal M&A business."

According to Lincoln Caplan's 1993 book, Skadden: Power, Money, and the Rise of the Legal Empire, Flom benefited, ironically enough, from a federal law designed to restrict hostile takeovers. Before the Williams Act of 1968, corporate takeovers were essentially unregulated and could be undertaken in secret and sprung on unsuspecting executives.

The Williams Act set, for the first time, strict disclosure requirements for anyone buying a certain amount of stock in a company (the original act's threshold was 10 percent; it was later lowered to 5 percent). In the process, the act legitimized the hostile takeover. It wasn't long before Flom established himself as the go-to attorney for companies looking to launch takeover bids, as well as those looking to defend against them. His first big deal: advising Morgan Stanley & Co. and its client the International Nickel Company of Canada (INCO), in a hostile takeover of Philadelphia battery manufacturer ESB Corp. launched in 1973.

Flom became so effective and so respected that companies often paid him a retainer to prevent him from representing potential opponents--a practice that became known as "The Joe Flom Protection Policy."

According to The Titans of Takeover by Robert Slater, Flom made $10 million in these retainers in 1984 with as many as 200 companies paying him $50,000 a year. Flom used these funds to help his firm develop other practices, such as tax and environmental. However, he also conceded that "Flom Insurance" cost the firm money. "We had to turn down a lot of major transactions because we were [already] standing by for someone," Flom told The American Lawyer in 1999.

Flom wasn't entirely comfortable with the notoriety that his corporate work attracted, preferring instead to spotlight his pro bono and philanthropic work. He told The American Lawyer in 1999 that his proudest accomplishment was the Skadden Fellowship Foundation, which he founded in 1988 as a way of encouraging young attorneys to pursue public interest work.

Flom also mentored younger attorneys such as David Fox, a former Skadden and current Kirkland & Ellis partner. "Joe was my mentor, and I had the great privilege to work with him on many deals," Fox says. "He was a great teacher, a great lawyer, and a great human being. Joe taught me that innovative ideas should be respected and not discarded, even if they flew in the face of convention. He taught me the importance of honesty and proper behavior. He was also someone who was not just about himself but cared about developing younger people and helping them with their careers."

Not that Fox's initial encounters with Flom weren't somewhat daunting. "He could be very intimidating, especially for young associates," Fox says. "Going into his office was like going into the holiest of the holies."

Finley, too, remembers being intimidated the first time he worked with Flom, although he says the feeling passed with time. "It was intimidating dealing with him at first, especially as an associate, but I still could learn from the way he handled difficult tactical and board process issues," Finley recounts. "It was very rewarding to come full circle and work with him on the Anheuser Busch/InBev transaction when I was practicing at a more senior level."

Perhaps remembering the discrimination he faced as a newly minted attorney, Flom also championed diversity at his firm. According to Caplan's book, Flom was instrumental in hiring Skadden's first female associate in 1959, even though at the time he was the firm's youngest partner by more than a decade. "What the hell does it matter as long as she can do the work?" Flom said at the time.

Flom's attitude cemented Skadden's reputation as a firm where merit mattered more than appearance, background, or connections. Over the years, Skadden picked off several talented attorneys that had been passed over for promotion by other firms. Eventual name partner William Meagher came to the firm after he failed to make partner at Davis Polk & Wardwell. Peter Mullen, who became executive partner in 1981, was hired after he was passed over for partner by Dewey Ballantine. "We've got to show the bastards that you don't have to be born into it," Caplan quoted Flom as saying.

He certainly did.

 

•RELATED ARTICLES

Skadden Name Partner Joseph H. Flom Dies at 87
The American Lawyer

He Built the Preeminent Law Firm in America
The American Lawyer, March 1989

Takeover Artist
The American Lawyer, December 1999

New Book Reveals Secrets to Joe Flom's Success
The Am Law Daily, November 2008

 

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