Magic circle takes hit as big-ticket M&A falls away
7 July 2008
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Corporate practices at magic circle firms have been rocked by dramatic falls in big-ticket M&A during the first half of 2008.
Top UK firms have seen the total value of announced deals plummet by up to 90 per cent compared with the first six months of 2007.
The figures, from financial information provider Thomson Reuters, show that the magic circle has been hit worse than expected by the credit crunch.
The total value of announced deals advised on in the UK fell by 72 per cent at Clifford Chance, 83 per cent at Allen & Overy (A&O), 87 per cent at Freshfields Bruckhaus Deringer and 56 per cent at Linklaters.
The largest fall was at corporate powerhouse Slaughter and May, which saw total deal value drop by more than 90 per cent, from $196.56bn (£99.11bn) in the first half of 2007 to $18.59bn (£9.37bn) this year.
Among the UK firms, Ashurst has fared best in an uncertain market for M&A lawyers. The firm was instructed on deals worth $22.57bn (£11.38bn) in the first six months of 2008 – just 1.1 per cent less than the previous year.
London head of corporate Adrian Clark (pictured) said: “We always see this happen in a downturn. The froth comes off the top of the market.
“Linklaters and Freshfields are heavily geared towards?doing?the occasional huge deal. Firms like us have got such a big corporate base, we’re doing normal M&A. That is less affected by the credit crunch.”
Australian firm Mallesons Stephen Jaques shot to fourth position in the table – ahead of Ashurst, Freshfields and Slaughters – on the back of its expertise in the mining sector. The firm won instructions on two of the year’s biggest deals: BG Group’s £6.6bn bid for Origin and Chinalco’s $14bn (£7.06bn) dawn raid on Rio Tinto.
While the picture for announced deals is not good, the UK’s largest firms performed better in a separate Thomson table for deals completed during the first half of 2008.
A&O maintained the top spot by closing transactions worth $114bn (£57.48bn), down 6.4 per cent on 2007. Clifford Chance and Linklaters saw falls of 7.2 per cent and 18.1 per cent respectively, while Freshfields was one of the few firms on the list to see an increase. It advised on $86bn (£43.36bn) worth of completed transactions, a small rise on the previous year, which saw it climb to second place overall.
Freshfields corporate partner Barry O’Brien said: “We’re still very busy, remarkably so, but the deal size is lower than it was last year.
“What matters to law firms is the ability to be flexible and deploy your resources to adjacent marketplaces.”
He said the firm had boosted corporate activity by acting on restructuring and rights issues, which are not included in the Thomson M&A tables.
“With Northern Rock, Bradford & Bingley and RBS [Royal Bank of Scotland] – that’s where we’re seeing activity at the moment,” O’Brien added. “Our lawyers are doing M&A one day and rights issues the next.”
Boosted by its mining and natural resources practice, Norton Rose also climbed the table. The firm achieved a 119 per cent rise in the value of completed deals and was bettered only by Slaughters outside the magic circle.
The table for European M&A saw less dramatic falls in deal value. Linklaters, which also topped the UK rankings, was the top European firm as legal adviser to announced deals totalling $164bn (£82.69bn) in the first half of 2008.
But this figure was 40.5 per cent down on the equivalent period in 2007, when the firm posted deals worth $275.7bn (£139.01bn).
Sullivan & Cromwell and Clifford Chance in second and third places saw falls of 32.4 per cent and 49.2 per cent respectively.
Canadian firm McCarthy Tétrault boosted total deal value by 329 per cent to jump 48 places into fifth on the European table. The firm’s performance has been powered by record M&A activity in Canada, with its lawyers acting on deals such as Swiss miner Xtrata’s $18.1bn (£9.13bn) hostile takeover bid for Ontario-based Falconbridge.