2001 – not a vintage year for corporate. After scaling the peaks of M&A in 1999-2000, a return to the plateau seemed inevitable after all that frenzied activity. Down but not out, corporate lawyers were then hit by a double whammy as the European Takeover Directive failed and the events of 11 September sank in.
Statistics can mislead, but there can be no disputing the fact that European M&A has plummeted. Thompson Financial figures for the first six months of 2001 put activity at f376bn (£232.95bn), just half of what it was for the same period in 2001. And that was before the collapse of the Twin Towers completely shattered economic confidence.
Few firms have the guts to admit it, but those that can will be redeploying underoccupied corporate personnel elsewhere, if they have not already done so. Even before the attack on New York, Linklaters shuffled a group of corporate assistants into its regulatory department. Just last week, Ashurst Morris Crisp moved a group of assistants out of corporate and into finance, energy and projects. This is just the tip of the iceberg, and many assistants who saw their future on headline-grabbing deals will be lucky to stay on transactional work at all.
So far, so obvious, but not all law firms are equal in the eyes of a downturn. The magic circle still sits with the three best US firms at the top of Mergermarkets’ M&A tables for the first nine months of 2001. The most interesting movement was the leap in rankings for Clifford Chance, which moved from twelfth last year to an impressive third in 2001 in deals ranked by value. It also maintained second position in deals by volume.
Part of Clifford Chance’s strategy has been to target the US investment banks, a tactic that took Freshfields to the top. Investment bank advisory work, while not in itself as profitable as working for acquirors or targets, gives an instant rosy glow to league table performance. The long-term payoff from this strategy is that banks, if they like you, will recommend you to corporates. If Clifford Chance has genuinely managed to lock into this virtuous circle, we can expect more.
For the other firms in the top 10, specialisation has really paid off. Herbert Smith and Lovells, for instance, have cornered the market in UK demutualisations. Between them, they have sewn up Equitable Life, Liverpool Victoria, National Mutual and the Friends Provident flotation. The only two things that take the gloss off are that there is only a finite number of mutuals left and some of the appointments came as a result of conflicts. Outside the top 10, Nabarro Nathanson and Hammond Suddards Edge are doing well, but it is still too early to say who will survive the intensifying battle. Again, those who specialise may be best placed to survive the shake-out.
In 2001, every corporate lawyer really wanted to be in private equity. Chasing the Holy Grail was US firm Skadden Arps Slate Meagher & Flom, which pinched Allen Murray-Jones from Lovells. Slaughter and May also had a win when Telegraph Hill instructed partner Jeff Twentyman on the establishment of its UK equity house.
Of the traditional private equity firms, Lovells fought back against the loss of Murray-Jones, taking on Derek Baird from Dickson Minto at the end of the year. Elsewhere, there was consolidation. Ashursts sealed its first deal for Cinven in two years, advising on the buyout of Burmah Castrol’s chemical divisions; Simmons & Simmons bagged its first piece of work for Duke Street Capital and Travers Smith Braithwaite netted Cazenove Private Equity. The main loser was Dickson Minto, which recorded disappointing figures after two years of record growth, and which must now decide how to address its relative lack of resources in London.
For those corporate lawyers who cannot take refuge in private equity, 5 July was a black day. In a Strasbourg Euro-farce, the European Parliament rejected a single European Takeover Directive at the death, after an unholy alliance between German big business and the unions froze it out. The directive would have prompted an explosion in EU M&A. Now the mega-deal heavyweights such as Linklaters and Freshfields may be looking with green eyes at firms with strengths that lie elsewhere.