Legal Intelligence

European M&A activity has plummeted in Q3, according to the latest data from Mergermarket, dropping to volume levels not seen since Q4 2004.


M&A market hits slowdown
European M&A activity has plummeted in Q3, according to the latest data from Mergermarket, dropping to volume levels not seen since Q4 2004.

Activity is down some 35 per cent on the same period last year, with a total of E159.8bn (£107.91bn) worth of deals completed – the lowest value level since Q1 2005.

Freshfields Bruckhaus Deringer topped the Q3 tables by value for the period 1 January to 21 September 2006, advising on 189 deals worth a total of E261.5bn (£176.59bn). The magic circle firm had key roles in two of the three biggest deals of July and August, advising on the E29.6bn (£19.99bn) Italian banking merger between Sanpaolo and Banca Intesa and on Construcciones Reyal’s E3.3bn (£2.23bn) takeover bid for Inmobiliaria Urbis. The firm also topped Thomson Financial’s Q3 league tables after advising on 211 announced deals involving any European involvement worth $323.4bn (£218.39bn).

Skadden Arps Slate Meagher & Flom has not topped the latest rankings, coming fourth in this quarter’s table ranked by value, with 59 deals worth E179.6bn (£121.28bn).

Clifford Chance again topped mergermarket’s pan-European volume league table, advising on 212 deals in the year to date, ahead of Freshfields and Linklaters, both of which advised on 189 deals.

According to Thomson, Clifford Chance also maintained the top spot for completed European deals, acting on 223 deals worth $244.4bn (£131.58bn), a $50.4bn (£27.14bn) increase on the same period last year. Freshfields ranked second with a total value of $221.9bn (£119.47bn).

The magic circle keeps its hold over the European M&A market, with Allen & Overy (A&O) in fourth place in the volume league table, with 162 deals ahead of DLA Piper with 141.

Away from league tables, infrastructure deals have been flavour of the month with bids for Thames Water and AWG, advised by Slaughter and May and Linklaters respectively. A&O, Clifford Chance, Freshfields and Herbert Smith, meanwhile, have bagged roles to advise the bidders – Alinta, Macquarie, Qatar Investment Office and Terra Firma – on the Thames Water auctions. (See City, page 21).

Finally, our City report would not be complete without mentioning online gaming. Thanks to the new legislation in the US the whole sector appears to be at melting point. The move by the US congress to ban banks and credit card companies from processing payments received from online gaming has resulted in sector doyen PartyGaming bowing out of the FTSE100.

But despite the continued turmoil in the sector, Freshfields and Linklaters, which advised on the PartyGaming and IPOs, have remained loyal to the sector. Indeed, sources at both firms have welcomed the US legislation, arguing that it has clarified the regulatory position in the US (to a point at least). What is more, the new US laws may have even removed the problem altogether. Because in light of recent events a fresh IPO in this sector is looking more unlikely than ever before. Indeed as one corporate partner put it, the London Srock Exchange would now think twice before allowing a gaming company to float.

Husnara Begum, City editor

Click here for table of M&A Highlights (Any European Involvement) September 2006.


Firm: Berwin Leighton Paisner
Partner since: July 2005
Educated: Sheffield University; College of Law, Gulidford
Key clients: Macquarie Bank, Thames Water

Infrastructure funds are the flavour of the month, with water utilities the muchdesired jewel in every fund’s crown. Berwin Leighton Paisner has been involved in more than its fair share, thanks to partner Patrick Somers’ work securing the firm’s first corporate instruction from Macquarie.

Macquarie disposed of South East Water to Hastings Fund Management for £665.4m. The disposal is widely seen as a strategic move by Macquarie to remove regulatory obstacles in its bid for Thames Water.

That is a project Somers and his BLP colleagues are already well familiar with after Somers played a key role in securing instructions from the Thames Water board of directors to advise the board on the utility’s sale by RWE.


One of the main things that occupied the minds of competition lawyers last month was the news that Sir Christopher Bellamy was stepping down from the Competition Appeal Tribunal (CAT) to join Linklaters as a senior consultant. Bellamy’s hire is opportune for Linklaters, which will shortly see the retirement of old hand Bill Allan. Having been a leading silk for several years before joining the Court of First Instance (CFI), Bellamy would have been able to name his price in private practice. As president of the CAT, his salary was £175,000 plus a pension. With Linklaters’ average profit per equity partner at £1.06m this year, he could be making a tenfold increase in salary.

Bertelmann Music Group (BMG) and Sony Music are appealing against the CFI’s judgment, which overturned the European Commission’s decision to clear the merger between the two companies. The Commission gave the merger between BMG and Sony, advised by Slaughter and May and Cleary Gottlieb Steen & Hamilton respectively, the green light in July 2004. However, in an unprecedented move, in July the CFI reversed the merger clearance, thereby requiring the Commission to carry out a fresh investigation. The shock move followed an application by the Independent Music Publishers and Labels Association, an international association that represents the interests of 2,500 music production companies, on 3 December 2004. The joint appeal by BMG and Sony is based both on procedural and substantive grounds.

