The frantic air that was characteristic of the City last year is now nowhere to be seen. This summer has not been one for mega-mergers and billion-pound deals, instead it has been one for talk of redundancies and quiet corporate departments.
The really big transactions that magic circle firms would like to call their bread and butter are often valued in billions rather than millions. Two examples last year were the 114bn merger of Glaxo Wellcome and SmithKline Beecham, and the 19.57bn merger of Australia's BHP and Billiton.
The five magic circle firms can roughly be split down the middle for where their expertise lies - Linklaters & Alliance, Freshfields Bruckhaus Deringer and Slaughter and May are corporate firms, specialising in mergers and acquisitions (M&A), while Clifford Chance and Allen & Overy (A&O) do finance. The latter two have been aggressively targeting corporate work, but still their names are best known for their banking and capital markets departments. For example, Clifford Chance and A&O are advising the banks and troubled telecoms giant Marconi respectively as it tries to sort out its finances.
So, the two big deals of last year were out of their hands - Linklaters advised SmithKline Beecham and Billiton, Slaughter and May advised Glaxo and BHP. Freshfields racked up its own fair share of corporate work as well; one of its biggest deals of 2000 was acting for the Compass Group in its demerger from Granada and subsequent disposal programme.
But this year the mega-deals that normally keep the three M&A firms so busy are nowhere to be seen, and Clifford Chance and A&O might just be able to seize the opportunity. One of the most complicated transactions going on at the moment is the 515.9m hostile bid by construction group Vinci for airports company TBI. Hostile bids, where the target company does not want to be taken over and the bidder has to woo its shareholders, are always incredibly complex.
So who is advising on this? Vinci is instructing A&O for the first time, because it has previously done small work with the firm's Paris office. TBI is using its long-term counsel Norton Rose, a firm in the top 10 but outside the magic circle.
Clifford Chance sets itself apart from the magic circle because it has a strong high-end venture capital practice, acting for funds made up of private investors who want to buy businesses and run them to make a profit. That work is proving more recession-proof than the traditional public company work.
The drop-off in corporate work could help firms outside the top three; there are a raft of firms outside the top 10 with good reputations for handling slightly smaller corporate work, such as Travers Smith Braithwaite, Macfarlanes, Gouldens and Rowe & Maw, all of which handle a lot of deals worth around 300-400m. The magic circle firms will have to target more of that work if their 750m-plus deals dwindle.
The City has its fingers crossed that there is no recession, but the cracks are showing. Linklaters, for example, has moved some assistants out of its &A department because it is so quiet.
Whether the big firms will suffer the most from a drop-off in huge deals, or whether they will instead attack work that their smaller rivals are doing, remains to be seen.