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Luke Bergstrom is a pick-up-the-phone kind of lawyer, a trait that helped him broker one of 2020’s largest M&A deals: the $8.1 billion sale of Credit Karma to Intuit — the financial software giant behind Turbo Tax.
Intuit’s deputy general counsel Stacy Doynow says she had San Francisco-based Bergstrom and his dealmaking team at Latham & Watkins on speed dial as they spent months together hammering out the details and navigating complicated antitrust matters before the deal finally closed in December.
“He’s pretty engaged and likes to talk to other people, so he’s one to get on the phone and hash it through,” said Doynow.
Bergstrom, a partner at Latham since 2004 and a co-leader of the firm’s M&A practice since 2017, has made a name for himself and his team by having a hand in many big deals in recent years. 2020 was no exception: out of the 19 tech deals valued over $1 billion, Latham had a principal role in seven.
And 2021 is shaping up to be a big year for deals, especially as the number of SPAC, or blank-check companies, listings continue to boom.
The second-highest-grossing law firm in the country, Latham pulled in nearly $3.8 billion in revenue last year in large part due to their corporate work, according to AmLaw.
Bergstrom’s team has managed to earn and maintain a strong pipeline of work by focusing on teamwork and mentorship, he said, which aligns with Latham’s collaborative culture, focus on international expansion, and not having a main office or distinct profit centers.
While attorneys do work in traditional practice groups — like litigation, M&A, tax, and private equity — the firm also encourages them to work with industry groups — like technology, fintech, and energy — so they can provide more specialized support to clients and bring more colleagues in on different matters.
This means less of an “eat-what-you kill” culture, where partners bring in business and keep it to themselves, and greater collaboration. At many law firms, lawyers earn an origination credit when they land a new client and are paid based on the revenue that firm earns from the client, even if they aren’t directly working on matters.
In 2019 it was reported that at Latham, lawyers earn an origination credit, but they can also earn a proliferation credit when they generate new business from an existing client. It’s a system that “promotes bringing in younger partners, cross-selling practice areas, and teamwork,” recently-retired and legendary litigator Miles Ruthberg legal blog Above the Law. The firm declined to comment on whether the credit system has changed since.
“The more that you can do together to hunt for new work and meet the needs of clients that’s not focused on the individual, but the team, the more you can be successful in the long run,” Bergstrom told Insider.
The strategy has helped Bergstrom and his team push Latham towards recognition as one of the top transactional law firms in the country. The legal industry ranking organization Chambers placed the firm in its second band for top M&A firms, alongside fellow corporate powerhouses Cleary Gottlieb Steen & Hamilton; Paul, Weiss, Rifkind, Wharton & Garrison; and Weil, Gotshal & Manges.
Bergstrom talked to Insider about brokering one of the biggest M&A deals of 2020, what it was like to close remotely, and how he’s planning for another busy year of dealmaking.
After laying the groundwork for the Intuit-Credit Karma deal, Bergstrom and his team had to work through it remotely.
Bergstrom is no stranger to big tech deals. He advised Adobe Systems in its $1.8 billion acquisition of Omniture; Monsanto in its $930 million acquisition of the Climate Corporation; Twitch in its $970 million sale to Amazon; and Seamless in its merger with GrubHub, and he has a roster of additional clients and deals in the life sciences, medical devices, and private equity industries.
A University of Pittsburgh School of law graduate, he was an associate at Big Law powerhouse Jones Day and top Silicon Valley firm Cooley Godward — today known as Cooley — before joining Latham as a partner in 2004. Since 2007, he has advised Intuit in its sales of Quicken Business Unit; Quicken Business; and Digital Insight, and acquisitions of TSheets; Demandforce — which he later helped sell to Internet Brands; Check; and Mint.
Credit Karma Founder and CEO Kenneth Lin said earlier this year that he and Intuit’s CEO talked for months in 2019 before deciding to move forward with the sale. For Bergstrom, that meant an extended period of early-stage discussions with the Intuit team before they even began putting together a term sheet, the first critical but non-binding document on the way to a deal.
