A recent American Lawyer story, “A Glimpse into Wachtell’s Mysterious Billing Structure,” reports that Wachtell Lipton Rosen & Katz’s fee arrangements with clients have long been cloaked in mystery.  Over the years, we’ve heard that Wachtell doesn’t charge hourly rates for M&A deals, but the details of their billing structure aren’t widely known.

Now we have an idea.  The American Lawyer has obtained what appears to be a standard fee agreement that Wachtell sent a client in 2012.  It shows that the firm typically charged fees for M&A deals that range from 1 percent to 0.1 percent of the transaction amount.  The fee agreement was signed by CVR Enengy Co., an oil refining and fertilizer business headquartered in Sugar Land, Texas.  The company paid Wachtell $6 million for a three-month failed takeover defense against corporate raider Carl Icahn and is now suing Wachtell and two of its partners for malpractice in Manhattan federal court and seeking return of the $6 million.  Wachtell maintains that CVR’s claims are meritless.

The fee agreement (pdf) was attached to a Jan. 16, 2012 letter that Wachtell partner Benjamin Roth sent to CVR general counsel Edmund Gross.  Roth states in the letter that the firm’s initial fee for taking the assignment is $200,000.  As for the balance of the compensation, Roth notes that he discussed an estimate with Gross but the amount itself is not revealed in the letter.  “Our final compensation will be agreed with you, mutually and reasonably, and will reflect the fair value of what we have accomplished for the company,” Roth writes.

Roth attached to his letter a one-page document entitled “Billing and Retention Policies,” which appears to be a standard billing policy summary sent to clients.  The document states that Wachtell provides a “distinctive service,” marked by extraordinary expertise and sophistication that doesn’t lend itself to hourly fees.  “We must base our fees not on time but on the intensity of the firm’s efforts, the responsibility assumed, the complexity of the matter and the result achieved,” the firm states.

While the firm explains in the document that its fees are not based on deal size, it nonetheless provides a range contingent on a transaction’s value.  The document states: “While our fees are not based on the amount involved in a matter, experience indicates that merger and acquisition and takeover fees have typically ranged [from] one percent or more on matters under $250 million and 0.1 of one percent or less on matters over $25 billion.”

The firm also makes clear that it won’t give client details about how Wachtell staffs it matters, or how the work was done.  “The firm does not furnish long-descriptions of services or details as to particular lawyers and hours,” the billing policy states.  In the CVR matter, Wachtell’s $6 million fee represented 0.2 percent of the $2.6 billion deal value, which is within the range cited in Roth’s letter.  CVR paid the fee shortly before Icahn took control of the company.