The net value of French M&A has been slashed in half this year, but a close examination of the deals that have been completed reveals that French and UK firms have coped with the depressed market much better than their US rivals.
In France many of the big transactions have been auctions, so there is many a sob story from firms that advised on certain deals without advising the victorious party. While some shrug and state that the fees are still coming in, others seethe with frustration.
This year, Shearman & Sterling, Skadden Arps Slate Meagher & Flom and Sullivan & Cromwell have been left the most frustrated. According to figures from Thomson Financial, Sullivan and Skadden Arps have dropped right out of the top 20 French M&A advisers, while Shearman has slid from two to 19. The only US firm to weather the storm has been Cleary Gottlieb Steen & Hamilton.
Cleary has one of the strongest French practices of all foreign firms and a superb M&A rainmaker in Pierre-Yves Chabert. The firm began the year by advising established client Euronext (when the exchange was formed, the firm advised it on its rulebook) on its $794m (£513.2m) acquisition of Liffe, and finished the year by advising new client Gecina on its $2.2bn (£1.42bn) deal for Simco. Cleary has previously worked with AGF, which owns a stake in Gecina, and the current Gecina chairman Jeancourt Glignani used to be the AGF chairman. In between, Chabert advised new client Saipen on its e1bn (£991.1m) tender offer for Bouygues’ offshore unit. Saipen, a subsidiary of Eni, came to Chabert via the skilled Italian competition practice of Cleary partner Mario Siragusa.
“But there are hundreds of deals that have died for others,” says Chabert. The absence of big-ticket deals has hit US firms hard. In 2001, they had an almost unfair stranglehold on the big cross-border deals and gorged themselves on a glut of work from their UK and US offices, but this has dried up along with their capital markets practices.
Shearman has been unlucky. As the firm’s managing partner Bob Treuhold says: “We didn’t back the winning horse on the big LBOs (leveraged buyouts).” Shearman advised failed bidders on the Elis and Shneider-Legrand LBOs, Carlyle Group and Eurazeo on their failed bid for Houghton Mifflin, and Schroder Salomon Smith Barney on the proposed high-yield debt financing for France Telecom’s sale of its transmission towers.
While Shearman was close, Skadden and Sullivan have failed to create a great French presence in corporate. Despite a reasonable 2001, Sullivan’s trumpeted recruitment of Gerard Mazet from Jeantet & Associés that January has failed to produce a snowball effect for a slow corporate team.
As the US firms have struggled, UK firms Allen & Overy (A&O), Ashurst Morris Crisp and Clifford Chance have gatecrashed the top of the charts, while Freshfields Bruckhaus Deringer and Linklaters have held their ground. Ashursts partner Thomas Forschbach, who led the charge, says: “French M&A has been driven more by private equity this year than any other.”
Ashursts has muscled in at the top of the table by carving a lucrative niche for itself on private equity (PE) deals and LBOs. Forschbach claims to hate the PE/LBO label, but the firm’s rise has been driven by this. After an almighty battle of the banks, his partner Jonathan Nabarro may have been lucky to advise the lenders on “the mother of all LBOs”, Schneider-Legrand, but Forschbach also advised the private equity consortium that bought the transmission tower business of Télédiffusion de France, and also worked on the e1.5bn (£960.9m) Elis LBO.
While Willkie Farr & Gallagher has a good reputation in this field, Linklaters is Ashursts’ only real rival this year and retains its number one position largely due to its advice on LBO-related financing. The firm recruited partner Fabrice de Moran-dière from Ashursts in 2001, who led the team advising KKR and Wendel Investissement on Schneider-Legrand. And Linklaters hopes to retain its number one position in 2003. Partner Jean-Marc Lefevre says: “LBOs are keeping us very busy. I’m much more confident now than two months ago that this will continue.”
Of the other UK firms, Freshfields has managed to retain its standing. The firm has advised on more deals than anyone apart from Linklaters, but its $8.4bn (£5.43bn) total is dominated by long-term UK client Kingfisher’s $5bn (£3.23bn) acquisition of Castorama. A&O’s presence in the charts is based solely on its banking practice. Banking partner Christophe Jacqemin advised the banks on the syndicated loans for Gecina’s purchase of Simco, and UK partners David Wootton and Mark Dighiro advised on the secondary rights issue that financed Kingfisher’s acquisition of Castorama. All parties involved on a deal make Thomson Financial’s charts.
Clifford Chance’s success is the big corporate news and shows a firm beginning to gain the returns on its stated long-term strategy. Clifford Chance has been aggressively hiring leading French corporate partners over the last two years: Frédéric Peltier and Marcus Billam from Darrois Villey Maillot Brochier and Dominique Bompoint from Bredin Prat. The corporate team in Paris now has around 80 lawyers and has been the rising star in a dire year.
