Sweet 16 spark power surge

Ever since 2008, when The Lawyer first published the Transatlantic Elite, we have tracked the activities of a collection of trailblazing firms known as the Sweet Sixteen.

This group of five UK- and 11 US-headquartered high-earning market leaders were chosen on the back of their position as advisers to the biggest and best clients around the globe on their most complex, challenging and remunerative matters.

The constituent parts of a Sweet Sixteen firm? Top talent, managerial vision, strategic verve and an unmatched ability to execute. Inevitably, in all cases this combination added up to sky-high financials – it is no accident that these 16 firms contain some of the highest-earning partners in the global legal market.

Over the past three issues of theTransatlantic Elite we have looked atthese firms in the round, making no distinction between practices or industries other than highlighting areas they have targeted spectacularly well.

Equally we have outlined the key pressures they have faced and the impact it has had on these firms – most notably the financial meltdown and the widespread layoff programmes most endured two to three years ago.

This year, for the first time, we have taken a different approach. The Transatlantic Elite has always been underpinned by the strategies the top firms are employing to ensure they are capturing the premier work in the global market.

Today, no area is more strategically key than energy and natural resources.

According to data from Thomson Reuters,last year the volume of global M&A leaped by more than 23 per cent to $2.4tr. The sector that saw more activity than any other? Energy and power, whose market share ballooned from 12.5 per cent to more than 28 per cent. That trend has shown no sign of slowing in the current year (see tables below).

It only takes a glance at commodities giant Glencore International’s $11bn May IPO (which featured Clifford Chance and Linklaters and valued the business at $59bn), to know that there’s money in them thar hills, valleys and offshore wind farms. That said, Glencore’s first-ever earnings report this month left investors disappointed, its share price down and some in the market fearing that the ending of another frothy bubble could be in sight.

With those kind of numbers, no wonder so many of the top firms are changing their game plans.

Kinetic energy

 “The energy sector for law firms has gone through a dramatic shift,” confirms Sarah Fitts, head of the energy group at NewYork’s Debevoise & Plimpton. “It used to be Houston firms working for the big oil companies and regional firms focused on regulatory work as opposed to the Sweet Sixteen firms. Now, energy has become another area where prominent global clients are looking for concentrated industry experience.”

That change means firms are rethinking their strategies, a trend illustrated by this month’s mergers of Norton Rose with Deneys Reitz in South Africa and Ogilvy Renault in Canada. If ever there was a natural resources-driven strategy it is Norton Rose’s.

As Fitts puts it, when Debevoise saw that clients were looking for increased energy specialisation a few years ago, it launched a practice group to help communicate the experience it had in corporate transactions in the sector and, “leverage what we are good at on behalf of clients, backed by decades of experience in the energy space”.

In other words, that is how Debevoise hasresponded to current booms, such as the shale gale in North America. Fundamentally, these are M&A deals of the type Debevoise has handled for years.

“That’s the way we look at this practice at Debevoise,” says Fitts, “as an opportunity to bring proven skills to bear for clients.”

This year’s Transatlantic Elite is focused primarily on the firms that have best capitalised on the consolidation that is rampant in the energy sector, making the key work M&A and transactions. Clearly there is a distinction between firms that are the world’s best at advising on public company M&A or major assets sales – regardless of whether the company involved is in the energy business – and those that day in, day out serve the needs of energy and natural resources companies.

But in many cases, to be in a position to win those top M&A mandates, a firm needs the depth of knowledge only borne out of years advising energy clients on regulatory matters, litigation, project finance and a wide range of other matters.

So, while Smith International, DukeEnergy and Chesapeake Energy may have turned to Wachtell Lipton Rosen & Katz recently for M&A advice – like IBM, no one ever got fired for bringing in the world’s top merger specialist – other firms have injected new impetus into their targeting of the energy and natural resources sector.

Sweet Sixteen Ranking

Tier one

Allen & Overy
Latham & Watkin
Linklaters
Skadden
Sullivan & Cromwell

Tier two

Freshfields
Clifford Chance
Cleary Gottlieb
Simpson Thacher
Slaughter and May
Wachtell

Tier three

Cravath
Davis Polk
Debevoise & Plimpton
Kirkland & Ellis
Weil Gotshal