Multibillion-dollar energy deals are a dime-a-dozen at Davis Polk, but is its lucrative haul in the energy sector a result of the firm’s expertise in the area or a more general strength in M&A?
The US firm undoubtedly clinched one of the top deals of 2010, advising oil giant ExxonMobil on its $41bn all-stock acquisition of Texas-based natural gas producer XTO Energy, the largest oil and gas transaction in four years.
The energy practice, headed by Richard Truesdell, has historically pulled off some of the M&A ’game-changers’ in the energy sector, including advising Exxon on its merger with Mobil in 1999 to create the world’s largest integrated oil company and advising Texaco on its merger with Chevron in 2001 to create the second-largest integrated oil company.
But most industry commentators agree that it is the white shoe firm’s overall M&A muscle that has attracted the big-name clients and deals, rather than a specialist energy focus or expertise.
“They’re seen as one of the best firms in the world and they have a great brand and play off that, but they’re not a ’player’ or a go-to firm in the energy space,” one US legal recruiter comments. “They don’t have a star partner or player in the energy area at the moment, and that’s what they need.”
Another recruiter adds: “Davis Polk have strength in capital markets and finance and it seems companies go to them for those reasons, not because they see them as a premier energy firm.”
Also in the US, partners Michael Kaplan and Alan Dean advised the banks on PPL Corporation’s concurrent SEC-registered offerings of $2.48bn of common stock and $1.15bn of equity units to partially finance its acquisition of E.on US.
Davis Polk’s network of offices in the US, Europe and Asia is by no means the largest among its transatlantic peers, but the wider industry is watching its next move with much anticipation – whether that move be expansion in the US, South America or Asia.
A third US commentator says: “Simpson Thacher has just moved into Houston and stirred things up, and if Davis Polk did that, people would want to take notice.”
Although others in the industry are less convinced by the idea of Davis Polk in Houston, the firm has already confirmed it is opening an office in Sao Paulo this year, with the exact opening date subject to the approval of the Brazilian authorities.
Corporate partners Manuel Garciadiaz and Maurice Blanco will lead the new office, which the firm hopes will reinforce its presence in energy and infrastructure opportunities in Brazil and Latin America.
“Brazil is one of the booming areas for energy and Davis Polk do have strong alliances there in the energy sector,” an industry source says. “It’s a good way to get a foothold in Latin America, but it’s fairly competitive and there are a lot of Miami firms who are already positioned there.
“For a white shoe firm to arrive there, they’re obviously making a real push to be more competitive and strengthen their relationship with clients.”
One of the recent energy highlights for Davis Polk in Brazil has been its role advising Cosan, the largest ethanol producer in Brazil, in connection with its $12bn
joint venture with Shell.
The firm also advised Odebrecht Drilling Norbe, a project finance subsidiary of Odebrecht Oil & Gas, on its $1.5bn offering of 6.35 per cent of senior secured notes due in 2021. Proceeds from the notes will pay for the construction of two deep-sea drillships, which will be chartered to Brazil’s state-owned oil company Petrobras.
The firm is also among many to take a keen interest in Hong Kong and energy opportunities in nearby China. It launched a Hong Kong local law practice last November with the hire of partners Bonnie Chan and Antony Dapiran, the latter being the managing partner of Freshfields Bruckhaus Deringer’s Beijing office.
It has since continued its raid on the magic circle, snaring Linklaters’ Beijing head Paul Chow, who joined the firm’s Hong Kong office in May.
George Bason, Louis Goldberg, Manuel Garciadiaz, Nigel Wilson
Top three sectors
Mining and minerals
Oil and gas
Top three geographical regions
ExxonMobil’s $41bn all-stock acquisition of Texas-based XTO Energy
Lead partners:George Bason, Louis Goldberg
Cosan’s $12bn Brazilian joint venture with Shell International Petroleum
Lead partners: John Amorosi, Manuel Garciadiaz, Michael Davis
PPL Corporation’s SEC-registered offerings to finance its acquisition of E.on US
Client: Bank of America Merrill Lynch, Credit Suisse
Lead partners:Michael Kaplan, Alan Dean