Clifford Chance has the only corporate team to substantially increase the net value of deals it has worked on, rising from $6.7m (£4.3m) to $10.2m (£6.6m). This increase can be attributed to work done for a few key clients and for offering them a breadth of service that others cannot. The firm has traditionally advised Electricité de France (EDF) on international projects, but since the arrival of antitrust partner Claude Lazarus from Herbert Smith, the corporate team has won EDF’s M&A work, managed by Peltier.
Clifford Chance has also built on its relationship with French supermarket chain Carrefour. In 1999 the firm did the antitrust work on the merger with its largest rival Promodès, but Clifford Chance has only just started advising on corporate M&A. Peltier, who had a particularly good year, advised Carrefour on the $900m (£581.7m) acquisition of Spain’s Centros Commerciales Carrefour. Billam’s largest deal of the year was advising France Telecom on its $1.8bn (£1.16bn) disposal of Télédiffusion de France to a private equity consortium, advised by Ashursts’ Forschbach. “The market gets more and more Anglo-Saxon,” says Forschbach.
It does, but the leading French firms remain strong. Bredin Prat seemed the best placed of the three as main corporate adviser to the M&A whirlwind of Vivendi Universal. And the firm seemed well set until the tempestuous reign of chief executive officer (CEO) Jean-Marie Messier came to an abrupt end in July this year. Bredin Prat founder Jean-François Prat had a close personal relationship with Messier, and when Messier went many thought Prat would too.
But Messier’s resignation ignited a fierce battle, as Vivendi’s advisers (legal and financial) fought to defend their reputations. The new management was concerned that Messier’s mismanagement had been accompanied by improper behaviour by its advisers. Despite recent investigations by the Securities and Exchange Commission in the US and France, the management found nothing untoward and realised the benefits of retaining advisers with an in-depth knowledge of Vivendi. Prat has now passed Vivendi on to his son, Sébastien Prat, who shares responsibility for it with Didier Martin and Philippe Beurier. “We’re now entering our honeymoon period,” says Sébastien Prat.
Darrois Villey will not be disturbed by a mere two deals on the board. Together with Jean-François Prat, Jean-Michel Darrois remains the biggest name in the French legal world, and the firm worked on the biggest deal of the year, the protracted Schneider-Legrand saga. Darrois has a strong relationship with François Pinault of Pinault Printemps Redoute, owner of Gucci, Rexel and others. As one French partner said: “Prat and Darrois will never starve when they can ring up these CEOs.”
It has been a tough year but, as Vivendi continues to dominate the headlines, Paris’s corporate departments will not be redundant. Bredin Prat may have the lion’s share of the work, but as one managing partner put it: “Everyone’s got a piece of the action.”
|M&A for first nine months 2002|
|Rank||Legal adviser||Ranking value including net debt of target ($bn/£bn)||Market share (%)||No of deals|
|2||Ashurst Morris Crisp||10.63/6.87||19.4||9|
|=3||Cleary Gottlieb Steen & Hamilton||10.15/6.56||18.6||18|
|6||Darrois Villey Maillot Brochier||8.52/5.51||15.6||2|
|7||Freshfields Bruckhaus Deringer||8.41/5.44||15.4||22|
|8||Allen & Overy||6.27/4.05||11.5||11|
|9||Slaughter and May||5.09/3.29||9.3||3|
|=10||Simpson Thacher & Bartlett||5.06/3.27||9.3||1|
|=10||De Pardieu Brocas Maffei & Leygonie||5.06/3.27||9.3||1|
|12||Herbert Smith/Gleiss Lutz/Stibbe||4.56/2.95||8.3||7|
|13||Wachtell Lipton Rosen & Katz||4.27/2.76||7.8||2|
|14||Jones Day Reavis & Pogue||4.17/2.7||7.6||17|
|15||Gibson Dunn & Crutcher||3.55/2.29||6.5||2|
|=16||Davis Polk & Wardwell||3.46/2.24||6.3||1|
|=16||Morris Nichols Arsht & Tunnell||3.46/2.24||6.3||1|
|=16||Kirkland & Ellis||3.46/2.24||6.3||1|
|19||Shearman & Sterling||3.42/2.21||6.3||11|
|20||Simmons & Simmons||3.16/2.04||5.8||7|
|–||Subtotal with legal adviser||44.17/28.55||80.8||172|
|–||Subtotal without legal adviser||10.51/6.79||19.2||721|
|Figures rounded to nearest $10K/£10K
Source: Thomson Financial