A Deal is a Deal
M&A attorney Brian J. McCarthy leads on mergers involving Disney, Pixar and Lucasfilm
Published in 2014 Southern California Super Lawyers magazine
on January 17, 2014
Updated on February 3, 2014
When friends invite Brian J. McCarthy to dinner, he tells them he might be able to make it. If they ask why he can’t commit, he tells them that he might be going out of town. And if they ask where he’s going, he tells them he doesn’t know.
“It could be New York, it could be St. Louis, it could be out of the country,” McCarthy says from his office overlooking downtown Los Angeles. “It doesn’t take me long to pack.”
In a typical year, about 30 percent of McCarthy’s time is spent on the road. Travel and long hours are just the nature of the beast when you’re a top mergers and acquisitions lawyer at a firm known for blockbuster deals. The Walt Disney Co.’s $4.05 billion acquisition of Lucasfilm and Activision’s merger with Vivendi Games both feature prominently in a long list of corporate transactions that McCarthy has either led or played a significant role in.
“I don’t think there’s a more accomplished M&A lawyer in the West,” says Harry McMahon, executive vice chairman of Bank of America Merrill Lynch. “He’s one of those people who really inspires confidence, which is essential for this kind of work.”
But McCarthy didn’t set out to be an M&A lawyer or work at Skadden Arps Slate Meagher & Flom, where he has spent all but 18 months of his career, and whose LA office he now manages.
If he hadn’t followed his father’s lead and gone into law, McCarthy says he probably would have been a history teacher; he’s particularly fascinated by the Gilded Age. But even that career option was probably a sign, given what the Gilded Age means in the history of American capitalism. “Maybe I was interested in business law even before I really knew what that meant,” he says.
After graduating magna cum laude from Tufts in 1975 with a degree in history and political science, McCarthy returned to his native New York and enrolled at Fordham Law. One summer he took an internship with the Suffolk County District Attorney’s Office on Long Island where he and other law students cut their teeth trying low-level traffic cases—mostly speeding tickets and stop signs.
“I like to joke that I have one of the best litigation records in the firm because I was 11-1,” he says.
But the work didn’t really grab McCarthy. In fact, what stays with him was the experience of riding from courthouse to courthouse each afternoon in the back of his friend’s Volkswagen. A self-described “news junkie,” McCarthy says he spent a lot of transit time with his head buried in either The New York Times business section or The Wall Street Journal—two papers he still reads every day, along with the New York Post and the Los Angeles Times.
“I realized that I was just very interested in deals,” he says. “I would read these stories and think, ‘Wow, how did they do that?’”
When he got back to law school, he switched gears and set up interviews with some of the firms that were regularly mentioned in the business section. He intentionally avoided Skadden.
“I didn’t want to work there,” he says. “They had a reputation for being a sweatshop.”
Instead, McCarthy set his sights on Rogers & Wells, a prestigious firm that dated back to the 19th century. It turned out the culture wasn’t a good fit.
“It was the kind of place where people would put their jackets on just to walk out into the hallway,” he says, recalling a stuffy interview process. “They had a barbershop there. It was just a very weird vibe.”
McCarthy interviewed at Skadden only after a corporate lawyer, for whom he had been interning, set up a meeting without McCarthy’s knowledge. He went out of courtesy. The interview ended up launching his career.
“Skadden was the first firm I went to where people really seemed to like what they were doing,” he says. “There was this exciting buzz in the air.”
At the time, hostile takeovers were commonplace, and McCarthy remembers asking Peter Atkins, a legendary M&A lawyer and Skadden partner, whether he preferred working on hostile or friendly deals. Atkins said he preferred hostile deals because they had an added layer of complexity. But it was the lawyer’s casual style that made the biggest impression on the young law student.
“He leaned back, put his feet up on his desk and gave me a 20-minute answer,” McCarthy says. “It was just great.”
McCarthy also made an impression when, mid-interview, another lawyer walked in and asked a question about a Wisconsin regulator.
“I asked them if this was the APL deal to buy Pabst,” he recalls. “They both kind of looked at me like I had been reading the papers on the desk upside down. But then they asked me what I thought of the deal.”
McCarthy said he really only knew what he had read in the paper, but he told his interviewer that it seemed like APL was trying to buy Pabst Brewing Co. and finance the deal with the target company’s assets. Unbeknownst to McCarthy, APL was a client of the firm at the time, and the fact that he understood the deal’s peculiar financing went a long way toward impressing his future employer.
“I think they thought: ‘At least he knows what we do here,’” McCarthy says.
Before starting, McCarthy secured a promise that he could switch to litigation if he hated corporate practice. “Even though I had an interest, I didn’t really know what corporate law meant,” he recalls. “In law school, they teach you to read cases and do moot court; they don’t teach you how to run a board meeting.”
The first deal hooked McCarthy. Two chemical companies—Celanese Corp. and Olin Corp.—had decided to merge. Skadden represented the former, and McCarthy quickly learned a few things.
First, the rumors about Skadden’s crazy hours were true. He had to pass up World Series tickets because he was working on the merger. Second, even though he didn’t always understand the “flurry of activity” that surrounded him, McCarthy says he appreciated the rhythm of the deal, which seemed to have a forward momentum not found in the endless-motion practice of litigation.
