Bleak deals climate shows no sign of thawing in Q1

There was a total of 732 transactions announced with UK involvement in the first three months of the year compared with 960 in the same period last year. On the completed deals front the picture is no rosier, with 569 crossing the line compared with 821 in 2010.

“[The figures tell] their own story,” commented ­Herbert Smith corporate chief James Palmer, one of a ­number of senior advisers expecting a tough 2011. “I always felt that the economy was going to have a tougher year this year than last and I think it’s still true. We’re ­seeing some potential activity, but how much actually happens is the real question.
“When you look at the economic factors, they’re not helpful in terms of things picking up.”

Nevertheless, the market capitalisation of announced deals with UK involvement nearly doubled over the same period, helped by BP’s purchase of stakes in India’s Reliance Industries and Russia’s Rosneft.

That pair of deals boosted Linklaters’ showing in the rankings, but the firm still dropped from first to second place against its Q1 showing in 2010, to be replaced at the top by magic circle rival Freshfields Bruckhaus Deringer. Linklaters advised on only eight announced transactions compared with 33 in the first three months of last year.

Freshfields advised on 15 announced deals in the year to the end of March, valued at just over $25bn (£15.4bn). Slaughter and May was the only other firm to reach ­double figures, advising on 10 deals, but trailing in 12th in the rankings.

Fellow magic circle firms Allen & Overy (11th) and Clifford Chance (18th) acted on five and eight announced deals respectively during Q1.

Freshfields London ­corporate head Mark Rawlinson was guarded about his firm’s performance.

“It’s a thin market at the moment so I wouldn’t read too much into it,” he said. “I want us to be doing well when the market comes back.

“A lot of the stuff we’re seeing has no UK involvement, so I’m not surprised [by the drop-off]. People are sitting on their hands.”

On the completed deals table Clifford Chance leads the way in terms of market capitalisation, with Freshfields in second place and ­Linklaters third, although Freshfields again acted on more transactions - 12 to Clifford Chance’s eight.

Much of Clifford Chance’s performance can be put down to a good showing from its private equity group, which won several mandates, including Apollo’s and CVC’s acquisition of Brit Insurance, which closed last quarter.

Private equity chief David Walker said: “Looking at our business overall, and ­particularly private equity, it’s holding up pretty well.

“There have been a ­number of deals that we’ve been involved in and there are a number of auctions and ­secondary buyouts being rumoured.”

Rawlinson agrees that buyout houses are likely to spark into life before the public M&A market.

“I suspect the private equity guys are most likely to drive activity again and I suspect that will happen at the back end of this year,” he predicted.