|Joseph H. Flom, Pioneering Lawyer in Mergers and Acquisitions, Dies at 87|
By JONATHAN D. GLATER
NYT Dealbook February 23, 2011, 8:56 am Legal/Regulatory | Obituaries
Joseph H. Flom
Skadden, Arps, Slate, Meagher & FlomJoseph H. Flom
Joseph H. Flom, a pioneering corporate lawyer who helped build Skadden, Arps, Slate, Meagher & Flom into one of the nation’s leading law firms, died on Wednesday morning in Manhattan. He was 87.
The cause was heart failure, a spokeswoman for the law firm said. He had homes in Manhattan and Palm Beach, Fla.
Mr. Flom, who rose to prominence in the 1960s as an adviser in proxy battles over control of public companies, became known as one of the pre-eminent lawyers involved in the costly and risky business of corporate mergers and acquisitions. Other companies often hired his firm simply to ensure that Mr. Flom and his team could not oppose them.
“Mr. Flom participated, on one side or the other, in virtually every major takeover battle of the last 20 years,” the author John Taylor wrote in The New York Times in 1994.
In 1985 alone, Mr. Flom orchestrated Ronald Perelman’s $2.7 billion takeover of Revlon and ABC’s $3.5 billion sale to Capital Cities. Twenty-three years later he represented Anheuser-Busch in a $52 billion takeover by InBev.
He counseled aggressive suitors, among them the corporate raiders James Goldsmith in his run at Crown Zellerbach and T. Boone Pickens in his bid for Unocal. And he erected defenses against hostile takeovers for Federated Department Stores and Chemical Bank.
As Skadden’s power grew, Mr. Flom also helped shape the giant law firm model that now dominates corporate law: a high-powered collection of specialists, spread out in offices across the country and around the globe.
Joseph Harold Flom was born in Baltimore on Dec. 21, 1923, and grew up in Brooklyn, the son of Itzak Flom, a labor organizer in the Manhattan garment district, and the former Fannie Hirsch. Mr. Flom once wrote that he had wanted to go to law school from the age of 6.
After graduating from Townsend Harris High School in Manhattan, he attended night school for two years at City College before enlisting in the Army in World War II.
He never graduated from college, but Harvard Law School admitted him after he completed military service, and he earned a law degree in 1948. At Harvard he was an editor of The Harvard Law Review.
After law school, by his account, many firms turned him down for a job because he was Jewish, but a small new firm in Manhattan run by Marshall Skadden, Leslie Arps and John Slate took him on. He became a partner in 1954 and within a few years effectively took over leadership.
In a 1994 book, “Skadden: Power, Money, and the Rise of a Legal Empire,” the journalist Lincoln Caplan portrayed Mr. Flom as a scrappy, sometimes rough-edged iconoclast who retained an outsider’s sense of himself in the white-shoe world of corporate law.
“We’ve got to show the bastards that you don’t have to be born into it,” Mr. Caplan quoted him telling his colleagues. Skadden is now one of the largest law firms in the world, with annual revenue exceeding $2 billion and about 2,000 lawyers in 24 offices in the United States and abroad. Mr. Flom was the last surviving original principal of the firm.
Malcolm Gladwell devoted a chapter to Mr. Flom in his book “Outliers: The Story of Success,” (Little, Brown, 2008), crediting him with building out and diversifying the firm and anticipating the rise of mergers and acquisitions as a specialty. “For 20 years, he perfected his craft at Skadden,” Mr. Gladwell wrote. “Then the world changed and he was ready.”
In the 1960s Mr. Flom began making his mark in corporate mergers and acquisitions, the hostile takeover in particular. Lawyers for major corporations tended to look down on that area of law, but as more companies began to consider growth by acquisition, they bypassed their own legal advisers and turned to young Turks like Mr. Flom at Skadden and Martin Lipton of Wachtell, Lipton, Rosen & Katz.
The watershed moment may have come in 1973, when the International Nickel Company of Canada made a hostile bid for ESB Incorporated. Morgan Stanley & Company, the investment bank advising International Nickel, proposed that the company hire Skadden to do the deal. Chosen because of his experience in the specialty, a rarity then, Mr. Flom commanded a team that helped Inco fend off a rival bid by United Aircraft. Inco eventually won ESB for $224 million.
