Skadden Arps Holds Lead as Mergers, Acquisitions Legal Adviser

Skadden, Arps, Slate, Meagher & Flom held on to the top spot among U.S. legal advisers on global mergers and acquisitions in the first half of this year, as deal-making sputtered after a brief recovery.

The New York-based firm, second-highest grossing in the U.S., was No. 1 last year and stayed there for the first six months of this year, with $100 billion of deals, according to data compiled by Bloomberg. Its work included Qwest Communications Inc.’s $10.5 billion stock takeover by CenturyLink Inc., the second-biggest announced deal of the year.

The six months saw a 2.7 percent rise in the value of global takeovers compared with the same period last year, from $890.6 billion to $914.52 billion.

“There are deals being done,” said Stephen Arcano, leader of the New York mergers and acquisitions practice at Skadden Arps. “There are debt commitments being written. They are out there. But they are not as plentiful as we might have expected.”

Wachtell Lipton Rosen & Katz and Cleary Gottlieb Steen & Hamilton LLP, both New York-based, were second and third, respectively. Allen & Overy LLP, based in London, and Latham & Watkins LLP, with Los Angeles roots, were fourth and fifth.

“There was a strong optimism at the beginning of the year based on a strong fourth quarter in 2009,” said Michael Gilligan, a New York partner of Allen & Overy. “I don’t think anybody is as optimistic as they were at the end of 2009.”

The end of 2009 saw a pickup in deal work following the credit crisis. The value of deals in the fourth quarter of 2009 increased 48 percent from the previous quarter, according to Bloomberg data, signaling a possible recovery in the marketplace.

First-Quarter Rise

The first quarter of this year saw a 3.5 percent increase in transactions from the first quarter of 2009.

Allen & Overy represented Novartis AG in its acquisition of Alcon Inc., the world’s largest eye-care company, announced Jan. 4, and Heineken NV in the purchase of the beer unit of Fomento Economico Mexicano SAB, Latin America’s largest soft-drink company.

“I think there is some consternation in the market as to what the next six months will bring,” Gilligan said. “That said, our pipeline is pretty robust.”

Life sciences have been an active area for deals this year, said Arcano of Skadden Arps. The firm represented Merck KGaA in the Darmstadt, Germany-based company’s $6 billion acquisition of the biotechnology equipment supplier Millipore Corp. and Melville, New York-based OSI Pharmaceuticals Inc. in its purchase by Astellas Pharma Inc., Japan’s second-largest drugmaker.

Health Care

“From my perspective, health care has been among the most vibrant sectors,” Arcano said. Large companies are trying to bolster their portfolio of drugs in the pipeline, he said.

Medical and drug companies were the fourth-most acquisitive companies in the U.S. by industry volume, according to Bloomberg data. Telephone companies were the first.

Natural-resource and energy-related deals were also busy, said M. Adel Aslani-Far, co-chairman of the mergers and acquisitions practice at Latham & Watkins in New York.

Oil exploration and mining companies were among the most frequent targets worldwide, along with telecommunications companies, according to Bloomberg data.

Of the 10 largest announced deals Latham & Watkins handled in the first half of 2010, five were energy or natural resource related, including Norsk Hydro ASA, Europe’s third-largest aluminum maker, in its bid to buy mining and smelting assets from Vale SA, a deal valued at $4.9 billion.

Latham & Watkins added a Houston office this year, adding lawyers for energy-related deals.

Clean Technology

“We have yet to see the big, big spending in the alternative-energy space, but you are starting to see some deals around clean technology and alternative energy,” Aslani-Far said. “As a macroeconomic and political driver I think this is an area to watch.”

One of the biggest questions in the marketplace is the immediate future of private-equity deals, said Ethan Klingsberg, a partner at Cleary Gottlieb.

A private-equity deal unraveled in May when Fidelity National Information Services Inc., the Jacksonville, Florida- based payment-services provider, rejected a $15 billion takeover bid led by New York-based Blackstone Group LP.

Cleary Gottlieb represented a special committee of the board of Interactive Data Corp., a unit of the London-based holding company Pearson Plc that provides financial market data and services, in its $3.4 billion takeover by Warburg Pincus LLC and Silver Lake. It was the year’s biggest private-equity deal, according to Bloomberg data.

Onetime ‘Modest’ Buyout

“A couple of years ago, that would have been considered a modest-size leveraged buyout,” Klingsberg said.

Private-equity firms announced $1.6 trillion of deals for the three-year period from 2005 to 2007 before credit markets froze.

After the credit crisis this year in Greece, the high-yield debt market became “choppy,” prompting a freeze in private-equity deals, the lawyer said.

Leveraged-loan investors are demanding the highest premiums in 2010. Borrowing costs have risen to the highest since Dec. 17 relative to benchmark rates since the 2010 low on April 15, according to Standard & Poor’s Leveraged Commentary and Data.

“The big driver on private equity is going to be where the high-yield market is going to go,” Klingsberg said. “If it’s going to be a choppy year in the high-yield market, I think it’s going to be hard to see something bigger than the Interactive Data deal.”

Private-equity groups may still do smaller, all-cash deals, he said.

Firms’ Rankings

Cleary Gottlieb was ranked second in private-equity announced deals, and Simpson Thacher & Bartlett LLP, based in New York, was first.

Deal volume for Latin American companies increased 133 percent, according to Bloomberg data. Total volume for Brazilian announced deals almost doubled, from $33 billion to $65 billion.

The largest announced Brazilian deal is Telefonica SA’s $8.93 billion offer for Portugal Telecom SGPS SA’s stake in their 50-50 venture Brasilcel NV. The purchase is being litigated in Europe.

“It really appears that Brazil in particular is a market on the upswing and will be of increased importance in global deal flow,” said Gilligan of Allen & Overy.

Top-Ranked M&A Law Firms, January-June 2010

       Firm           Value of Deals (billions)

1. Skadden Arps             $99.7 
2. Wachtell Lipton          $78.6 
3. Cleary Gottlieb          $72.1 
4. Allen & Overy            $52.8 
5. Latham & Watkins         $50.7 
6. Simpson Thacher          $47.9 
7. Linklaters               $46.5 
8. Freshfields              $46.0 
9. Sullivan & Cromwell      $45.1 
10. Blake Cassels           $44.8
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