The deterioration of Enron's position has turned a simple M&A transaction in which UK firms had bit parts into an extremely complex and profitable insolvency that will spawn endless litigation. Linklaters has come out best as the adviser to administrator Pricewaterhouse-Coopers (PwC), but Allen & Overy (A&O) is providing legal advice to the largest creditor, and insolvency and litigation departments at most top firms will benefit from Enron's demise. Linklaters has been involved since Enron's aborted takeover by rival energy company Dynegy. The deal was driven primarily by the established Texas-based law firms, with Vincent & Elkins acting for Enron and Baker Botts for Dynegy. However, it was obvious even before merger negotiations began that Enron was in dire financial trouble, and that should the merger not go through, it would be facing insolvency. Enron therefore drafted in Weil Gotshal & Manges in the US and Linklaters in the UK. Both have impressive M&A capacity, but also strength in insolvency and restructuring. According to sources close to Enron, Linklaters worked on the European aspects of the merger with an eye to a future insolvency, making contingency plans in case the deal failed. It became apparent this week to the Enron board that some of the European operations were insolvent, so the board decided to call in the administrators. As Linklaters was already working on the M&A transaction, the firm was the automatic choice to provide PwC with legal advice. By the time Linklaters filed the administration petition last Thursday (29 November), some of Enron's power customers had already cancelled supply contracts after Enron's credit ratings were slashed to junk bond status. Enron has several subsidiaries in the UK and Europe, four of which were included in the administration order. However, other subsidiaries such as Wessex Water, which is ring-fenced under Ofwat regulations, remain solvent. By Friday, top law firms were receiving panicked calls from existing clients for advice on debt and liabilities. According to a source at A&O, which has received instructions from several major creditors, the exposure of banks and energy companies in Europe runs to hundreds of millions of pounds, if not more. Allegations of financial mismanagement and dubious accounting procedures against Enron's US parent company mean that drawn-out litigation, including dozens of class action suits, are inevitable. Numerous class action suits had been filed in the US by last Friday, primarily on behalf of Enron's employees and shareholders, alleging that the company issued misleading statements which inflated the price of its shares. With Enron expected to declare Chapter 11 bankruptcy imminently, the lawyers' feeding frenzy on the other side of the Atlantic will make the UK furore seem sedate. Arthur And-ersen, the accountancy firm, is now being probed by the US Securities and Exchange Commission on its own auditing, and Enron's directors are no doubt taking advice on their personal liability. A source at Skadden Arps Slate Meagher & Flom's New York office said that he expected most major US national firms to get a look-in in the ensuing litigation.