Intuit counsel Doynow, who leads the company’s M&A work, says she and Bergstrom didn’t complete any transactions the entire first year they worked together, but they laid the groundwork to be good teammates for the Credit Karma deal.
“He took the time to invest in me and the rest of the team and spent a lot of time building relationships, learning how we wanted to operate, and building playbooks. When the time came to start getting really into it, the foundation was already there,” she said.
The term sheet came together in November 2019 and was finalized around mid-December. The parties signed the deal on February 24th, 2020 and the sale was an “intense grind from that point until closing,” Bergstrom said.
The deal had some significant logistics to be worked out: because Intuit had so many stockholders, it had to register an SEC Form S-4, which documents a company’s share distribution, amounts, terms, and other financial information. It’s an unusual requirement for a private acquisition, but Bergstrom said the Intuit and Latham teams took care to ensure stockholders could get a hand on their shares as quickly and smoothly as possible after the deal closed.
There was also a significant antitrust component: acquiring smaller rivals with competing software has historically put deals in the crosshairs of antitrust regulators, and an issue that’s threatened deals by large tech companies like Google, Facebook, and Apple. Intuit and Credit Karma offer somewhat similar financial technology, so lawyers on Bergstrom’s team in November reached a deal with the Department of Justice to sell Credit Karma’s tax business to Square to offset antitrust concerns.
Doynow said Bergstrom was available to handle whatever the Intuit team needed, from signing off on high-level matters to giving a younger lawyer a break by completing smaller tasks without charging his normal partner rate.
The transaction finally closed on December 3, 2020 for a whopping $8.1 billion. In addition to the Latham team, Qatalyst Partners served as Intuit’s financial advisor; Goldman Sachs served as Credit Karma’s financial advisor, and Skadden and Wilson Sonsini Goodrich & Rosati served as Credit Karma’s legal advisors.
Bergstrom said he expects his team to be busy this year, thanks to tech clients’ appetite for dealmaking and the SPAC craze.
At the finish line of a big deal, the Latham team and clients usually celebrate with a late-night closing dinner, a tradition that’s been postponed due to the pandemic. Instead, the teams met over video chat to celebrate with at-home cocktail kits, a homage to the homemade, barrel-aged cocktails Bergstrom usually delivers to clients and colleagues to bookend months of hard work.
Bergstrom, an avid cook, approaches cocktails like a nice meal: it’s all about building up flavor profiles and adding new recipes to his collection. Pre-pandemic, he spent a lot of time traveling the world to meet with clients, giving him plenty of opportunities to chat with bartenders and learn their tips of the trade.
During a visit to London’s storied American Bar at the Savoy Hotel, he scored his favorite cocktail to barrel-age: a rum drink once called The Other Cocktail that he says may not even be on the menu anymore. In all, Bergstrom says he’s barrel-aged more than 20 different cocktails and in a normal year he fixes up more than 20 gallons to give away during the holidays and after big deals.
Bergstrom believes big deals will continue to dominate his work schedule in 2021. He expects M&A activity to boom in the technology, healthcare, and life-sciences industries thanks to favorable interest rates, a private equity market that’s flush with cash, and a change in consumer habits due to the pandemic.
“Working from home has had a real effect on how people work, live, and shop, which has played a role in who has been successful and active in M&A activity,” he said.
He added that the continued interest in special purpose acquisition companies, or SPACs, will also drive dealmaking this year.
“There’s a ton of money that’s flooded into the SPAC market, and we expect SPACs will be on the hunt for merger opportunities throughout the year,” he said. Since most SPACs have a “limited shelf life” to find a deal — around 18-24 months — they should result in a frenzy of dealmaking in the months to come.
Due to Latham’s representation of many tech clients, Bergstrom expects the firm is in a good position to be a frontrunner in work to come.
While most of this work will continue online and remotely, the pandemic has thrown a wrench in Bergstrom’s cocktail hobby, which has been a core way to bond with clients. Until he can return to large-scale, barrel-aged creations to pass around after his next big tech deal, he says he’s staying home, enjoying a simple old-fashioned with Bas-Armagnac brandy.