Volume 151, No. 147 Thursday, July 28, 2005
Chicago attorney helped define, refine private equity sector
By JERRY CRIMMINS that, Levin is an outstanding salesman,
Law Bulletin staff writer
The little business that he stumbled into
Rauner said, with “super common sense,
which almost no tax attorneys have.’’ ‘Dummy,’
in the early 1970s didn’t amount to much in
Jack S. Levin’s estimation.
Levin didn’t start out to be a deal lawyer.
He started out to be an Army general. ‘dumbest’ form duo
Yet that little business “grew to be a He grew up on the West Side near There’s some humor in the story of how
mainstay of the American economy and Madison Street and Kedzie Avenue where
Kirkland & Ellis’ long connection with the
more recently the global economy,’’ said his father ran a famous restaurant, Little
private equity field began.
Levin, one of the top partners at Kirkland & Jack’s, founded by Levin’s grandfather in
Ellis. 1905. A senior partner got a call from an
The business that Kirkland & Ellis had Among those who patronized the official at First Chicago Corp. who said,
not heard of until the early ‘70s was private restaurant were Mayor Richard M. Daley; “Hi, could you tomorrow morning send
equity financing. And it had a brother, Jake Arvey, Daley’s predecessor as over your best venture capital lawyer…?’’
venture capital. chairman of the Cook County Democratic The senior partners, according to
When Levin happened onto it, the field Party; Al Horan, Democratic committeeman attorney Jack S. Levin, had never heard of
amounted to small investments totaling in of the West Side’s 29th Ward, and lots of
venture capital. The term was generally
America no more than a few hundred average families, Levin said.
unknown in the early 1970s.
million. For a while, Levin worked the cash
Since then, venture capital/private equity register and delivered the restaurant’s “Somebody said, ‘Send Jack because he
financing has grown to $70 billion in famous cheesecake. doesn’t know much about anything, but he
investments last year in the U.S. alone, But by the time the establishment closed knows a little bit about a lot of things,’ ”
according to Thomson Financial. Professor in 1962, Levin had just graduated from according to Levin.
Josh Lerner of Harvard Business School Harvard Law School. Levin introduced himself to Stanley C.
says that private equity groups today He described his route this way: Golder, head of the fledgling venture capital
manage $300 billion in funds. By 1950, the schools in the neighborhood
unit at First Chicago Corp., with these
In the mid-’70s, venture capital and around his family home at 3400 W.
words: “Hi. What’s venture capital?’’
private equity provided work for only one Washington Blvd. “were deteriorating
man at Kirkland & Ellis — Levin. badly.’’ “Just my luck,’’ Golder responded, “they
Since then, the field has exploded. His family sent him to St. John’s Military send me a dummy for a lawyer.’’
Kirkland & Ellis now has “probably 250 to Academy in Wisconsin where he learned Three hours of negotiations followed
300 lawyers spending the majority of their “discipline and will power’’ and received an between First Chicago and a small firm in
time on venture capital and private equity appointment to West Point. which the institution wanted to invest
transactions in seven offices, including two His wanted to be a general, Levin some venture capital. Levin, on orders
in Europe and five offices in the United related, but “my father convinced me maybe
from Golder, said nothing.
States,’’ Levin said. that wasn’t the best career.’’
Highly successful Kirkland lawyers and He went to Northwestern University, At lunch, Levin told Golder, “This form
major private equity operators and funds in became a certified public accountant, and agreement doesn’t have anything to do
Chicago and elsewhere trace their next chose Harvard Law School because he with the terms you’re negotiating in there,
beginnings in part to the work of Levin, it was “the best.’’ and you’re negotiating the terms all
according to his colleagues. “Couldn’t you get into one of the local wrong.’’
This year, Chambers & Partners, the law schools?’’ a family friend asked him. Levin added, as a joke, “You must be the
British legal publisher, called Levin “the “You’ll never become a judge going to dumbest venture capital investor in
father of private equity’’ and gave Levin its Harvard.’’
Lifetime Achievement Award. He graduated first in his class.
Levin, 69, is the first Chicago-based Early in his law career, Levin was named Golder suggested that Levin handle the
lawyer to receive this award, according to assistant to U.S. Solicitor General Archibald next round. The deal was completed.
Fiona Boxall, managing editor of Chambers Cox and to Cox’ successor, Thurgood “Stan said, ‘OK, you’re my guy,’ ”
& Partners. Marshall. Levin argued eight cases before .
according to Bruce V Rauner, Golder’s
“Jack is a genius,’’ said Bruce V Rauner, the U.S. Supreme Court in that role and 12 protege.
principal of GTCR Golder Rauner, a leading cases before various U.S. appeals courts, — Jerry Crimmins
Chicago private equity firm. In addition to continued
and tried three cases in U.S. district courts, lobbied the U.S. Department of Labor to from there left and became Willis Stein
all tax and business matters. change its interpretation of the “prudent Partners,’’ Levin said, “and many, many
He felt he’d achieved “the pinnacle of man’’ rule of the Employee Retirement others.’’
litigation’’ already as a young man. Income Security Act that governed pension Levin estimates that he has represented
So when he returned to his first fund investing. “somewhere around 200 venture capital and
employer — Kirkland & Ellis — he decided The new interpretation in 1979 allowed private equity firms.’’
to switch his focus. pension funds to invest some money in small Levin’s influence and legal advice was
He decided to become a tax lawyer, where or new companies and venture capital. sought beyond Chicago. For instance, Quigley
one case would not last for years. He said he This, Rauner said, released “a tidal wave said of New York’s Kohlberg, Kravis, Roberts
wanted to make things happen in the future of capital.’’ & Co., founded in 1976, “Their early
rather than quarrel over the past. Today, a quarter to a third of the money in investors were all from Chicago and Jack was
That phase lasted three years. VC/PE comes from pension funds, according representing them.’’
