Wall Street's Most Powerful Law Firm

In good times and bad, Skadden's lawyers make money on upheavals in global capitalism.

From left, Joe Flom, Eric Friedman and Robert Sheenan

Skadden. The name, terse and uncompromising, symbolizes the most rarefied levels of corporate law, where clients throw platoons of attorneys at a problem and barely blink at the resulting $50,000-an-hour bills.

With 1,700 attorneys and $2.2 billion in fees last year, New York's Skadden, Arps, Slate, Meagher & Flom is the biggest U.S. law firm by revenue and the third biggest worldwide. The partnership's $693 million profit in 2007 exceeded the net income of much larger companies, including Yahoo! (nasdaq: YHOO - news - people ), Southwest Airlines (nyse: LUV - news - people ) and Avon Products (nyse: AVP - news - people ). By revenues, Skadden ranks No. 213 on our list of the Largest Private Companies in America.

All that money flows from a simple business model: Skadden specializes in advising companies when they are merging, being taken apart or face a mortal threat from regulators, competitors or other lawyers.

Having grown to the size where it's involved in practically every big transaction on Wall Street, Skadden has become a brand name--and a security blanket for nervous executives. "When something doesn't go right, the general counsel can say to the CEO, 'I had Skadden on it,' " says Eric Friedman, 44, who is slated to succeed Robert Sheehan, 61, this spring as executive partner in charge of the firm.

This isn't law firm puffery. In the 1950s, Skadden practically invented one of the most lucrative branches of corporate law, the art of mounting and defending against hostile takeovers. Inside its headquarters near Times Square are several floors of conference rooms where executives and lawyers huddle day and night, negotiating multibillion-dollar transactions or plotting strategy on how to keep raiders at bay.

"I've often thought they should set up an index based on the activity in those conference rooms," jokes Edward Knight, general counsel of Nasdaq OMX Group, which last year enlisted Skadden's help in the Nasdaq's complicated, $3.7 billion takeover of Sweden's OMX exchange.

The Skadden Index would be down a bit, as the carnage on Wall Street tamps down enthusiasm for its mainstay mergers and acquisitions work. Despite the turmoil in financial markets, those rooms are still busy: Skadden recently represented Nomura in the purchase of international operations from bankrupt Lehman Brothers (nyse: LEHMQ - news - people ), and helped Citigroup (nyse: C - news - people ) sell its outsourcing business to India's Tata Consultancy Services (other-otc: TACSF.PK - news - people ) for $505 million.