In 1982 Mr. Flom represented the Allied Corporation in its acquisition of Bendix, a fiercely fought $1.96 billion transaction that prompted calls for new federal regulations governing mergers and acquisitions to protect shareholders’ interests and guard against concentrations of corporate power.
Some argued that the mergers were hurting the nation’s economy by transferring wealth from employees to bondholders and bankers, and diverting corporate funds from research and development. Mr. Flom, however, was skeptical about the need for changes.
“Shareholders already have a referendum,” he told The New York Times in 1982. “If they don’t like the results, they can fire the management, or sell their stock. The system, with all of its problems, is working. There’s no justification for questions about economic concentration.”
Mr. Flom developed a reputation for driving his staff. Lawyers would work around the clock for days to get deals done. (Skadden continues to be regarded as an aggressive, high-pressure firm that commands high fees.)
Concerned that Skadden could become a boutique law firm focused primarily on mergers and acquisitions, Mr. Flom headed an effort to expand into other areas, like real estate, product liability and energy.
To accomplish that, Skadden solicited retainer fees from client corporations that wanted to have the firm on call for mergers and acquisitions work. The clients were then offered the chance to use the retainer fees as credit toward other legal services. (Some said they were pressured into accepting the credits.) The strategy helped convert Skadden into the firm that Mr. Flom had envisioned: not a single expert boutique but a collection of them, offering a range of high-value specialized services to corporate clients.
As a philanthropist, Mr. Flom gave millions of dollars to Harvard Law School, where an endowed professorship bears his name. In November 2005, he and the Milton Petrie Foundation donated $10 million to the school for a center that would study legal issues related to biotechnology and health policy.
He also supported programs at City College of New York; pledged to make sure that college tuition would be covered for a class of 80 Harlem sixth-grade students whom he “adopted” in 1983; and supported Urban America, a development fund that invests in depressed areas. He served as a trustee of the New York University Medical Center and Barnard College and as the mayor’s representative on the board of the Metropolitan Museum of Art.
At his firm he helped establish the Skadden Fellowship program, which gives money to recent law school graduates involved in public interest projects.
Mr. Flom’s first wife, the former Claire Cohen, died in 2007. His survivors include his wife, Judi Sorensen Flom; two sons by his first marriage, Jason and Peter Flom; his first wife’s daughter by an earlier marriage, Nancy Laing; six grandchildren; and two great-grandchildren.
His colleagues, in interviews, said that what set Mr. Flom apart was his willingness to step back and let others work on important corporate transactions. When Skadden advised a special committee of RJR Nabisco in 1988 in the $25 billion leveraged buyout of the company by Kohlberg Kravis Roberts & Company, for example, he was only indirectly involved, he said; younger partners took the lead. The transaction was the subject of the book “Barbarians at the Gate: The Fall of RJR Nabisco” (Harper & Row, 1990) by Bryan Burrough and John Helyar.
In his 1994 book on Skadden, Mr. Caplan described Skadden lawyers in thrall to Mr. Flom as they would try to decode his doodles and cryptic remarks, like “They’ve taken their best shot, and it was a balloon with no air in it,” and “Their phone is off the hook, and no conversation is going to put it back on.”
At the height of the mergers and acquisitions wave in the 1980s, Mr. Flom was aware of the value of maintaining good public relations during a takeover, whether to reassure employees or stockholders. But he also sensed the limits of public relations at a time when most of a company’s shares were in the hands of institutions and arbitrageurs.
“There’s no case in American corporate history that I’m aware of where any major corporation was or was not taken over because the stockholders were told it was a good or bad idea,” he said in 1989. “P.R. can’t change the dynamics of the marketplace.”
Michael J. de la Merced contributed reporting.
This post has been revised to reflect the following correction:
Correction: February 25, 2011
An obituary on Thursday about the corporate lawyer Joseph H. Flom misstated the location of Townsend Harris High School when he graduated, in 1940. The school, now in Queens, was in Manhattan at that time.