July 6 (Bloomberg) -- Wachtell, Lipton, Rosen & Katz, the most-profitable U.S. law firm, was the top legal adviser on mergers and acquisitions for the first half of 2009 after advising on deals worth double those it did a year ago.

The firm, co-founded by Martin Lipton, who created the “poison-pill” takeover defense, advised buyers, sellers or targets on $150 billion in deals this year, up from $70 billion at the same time last year, cornering a 20 percent share of the global M&A market. Deal volume has fallen 44 percent this year to $759 billion, according to data compiled by Bloomberg.

“It’s a tough environment for our clients; that doesn’t make it a fun environment for us,” said David Katz, a Wachtell mergers and acquisitions partner. “We’re not looking at this as a better year.”

Mergers and acquisitions declined throughout the first half of the year as financing remained difficult to obtain and buyers and sellers disagreed over valuations amid continued market volatility. Announced deals in the first half were the slowest since 2003.

Deal lawyers said they expect the second half to remain slow, with a possible improvement toward the end of the year if banks continue to stabilize and financing becomes easier to get.

“The world has been more focused on finding money than spending it,” said Alan Paul, a mergers and acquisitions partner at Allen & Overy LLP in London. “Clients are looking at things. What has not been happening is having the looking turn into closed transactions.”

Largest Deals

Wachtell is advising on three of the 10 largest deals in the first half, including Wyeth in its $64 billion takeover by Pfizer Inc., the largest deal of the year, and Schering-Plough Corp. in its acquisition by Merck & Co. for $47 billion, the second-largest.

Six of the top 10 law firms for 2009 are working on Pfizer’s acquisition of Wyeth, and four are working on Merck’s takeover of Schering-Plough.

“There have been a lot of clients contacting us throughout, we’ve been pretty fortunate,” Katz said. “Deals are harder to do now; there are a lot of false starts.”

The firm, with its sole office in New York, may have benefited from the majority of transactions being in the Americas. The region accounted for $375.4 billion in deals this year, compared with $230.4 billion in Europe, the Middle East and Africa, and $153.7 billion in Asia.

Xstrata, Anglo

Wachtell ousted Linklaters LLP, the London-based law firm that was the lead deal adviser at the end of last year. At the end of the second quarter last year, New York-based Skadden, Arps, Slate, Meagher & Flom LLP was ranked first. Sullivan & Cromwell LLP, the law firm that was the top deal firm for four straight years until 2008, fell to 17th place. It ranked second last year.

Charles Jacobs, a Linklaters partner in London, said larger deals such as Xstrata Plc’s proposed acquisition of Anglo- American Plc for 22.5 billion pounds ($37 billion), may be a catalyst for other M&A. Linklaters is advising Anglo on the transaction.

“There is still a bit of a gap in expectations between sellers’ views on what they’re worth and buyers’ views on what they’re willing to pay,” Jacobs said.

Hostile Takeovers

There is a possibility of hostile takeovers picking up in the second half of the year, said Katz, who also teaches at New York University School of Law.

“Companies are concerned that their stock values are too low, that the market doesn’t value them properly and that could make them a target,” Katz said.

Life sciences, natural resources, and energy, oil & gas industries will continue see the most activity, Allen & Overy’s Paul said. The financial-services area and the pharmaceutical industry could also be busy, Katz said.

“Until the work comes in, you don’t want to speculate,” said Adrian Clark, the head of the corporate department in London at Ashurst LLP. “There’s a slight feeling that maybe the worst is over.”

The volume of acquisitions of targets in bankruptcy increased 229 percent, to $26.3 billion this year from $8 billion at the same time last year. The number of those deals increased from 148 to 231.

That number may increase in the second half of 2009 and in early next year, Allen & Overy’s Paul said.

Private Equity

“It’s then that people will be willing to buy, because a distressed seller has to sell,” Paul said. “They will be able to reach a price easier than as has been the case. The rate at which companies are having to sort themselves out is increasing, from what we’ve seen.”

Private equity deals declined sharply, to $37.4 billion this year from $146.7 billion at the end of the second quarter last year, as inexpensive financing remained scarce.

Following Wachtell were Skadden; London-based Clifford Chance LLP; New York-based Simpson Thacher & Bartlett LLP; Sydney’s Mallesons Stephen Jaques; Linklaters; Toronto-based Blake, Cassels & Graydon LLP and Stikeman Elliott LLP; New York’s Cleary, Gottlieb, Steen & Hamilton LLP; and Melbourne- based Allens Arthur Robinson.

Linklaters ranked first on cross-border announced deals and Simpson Thacher was No.1 on private-equity deals. In other league tables, Cravath, Swaine & Moore LLP was ranked first among advisers on global equity initial public offerings, according to data compiled by Bloomberg. Sullivan & Cromwell was the top adviser on global bonds issuances.

Top-Ranked M&A Law Firms for 2009’s First Half

Firm                          Value of Deals (in billions)

Wachtell Lipton                    $150.4
Skadden Arps                       $119.6
Clifford Chance                    $109.9
Simpson Thacher                    $107.8
Mallesons                          $ 94.2
Linklaters                         $ 92.6
Blake Cassels                      $ 83.5
Stikeman Elliott                   $ 81.0
Cleary Gottlieb                    $ 73.7
Allens Arthur                      $ 72.6

Results are based on Bloomberg’s Global Legal Advisory Mergers & Acquisitions Ranking for 2009 Mid-Year.

To contact the reporter for this story: Lindsay Fortado in London at lfortado@bloomberg.net.

Last Updated: July 6, 2009 09:33 EDT