Number crunching: Shearman & Sterling

The UK and Continental Europe has long presented challenges for Shearman & Sterling.

In 2008, the firm juggled the impact of the economic crisis with the exit of high-profile London M&A partner Peter King to Weil Gotshal & Manges, while its German office waved farewell to global M&A co-head Rolf Koerfer, not to mention the entire Mannheim office.

It was a crushing time for a firm that had its eyes fixed on building capacity generally across Europe, but the exodus was tempered by the relocation of New York heavyweight M&A partner Creighton Condon to the London office. Condon later led Shearman’s team on Cadbury’s $21bn (£13.2bn) acquisition by Kraft in 2009.

That deal made 2009 a bumper year in terms of UK M&A value, a welcome relief after a sober 2008. According to data from Thomson Reuters stretching from mid-2007 to the end of 2011, 2008 put a dent in Shearman’s ambition to be a serious European M&A contender, with the total value of deals involving a UK target dropping
by 94 per cent compared with the previous year – from a massive $23.35bn to $1.2bn.

While the 2007-08 slump is a well-known story, Reuters’ data points to an interesting trend from Shearman: the past five years show the value of UK M&A deals it has advised on rise and fall in tens of billions from one year to the next.

The pattern is consistent: after a bleary 2008, the value of UK M&A ramped up again in 2009 thanks to Kraft’s $21bn acquisition of Cadbury, before slumping back down again in 2010, taking a $21.6bn hit in deal value.

Nevertheless, 2010 saw London outpace its US parent practice in terms of revenue, with the UK office breaking the $100m barrier and recording a 4.5 per cent rise in revenue, suggesting the office had boosted its fortunes in Europe – with or without the help of M&A involving a UK target.

While 2010 was slow on M&A but big on City revenue, 2011 brought us back to the rollercoaster, with the value of UK M&A deals shooting back up to $17.4bn.

Shearman represented some high-profile clients, building its reputation as a magic circle challenger in terms of complicated cross-border transactions and
high-end deals, including the $476m acquisition of Liverpool FC by New England Sports Ventures, where lead London partner Laurence Levy advised on English law alongside City blueblood Slaughter and May.

In total, Shearman came up against a magic circle firm as a legal acquirer or target on a majority of its UK M&A deals between 2007 and 2011 – 34 out of 28 – lending weight to the New York firm’s City credentials.