Levin recalled that he sometimes would to Levin. Similarly, Levin was heavily involved in
develop a complex tax plan, only to hear from Levin and Golder were involved in several structuring Clayton, Dubilier & Rice Inc.,
the transactional lawyer assigned to carry out such lobbying efforts in Washington, some of another New York private equity firm whose
Levin’s work with the client, “The plan didn’t which involved IRS regulations, Levin said. initial funds, Quigley said, were largely from
really fit and we abandoned it.’’ VC/PE expanded from startup transactions Chicago.
Restless and dissatisfied, Levin decided he into leveraged buyouts, growth-equity Quigley is today a principal in Nassau
wanted to do transactions and butt heads. investments in existing companies, Capital LLC, a firm that exclusively invests
He was 34, and had made partner at turnaround investments, industry capital on behalf of Princeton University’s
Kirkland. He announced that he wanted to consolidations and exit strategies for those endowment fund.
make another career switch, to become a investments, and — very important — the Levin and other Kirkland & Ellis lawyers
corporate transactional lawyer — albeit one formation of venture capital, private equity and helped set up and structure Nassau, Quigley
with no experience. buyout funds run by full-time professionals. said. “They’re still my first call.’’’
“Whoa!’’ other partners said, Levin Levin “invented many if not most of the Today, Levin said, Kirkland “probably
recalled. “You’re going to have to work for legal mechanisms that people still use in forms 50 to 100’’ private equity funds a year.
third-year associates, and they’re going to private equity investing today,’’ said Kevin R. Venture capital people move fast, the way
tell you what to do.’’ Evanich, a Kirkland partner. Levin trained Levin likes. He said they “will typically
At first, Levin took orders from third- and Evanich starting in 1983 when the firm’s negotiate and consummate a transaction in a
fourth-year associates. And “every weekend, private equity group had only five lawyers. few weeks or at most a month or two.’’
I took home books about [Security and All of these VC/PE deals “were new types Usually just two or three people at the
Exchange Commission] law, about mergers, of transactions presenting a number of very venture capital firm handle the deal. No
books about public offerings’’ until, after two complicated and difficult issues, both tax corporate bureaucracy interferes, Levin said.
years, he rose in his new field to play the role issues and SEC issues and other regulatory Radke, who later helped found Kirkland’s
of a senior partner. concerns,’’ said Kirk A. Radke, who started New York office, said, “So many lawyers see
Thus, when fate called in 1972, he was working for Levin full time in 1984. the big picture and can’t understand the
ready. “Jack, because of his energy and intellect, details, or vice versa. Jack had the unique
His law firm sent him to advise Stanley C. was able to thread the needle through all capability to do both and a unique capability
Golder, head of First Chicago Corporation’s these different areas of the law and get things to understand the tax world and the
small venture capital subsidiary, about an done for the investors,’’ Radke said. corporate world.’’
investment in a small company with a new “He was not only representing the guys “Jack started back in the days when it was
idea. doing the deals,’’ commented John G. Quigley, venture capital, industry consolidation and the
For most people in those days, Levin said, a former Kirkland associate, “but he was beginning of the buyout era,’’ said Avy H.
“The words venture and capital didn’t fit representing the institutions providing the Stein, name partner of Willis Stein & Partners,
together…. The words private and equity money to launch some of the pioneer LBO and a $2 billion Chicago private equity fund. “Jack
didn’t fit together…. It was like saying tuna venture capital firms throughout the U.S.’’ has been a trusted adviser to the largest and
fish elephant.’’ Levin represented Golder when Golder most successful firms in all those areas.’’
However, he said, a few financial and colleagues started their own private Levin teaches part time at Harvard and
institutions like First Chicago, Continental equity/venture capital firm in 1980, Golder the University of Chicago. As language
Bank and Prudential Insurance Co. in New Thoma Cressey. evolves, he said, today “venture capital
York were making small venture capital Today that firm is GTCR Golder Rauner means investing in early stage companies.
investments, $250,000 to $500,000, to buy and has $6 billion in assets. Private equity now means investing in more
equity in a small or startup firm. Levin represented First Chicago when John mature, later stage companies.’’
The original investment on which Levin A. Canning Jr. took over the venture capital He also wrote the books.
represented the late Golder — who was unit and it expanded to a $2.6 billion operation. He is the author of “Structuring Venture
himself an extraordinary pioneer — was a Then Levin represent Canning when Canning Capital, Private Equity and Entrepreneurial
company that wanted to make throw-away and others founded Madison Dearborn. That Transactions,’’ republished annually by
plastic bedsheets for hospitals. firm today manages more than $6 billion in Aspen/Panel Publishers. He is co-author with
The idea failed. But the relationship of private equity investment funds. Martin D. Ginsburg of “Mergers,
Golder and Levin took off. “We picked up Continental Bank’s venture Acquisitions and Buyouts,’’ republished semi-
In the late ‘70s, with Levin’s help, Golder capital unit, and then, after a spinoff, guys annually by Aspen/Panel Publishers.
Reprinted with permission from Law Bulletin Publishing Company.