Lawyered Buyouts


By Lawrence Lederman

Farrar, Straus & Giroux -- 348pp -- $24

When attorney Lawrence Lederman left clubby Cravath, Swaine & Moore in 1974, his prospects were dim. The stock market was falling, and hardly anyone was doing deals--his specialty. But after a lengthy search, Lederman landed in what would soon become a hot mergers-and-acquisitions firm: nine-year-old Wachtell, Lipton, Rosen & Katz.

Tombstones--the title is slang for the announcements of completed deals--traces the 1980s' merger wave through the backroom maneuvering of the lawyers and investment bankers who made billions off the raiders and their prey. At times, the triumphs Lederman recounts seem too effortless, and some of his stories lack either the passion or the skepticism that would have made them more compelling. Still, this is a well-written glimpse into many of the contests and the players that roiled U.S. business.

The book is as much social history as narrative. Lederman tells of Kohlberg Kravis & Roberts' early leveraged buyout of Houdaille Industries in 1978--the first time a firm borrowed more than the book value of a company's assets--and recounts William F. Farley's costly 1989 tender offer for West Point-Pepperell, which signaled both the slowdown in megadeals and the demise of Drexel Burnham Lambert Inc. Lederman seems nearly unhinged by the thrill of such transactions: "I found that all the mystery and excitement of sex, of breaking down resistance, of scoring and conquest, were associated with a takeover. Manliness was at stake, and measured."

But he also acknowledges the era's excesses, in part through the tale of his protege, Ilan Reich. Reich was accused of insider trading in 1986, eventually pleaded guilty, was fined $485,000, and sentenced to a year and a day in jail. The episode still haunts Wachtell Lipton, which split over whether to support him. Last year, Lederman left the firm amid controversy over the disclosures to be made in Tombstones and joined a more traditional Wall Street law firm. By then, the business Establishment to which he returned had been forever altered by the takeover craze.

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