“It feels like you’re accomplishing something,” McCarthy says of dealmaking. “There’s a beginning, middle and an end. A client has a specific goal and you’re helping them toward reaching that goal, usually in a short time span.”
As it turned out, the Celanese-Olin merger stalled after a month. But it wasn’t a total loss. Everybody got along, and, as McCarthy recalls, the bankers wanted to make the best of it, so they held a 200-person-plus closing dinner at Tavern on the Green. That experience wasn’t common—McCarthy says that’s the only time he’s gone to a closing dinner for a deal that didn’t happen.
“Usually these deals end and everyone is pretty happy,” he says. “I like that feeling.”
Soon he developed a reputation as a hostile-takeover specialist, something he chalks up to the business environment of the late ’70s and early ’80s, when such deals were in vogue. But he’s really more of a generalist, because as he puts it, “a deal is a deal.” And while M&A can be incredibly complex, it’s often the laws governing the underlying industry that drive that complexity.
“You’re like the quarterback of a team of lawyers, because every deal is going to touch on so many different areas of the law,” he says. “There are always tax issues, and employment law concerns, and usually real estate. If it’s a regulated industry, you need specialists in that area, too.”
Advising the board of Wesco Financial Corp. in the company’s sale to Berkshire Hathaway, for example, meant that McCarthy had to draw on Skadden’s insurance experts. Similarly, representing Freedom Communications in the sale of its newspaper and television assets meant leading a team of FCC specialists.
“Brian has an amazing ability to stand back and connect all the dots when you’re dealing with a complex M&A issue,” says Barry Feld, the CEO and president of Cost Plus Inc., which McCarthy represented in a 2012 sale to Bed, Bath & Beyond. “He knows how to get everyone on the same page and put a plan together.”
As with everything, location matters.
“The Los Angeles office used to do more oil and gas because LA used to have a significant oil and gas industry,” McCarthy says. “But these days we do a lot of health care work because that’s a big part of the Southern California economy.”
Then there’s Hollywood. In 1983, McCarthy moved west to help open Skadden’s LA office. The following year, the firm successfully helped Disney fight off a hostile takeover bid from Saul Steinberg, a businessman known for leveraged buyouts, including a failed attempt to buy Chemical Bank in the late 1960s. That, as the famous movie line goes, was the beginning of a beautiful friendship. Disney has since called upon Skadden to handle some of its biggest deals, including 2012’s acquisition of Lucasfilm, which brought the Star Wars franchise into the Disney fold.
The deal made worldwide headlines. One story mentioned how McCarthy brought in associates who were Star Wars fans to verify that Lucasfilm really did own the IP rights to thousands of characters. “I tried to find people in the office who … didn’t have to spend time figuring out who Princess Leia was,” McCarthy told The Hollywood Reporter. “I was shocked by how many people knew the intricacies of whose father-in-law was married to whose sister.”
These days, McCarthy is pretty tight-lipped about representing the Mouse.
“When you do an entertainment deal, there’s always a higher likelihood of leaks,” he says. “You worry about loose lips, especially in LA where a rumor about a deal could end up on the Internet or in the trades in minutes.”
But while he appreciates the cool factor of entertainment deals—the firm represented Summit Entertainment when Lions Gate acquired it in 2012, and McCarthy found out just how many associates were Twilight fans—he says entertainment deals don’t really bring out his inner fan.
“In the ’80s, there was a lot of consolidation in the beer industry, so I did a lot of those deals,” he says with a grin. “Let’s just say the due diligence on those deals was very thorough.”
While dealmaking accounts for the bulk of McCarthy’s time, he’s also something of a consigliere to boards and CEOs. That can mean digging into the nuances of a corporate charter or analyzing case law so that clients can avoid shareholder lawsuits. But it’s not always about the law.
“You have to be something of a shrink,” he says.
John Pound, who has served on several public company boards, agrees. “Each board develops its own culture and personality,” he says. “Lawyers like Brian are always parachuting into time-sensitive, high pressure situations.”
What sets McCarthy apart from some of his competitors, Pound says, is his ability to calm a situation down.
“It’s easy to whip a board up when there’s a serious issue,” Pound says. “Brian does exactly the opposite. He’s a good observer of people and relationships, and he has a way of conveying confidence and quickly gaining a board’s trust without wrapping it up in his own ego. He’s very likeable and fact-driven.”
About 10 years ago, McCarthy spent Memorial Day weekend at one such board meeting. A health care company had decided to fire its CEO—that weekend. In fact, after the vote, the board turned to McCarthy and told him to carry out the order immediately.
“I told them I’m happy to do it, but think about it,” McCarthy recalls. “Do you really want to send the hired gun to go fire the guy who’s been the CEO for years?”
Legally, the board was on solid ground, but McCarthy felt a face-to-face meeting with members of the board would be more dignified. He also thought the personal touch might cool down a contentious situation.
Eventually, he says, “They decided that the board should handle the matter directly. It was just the right thing to do.”
Meanwhile, McCarthy was late to a wedding because of the board meeting. It wasn’t the first time work got in the way of social engagements, but he shrugs this off.
“It’s a service business,” he tells young associates.