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									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.

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