Number crunching: Skadden

Data on US firms advising a UK target has highlighted the marked trend towards lower deal volumes since the zenith of 2007, with the occasional higher value matter thrown in.

Michael Hatchard
Michael Hatchard

According to figures from Thomson Reuters taken from 2007 to the tail-end of 2011, US deals machine Skadden Arps Slate Meagher & Flom has been driving down the same road in the City as US rivals such as Sullivan & Cromwell and Shearman & Sterling (The Lawyer, 27 February and 12 March).

Looking solely at M&A involving UK targets – a narrow approach that inevitably excludes a raft of more international matters – Skadden advised on just two deals last year, as opposed to 11 in 2008. On the flip side, the total value of deals in 2011 was $3bn (£1.89bn) more than in the previous year.

Reuters’ data confirms that the recession ate into the value, but not the volume, of Skadden’s deal activity involving UK targets between 2008 and 2009, although
it is worth noting that the firm did advise a UK buyer, BlackRock, on its $20bn acquisition of Barclays Global Investors in 2009.

In the years that followed, total deal value inched up, hitting $7.2bn in 2010 and $10.3bn in 2011, despite deal volume remaining flat.

“Skadden has seen a notable increase in M&A activity in the past two years, dominated by strategic and sizeable deals,” confirms Skadden corporate partner Michael Hatchard, who expects to see bigger bucks pour in by the end of this year. “The relative strength of activity in 2011 is likely to be eclipsed in 2012, based on current dealflow.”

Positive stuff, but the spectre of a double-dip recession remains – something that is possibly spurring companies to make deals before the trading environment gets gloomier.

Skadden’s biggest deal involving a UK target since 2007, for example, was the $10bn Hewlett-Packard acquisition of Autonomy Corp at the end of last year. The
deal accounted for the bulk of 2011’s value. It’s a recurring theme in the wider market, but one that does not wash with Skadden’s London office.

“Volume has been stronger when you take into account long-lead deals announced in one year that continue into another,” argues Hatchard.

The uptick in M&A value in the past two years suggests that the pile of cash companies have been sitting on is coming back into view. True to form, Skadden will be there,ready and waiting for instructions.

Looking good for 2012

Suggesting 2012 will eclipse 2011 in terms of dealflow is a bold forecast, but Skadden’s London office is beginning to show the green shoots of a good year.

Keeping the focus on M&A involving UK targets, this year will see the firm act for the owners of London-headquartered software company NDS Group on its $5bn (£3.2bn) takeover by Cisco Systems, with corporate partner Michael Hatchard leading on English law.

‘’The London M&A desk has seen extensive involvement in both UK and non-UK target transactions,” says Hatchard, pointing out that substantial deals have been coming from UK buyers and sellers in the past five years.

Decline in UK M&A value between 2007 and 2009

Top five deals with a UK target

1. Among a raft of firms advising Thomson Corp on its $18.2bn (£11.5bn) takeover of Reuters in 2007

2. One of five firms advising Hewlett-Packard on its $10bn acquisition of Autonomy Corp last year

3. Advised UK-based engineering business Smiths Aerospace on its $4.8bn takeover by GE in 2007, along with three other firms

4. Advised Barclays during China Development Bank’s 3.1 per cent stake in Barclays in 2007, worth around $2.9bn

5. One of five firms advising Permira on its $2.8bn takeover of NDS Group in 2008