ABSTRACT
What value do deal lawyers add? In a classic paper from forty years ago, Ron Gilson described deal lawyers as adding value by reducing transactions costs (lawyers were ‘transaction costs engineers’). In this article, we investigate that story. Using quantitative and qualitative data, we dig into what is one of the fastest growing and most lucrative practice areas for lawyers-the world of high yield secured syndicated loans and Liability Management Transactions (‘LMTs’). The puzzle that attracted us to study this world was reading press account suggesting that clients were investing more and more in having their lawyers search contracts for loopholes to extract value from their counterparts. On its face, this looked to be more a story of lawyers as rent extractors rather than transaction costs reducers. In a Gilsonian world, lawyer resources would be spent at the front end of deal design to make sure there were no loopholes to be exploited at the back end. And, if there were some drafting infelicities, the accumulated reputational capital of repeat transactor big firm lawyers would smooth things out with minimal litigation costs incurred. The Gilsonian world is not what we find; not by a long shot.
Choi, Stephen J and Gulati, Mitu and Jennejohn, Matthew and Scott, Robert E, Swiss Cheese Contracts: The Costs of Creative Lawyering (August 14, 2025), Virginia Public Law and Legal Theory Research Paper No 2025-63; Virginia Law and Economics Research Paper No 2025-18.
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