Microsoft last month appointed a new in-house lawyer to lead its antitrust battle with the Commission following an overhaul of its core in-house IP team. Erich Andersen will replace Haracio Gutierrez as Europe, the Middle East and Africa associate general counsel for law and corporate affairs.

Finally, the Office of Fair Trading last week cleared the anticipated merger betweeen the New York Stock Exchange and Euronext.


Allen & Overy’s most high-profile deal last month was advising ABN AMRO, Credit Suisse, Goldman Sachs, ING and Morgan Stanley, the lead arrangers of €3.3bn (£2.23bn) senior and €1bn (£675.3m) mezzanine facilities in connection with Cinven and Warburg Pincus’s acquisition of Dutch cable companies Casema Holding and Essent Kabelcom, and the refinancing of the existing debt financing of another Dutch cable company, Multikabel, which Warburg Pincus acquired back in 2005. Lovells represented the sponsors.

Elsewhere in the magic circle camp, Clifford Chance advised BNP Paribas and Fortis Bank on the financing of a bid by pharmaceutical company UCB for Schwarz Pharma. The friendly cash-and-shares offer values Schwarz at €4.4bn (£2.97bn). Clifford Chance also advised the joint underwriters, sponsors and brokers on the £2.9bn rights issue by mining company Xstrata. The rights issue will be be used to fund part of the £8.5bn takeover of Falconbridge. Freshfields Bruckhaus Deringer is acting for Xstrata.

Freshfields, led by partners Neil Falconer, Marcus Mackenzie and Sean Piercem, is advising the Osprey consortium on the £910m-term and £25m-term loan facilities for the acquisition of AWG. A separate team, led by partner David Ereira, is acting for BC Partners on the financing of its acquisition of Brenntag from Bain Capital for €3.1bn (£2.09bn).


United States
Cleary Gottlieb Steen & Hamilton, Kaye Scholer, Latham & Watkins and Wachtell Lipton Rosen & Katz won roles on what could be one of the world’s largest leverage buyouts if the bid is accepted. Private equity funds Apollo Management and Texas Pacific offered $15bn (£7.9bn) for Harrah’s, which bought the US’s most profitable casino, Caesar’s Palace, last year. Apollo instructed favoured firm Wachtell, while Cleary is advising client Texas Pacific. Latham is representing Harrah’s, while Kaye Scholer netted work from the company’s special committee.

United States
Cravath Swaine & Moore and Skadden Arps Slate Meagher & Flom advised on a $5.8bn (£3.12bn) deal that brings together two of the US’s leading wireless communication tower companies. Cravath advised Crown Castle International on its acquisition of Global Signal, advised by Skadden, for $3.9bn (£2.1bn) in cash and stock and the assumption of $1.8bn (£969.11m) in debt. Cravath corporate partners James Woolery and Stephen Burns led the team advising on the transaction, alongside tax partner William Brannan. Crown Castle’s executive vice-president and general counsel Blake Hawk and corporate secretary Donald Reid instructed the Cravath team. Skadden corporate partner Joseph Coco led the team advising Golden Signal.

Shearman & Sterling, Homburger Rechtsanwalte and Bech-Bruun advised on Phonak’s DKr15.5bn (£1.4bn) acquisition of hearing aid manufacturer GN ReSound. Swiss hearing systems company Phonak entered into an agreement with Denmark’s GN Store Nord to acquire its subsidiary, GN ReSound. The acquisition of GN ReSound increases revenue by 73 per cent, making Phonak the world’s largest manufacturer of hearing instruments. Homburger provided Swiss law advice to Phonak, led by Daniel Daeniker. Copenhagen-based Bech-Bruun, provided Danish law advice to Phonak, led by partner Philip Risbjorn. Shearman advised on the German, US and Chinese legal aspects of the transaction. GN was advised by Copenhagen-based firm Gorrissen Federspiel Kierkegaard and Lenz & Staehelin in Zurich.

Allen & Overy (A&O), Denton Wilde Sapte (DWS) and Thompson & Knight advised on an $850m (£448.24m) energy joint venture between Sinopec International Petroleum Exploration and Production Corporation of China and India’s ONGC Videsh. The joint venture involved the purchase of Colombian oil producer Omimex de Colombia. A&O advised Sinopec, led by partner Mitchell Silk. DWS advised ONGC Videsh, led by Dubai-based energy and infrastructure partner Sean Korney. Thompson & Knight advised Omimex, led by Houston partner Jerry Metcalf.