July 2 (Bloomberg) -- Skadden, Arps, Slate, Meagher & Flom, the New York law firm with the highest revenue, held on to its lead over Sullivan & Cromwell as the top legal adviser on mergers and acquisitions.

Skadden's lead, measured by the value of announced deals it worked on, narrowed to $14.5 billion through June 30 from $17.7 billion at the end of May, according to data compiled by Bloomberg. Skadden took the top spot from New York-based Sullivan & Cromwell in May, ending a four-year reign.

Following the collapse of debt and credit markets last year, global-deal volume in the first half was down 36 percent, according to Bloomberg data. There were 14,210 deals with an announced value of $1.53 trillion, the lowest since 2005, down from 16,489 deals valued at $2.37 trillion a year earlier.

``This is the down point for M&A,'' said Scott Barshay, a mergers and acquisitions partner at New York's Cravath, Swaine & Moore, who sees a possible increase in deals later in 2008.

Barshay said he's ``hopeful that as the credit markets start to come back,'' there will be both more strategic deals, such as buyouts of competitors with powerful brands, and more leveraged buyouts.

Skadden advised on six of the 10 largest deals in the first half. It represented Anheuser-Busch Cos Inc. in the proposed strategic acquisition by competitor InBev, for $46.3 billion and Wrigley WM Jr. Co. in the planned acquisition by candy-maker Mars Inc. for $22.6 billion. A year ago, Skadden hadn't advised on any of the top 10 deals.

Sullivan & Cromwell advised on $346.7 billion in deals in the first half. The firm is advising Alcon Inc. in its pending acquisition by Novartis AG for $37.6 billion and China Unicom Ltd. in its planned acquisition of China Netcom Group Corp. Hong Kong for $29.3 billion.

Seven on One Deal

The top seven law firms ranked by Bloomberg for 2008 are working on BHP Billiton Ltd's attempted hostile takeover of Rio Tinto Group, the world's third-largest mining company, for $173 billion. Rio Tinto has rejected the bid.

Sullivan & Cromwell Chairman H. Rodgin Cohen, in an interview with Bloomberg Television in May, said the volume of deals might not increase until the end of the year.

``I don't think we will be where confidence is restored until the end of this year or early '09,'' Cohen said. ``Buyers psychologically are concerned when they're having their own issues. They're thinking, `Should we go out and buy or should we make sure our own house is in order first?'''

While global M&A volume hasn't reached the record highs of last year, it has climbed steadily, from $172.7 billion in January to $299.1 billion in May and $326.5 billion in June. The value of deals in June was 22.5 percent lower than last year at this time, when $421.4 billion in deals were announced.

More Strategic Deals

The year has been marked by a steady stream of strategic deals, by leveraged buyouts of a few billion dollars, by foreign companies taking advantage of a weakened U.S. dollar and by the emergence of sovereign wealth funds, said Brian Hoffmann, a mergers and acquisitions partner at Clifford Chance in New York. There will be a ``continuing need'' for investment in U.S. entities, he said.

``People are taking advantage of the weak dollar,'' Hoffmann said.

Sovereign-wealth funds have injected billions of dollars into U.S. financial institutions this year. Sullivan & Cromwell has advised Citigroup Inc. in the $6.9 billion investment in the company by the Government of Singapore Investment Corp. and a $5.6 billion investment by a group of investors including the Kuwait Investment Authority.

Private Equity Deals

Private-equity deals of $10 billion or more, which came to a halt as the debt market collapsed and leveraged buyouts became harder to finance, are unlikely to resurface this year, Barshay said.

``We'll see the middle market start to come back, but I don't see it remotely resembling what we saw in the marketplace that ended a year ago,'' he said. ``As the economy starts to look like it's starting to stabilize, we'll see an upturn in the number of M&A deals.''

Private-equity deals of a few billion dollars -- so called middle-market transactions -- are already back to their previous highs, said R. Newcomb Stillwell, a partner in Boston-based Ropes & Gray's private equity practice who advised Bain Capital LLC in its acquisition of Bright Horizons Family Solutions Inc. The transaction was completed in May for $1.3 billion.

``I'm bummed because I was looking forward to enjoying the credit crunch and improving my golf game, but I haven't even had a chance to pick up a golf club since May,'' Stillwell said.

Cravath

Cravath is getting hired to handle more deal financings than earlier this year, a sign that buyers are gaining confidence in the market, Barshay said.

``Those groups are starting to get busier, which really may bode well for the second half of the year,'' Barshay said.

Clifford Chance's Hoffmann said he isn't as optimistic. Strategic deals could slow ``as the economy continues to weaken,'' he said.

``I'm not sure we've bottomed out,'' Hoffmann said. ``More importantly, the perception that we're in a weaker economy is strengthening.''

Top-Ranked M&A Law Firms for 2008's First Half

Firm                     Value of Deals (in billions)

Skadden Arps                  $361.2
Sullivan & Cromwell           $346.7
Linklaters                    $342.9
Allens Arthur                 $186.9
Davies Ward                   $176.9
Freehills                     $174.4
Slaughter & May               $163.2
Simpson Thacher               $156.3
Blake Dawson                  $151.3
Clifford Chance               $111.9

Results are based on data compiled by Bloomberg as of 5 p.m. New
York time, June 30, for advisers of buyers, sellers or targets.

To contact the reporters on this story: Lindsay Fortado in New York at lfortado@bloomberg.net; Carlyn Kolker in New York at ckolker@bloomberg.net.

Last Updated: July 2, 2008 00:01 EDT