Private Equity and Litigation

The rise of private equity equity has been a boon to law firms. Especially deal lawyers. When deals go awry, the PE crowd doesn’t doesn’t hesitate to move from the boardroom to the courtroom. The recent fast track litigation between Cerberus and United Rental demonstrates that.

But with private equity, there is always the discipline of calculation. The recent settlement of the proposed Blackstone-PHH acquistion shows clients with a lot of money still don’t like paying lawyers if the return isn’t right.

The Financial Times has more here (reg req $$), explaining why PHH’s changed fortunes (owing to market conditions and available financing) made it a no-go. The FT has a trenchant observation which captures how savvy business clients look at major litigation:

Blackstone’s decision means that there will not be a long drawn out legal battle with all the uncertainty and expense that entails.

I bet there will be more settlements like this. I termed this phenomenon “Litigation is Revealed as a Failure, not a Strategy.” It’s #3 in “The Wired GC Legal Top 10 for 2008.

I promise to stop flogging that report if you subscribe here so I can send you a copy.