Links leapfrogs rivals in sluggish year for M&A

2010 saw a slight upturn for corporate teams, especially those whose business is not heavily UK-based, says Gavriel Hollander


Mark Rawlinson
Mark Rawlinson

Corporate partners across the spectrum in the UK have been busily talking up a slow but steady recovery in the M&A market, especially in the second half of 2010. But figures released by Thomson Reuters do little to support this anecdotal evidence.

While there was a slight upturn in both the volume and value of deals with domestic involvement in 2010 compared with 2009, the rise was small. And set alongside a steep drop-off last year, evidence of a genuine recovery remains thin on the ground.

The year to 12 December saw a total of 3,488 deals with some UK involvement, the value totalling $308.9bn (£197.84bn). The ­figures for the same period in 2009 were 3,398 transactions, ­valued at $240.7bn.

In terms of volume at least – the measure widely viewed as being the more relevant when examining the rate of recovery for the M&A market – the rise is only 2.6 per cent. In 2008, there were 4,424 announced transactions. That means a two-year snapshot of the market shows a fall of 21 per cent.

But the data is not reflected in the attitude of corporate partners who, while not exactly bullish about prospects for 2011, have been talking up their books.

“Clients are definitely more active but that may not have come across in the data,” says Allen & Overy (A&O) London corporate head Richard Browne. “The market’s been a bit better than last year, which was a bit better than the one before.”

A&O is one of a handful of firms whose performance shows a marked improvement on 2009. The firm had fallen behind its magic circle peers, trailing in 27th on the back of 54 deals, worth $13.5bn. But a clutch of valuable mandates saw A&O rocket up the table to third in 2010, acting on deals with a combined value of $54bn and trebling its market share. Browne, however,
downplays the significance of the year-end statistics.

“I’d love to say it’s all changed dramatically and we’re marching forward to global domination but taking a snapshot over just one year can be misleading,” he says. “We’ve been busier this year but I suspect everyone else has been too. We’ve been doing well and are ­getting our share of deals.”

Among the outstanding deals in which A&O had a hand – all on the sale side – were the $3.8bn sale of healthcare company SSL International to Reckitt Benckiser, the demerger of Cable & Wireless and the sale of Autobar to private ­equity house CVC.

At the top of the rankings ­Linklaters has displaced last year’s number one Slaughter and May. Both firms lost market share, ­suggesting that the big deals are being spread around more than they have been in recent years.

Slaughters suffered the more alarming fall, dropping to 4th in the 2010 list behind the combined efforts of alliance firms Herbert Smith, Gleiss Lutz and Stibbe in second, as well as A&O.

The firm’s market share fell from 43.6 per cent to just 13 per cent. However, it acted on only five fewer transactions – 50 ­compared with 55 in 2009.

Linklaters has also seen its market share fall, despite regaining the top spot. However, of more significance to the firm will be the increase in deal volume, up to 75 from 61 last year.

Of the rest of the magic circle, Clifford Chance also upped the number of transactions it was involved in from 46 to 60. Freshfields Bruckhaus Deringer, in third place last year, dropped to sixth this time round. The 56 deals on which the firm was involved matched last year’s figure, but total value fell from $79bn to $41.5bn.

However, London corporate chief Mark Rawlinson is one of several figures in the market who argue that the figures for this year do not offer a true reflection of activity levels.

“It’ll take some time to show in the figures,” says Rawlinson, commenting on what he perceives as a much-improved year for M&A dealmakers. “I think it’s not going to be until Q3 this year before we see any material uptick.

“As a department, we were a good chunk busier in November and December than in the months before. We have quite a few IPOs in the pipeline and there’s a strong correlation between good equity markets and strong M&A.”

The feeling that the year improved for the City’s top corporate practices as it progressed is shared by DLA Piper London ­corporate head Charles Severs, whose own firm was propelled into the top 15 on the domestic front after increasing its deal volume by 50 per cent.

“It’s been a totally different year [from 2009],” comments Severs. “M&A picked up in a big way in the last half especially, but even across the whole year it’s been busier.”

That is certainly true for DLA Piper’s corporate team, which landed roles on a string of big ­private equity disposals. These included the Autobar deal as well as the sale of Pets at Home to private equity giant Kohlberg Kravis Roberts, on which it acted for the target company’s management.

“Every year our value has been getting higher because we’re going towards a high quality, high value practice,” adds Severs. “This year we’ve been lucky because in terms of the big private equity disposals we’ve been involved in most.”

On the global front, Skadden Arps Slate Meagher & Flom kept its place as the leading deal-doer, but the story was similar to that on the UK front, with the firm losing market share and value. It did break through the 200 transaction barrier, however, acting on 210 compared with 182 in 2009.

Linklaters came in as the leading non-US firm on the global list, but again its deal volume was cut, as was Freshfields’, the firm trailing in a place behind its magic circle rival in eighth.

The performance of Hogan Lovells, CMS and DLA Piper, all of which broke into the top 20 on the domestic table, suggests that those firms whose practice is not centred on the UK have weathered the recession best. It’s an argument supported by the relatively poor showing by Slaughters.

“It’s a key factor in our success,” confirms Severs when asked about his firm’s international network.

But overall, the picture is far from rosy, even if corporate groups feel busier than 12 months ago. The big ticket deals have been slow to come back, transactions take longer to close and banks are still keeping a tight hold on ­credit as the eurozone remains under the gun.

“Credit’s still available, but it isn’t flowing in the way it used to,” says A&O’s Browne, although he adds that he thinks next year “will see a steady increase in activity”.

How lucrative that increase will be is what is keeping the corporate ranks from sleeping easy at night.

As Rawlinson concludes: “It’s been a hard year and there’s still a lack of confidence – there are no prizes for being brave.”

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gavriel.hollander@thelawyer.com