At Cravath Swaine & Moore, where lawyers pride themselves on taking a generalist approach to the market, there are no strict internal sector-based departmental lines.
Consequently, Cravath does not have an energy department as such, although the firm’s stellar corporate client base means that many of its partners have found themselves spending an increasingly high proportion of their time on natural resources-related transactions.That said, the firm dropped out of the Thomson Reuters M&A rankings for energy-related deals in 2010, suggesting that a sharper sector focus might not be a bad thing.
Cravath partner Mark Greene disagrees. “We are generalists and in any given year one sector might be more active than another,” he says. “It really is more important to us to have the relationships across the range of sectors. Other firms might bet the farm on one sector, which can be fine, but it’s not as diversified.”
It remains unlikely that Cravath will deviate greatly from either this approach or its virtually single-office strategy – it has a small four-partner, 27-lawyer London office, while internal sources confirm it has no plans to follow the growing crowd of blue-chip firms by opening a Hong Kong local law presence to capitalise on the current boom.
Cravath is also likely to continue with its aversion to lateral hires – it has made none in the past two years.
But the blue-blood firm has not had its head in the sand of late.
While the firm might not admit it publicly, Cravath partners are understood to have been intensifying efforts to get closer to sectors that will require consolidation and investment in the next few years, while identifying ways in which the firm can sell itself, with quality remaining the number one sales pitch.
Clearly, the energy and natural resources market is high on that list, with the oil, gas and alternative energy sectors proving particularly fruitful.
“This amount of activity hasn’t come as a surprise to us,” says Greene. “If you talk to the bankers in this space, over the past few years the mantra has been one of massive consolidation. This trend has been preceded by five or six years of anticipation.”
In the past couple of years Cravath’s hefty corporate client base, which includes longstanding relationships with the likes of Alcoa, Chevron, First Solar, Royal Dutch Shell, Massey Energy, Occidental Petroleum and Dynegy, has provided instructions on a succession of weighty M&A and litigation matters.
Currently, Cravath is targeting an expected growth of deal activity in mining and minerals, power and oil and gas. It believes mining and minerals will be the most important sector, as growth and demand arising from Chinese expansion takes its course.
The need for US capital investment in its domestic utilities and power generation is likely to drive the electricity/ power sector, while the oil and gas sector – featuring the boom in shale-related deals – will continue to be important in terms of M&A activity thanks to high commodity prices.
Cravath’s recent work for clients such as Shell, ConocoPhillips and Chevron – as well as Chesapeake on the financing side – on shale-related deals is evidence both of its involvement in the wave and the benefits of maintaining lengthy client relationships.
A similar comment could be made in relation to one of Cravath’s standout energy deals, Massey Energy’s controversial $7.1bn merger with Alpha Natural Resources. Cravath initially advised Massey in relation to a derivatives law suit and later, as the US domestic coal industry began to consolidate, the firm was in pole position to advise on its deal with Alpha.
Geographically, Cravath remains most focused on the US and Canada, primarily because of the proximity to its home and key market.
Richard Hall, Mark Greene, Sarkis Jebejian, Andrew Thompson
Top three sectors
Mining and minerals
Oil and gas
Top geographical regions
Air Products and Chemicals’ (ultimately withdrawn) $7bn offer to acquire Airgas
Client: Air Products
Lead partners: James Woolery, Minh Van Ngo
Terra Industries’ $4.7bn sale to CF Industries
Client: Terra Industries
Lead partners:Thomas Dunn, Faiza Saeed
Massey Energy’s $7.1bn merger with Alpha Natural Resources
Client: Massey Energy
Lead partners:James Woolery, Minh Van Ngo