Independent law firms made a comeback in European M&A in the first half of 2022.
Nine of the top 20 legal advisers on U.K. and Europe deals in the six months to the end of June were local Continental European firms, according data from Refinitiv.
German firm Hengeler Mueller came second in the rankings, while Italian firms Legance Avvocati Associati, Gatti Pavesu Bianchi, and Chiomenti Studio Legal as well as Canada’s McCarthy Tetrault all ranked in the top 10.
None of the same nine independent firms had featured in the top 20 in the first half of 2021.
U.S.-headquartered firm Simpson Thacher & Bartlett topped the tables, working on 34 deals with a combined value of over $114 billion.
Simpson Thacher was one of several firms to benefit from advising on what has been reported as the largest-ever take-private deal for a European-listed company. In April, Simpson Thacher, Gatti, Legance and McCarthy Tetrault all advised on the $63 billion takeover of Italian infrastructure company Atlantia by family fashion power-house Benetton and private equity heavyweight Blackstone.
Partner Ben Spiers, the European head of M&A at Simpson Thacher, said the rankings demonstrated a shift into more private equity funded work.
“Ten years ago, the makeup at the top of the league tables would have been quite different but now we see more firms like us in there. The probable reason for that is because of the increased presence of private equity in the M&A market, with less activity in strategic corporate deals.” he added.
U.K.-centered elite duo Freshfields Bruckhaus Deringer and Clifford Chance placed third and fourth respectively, after coming first and second last year.
Clifford Chance London private equity practice head Christopher Sullivan said he had seen an increase in deals using alternative debt providers.
“Previously we would have seen lending being done primarily by the bank, but as this has become very expensive we are seeing debt funders stepping in and writing much bigger cheques”
Hengeler M&A partner Daniel Moeritz said his firm had benefited from specialising in complex types of deals. Commenting on a strong period of activity in Continental Europe, he added that in previous years the U.K. had been a busy transactional market as there had been so many public-to-private deals, but that that kind of deal was difficult to replicate indefinitely in the current environment.
Overall the total annual deal value of M&A work in the U.K. and wider Europe for the first half was down 15% from the same period last year, similarly the number of deals done decreased by 10%.
However, last year was a bumper period for activity. By the end of 2021, annual M&A had topped $5 trillion for the first time ever, and firms experienced all-round record profit gains so a slowdown had been expected.
Clifford Chance’s Sullivan noted that factors such as the war in Ukraine had had a noticeable impact on activity levels earlier this year.
“We can’t ignore the impact the tragic Ukrainian situation has had on the market,” he said. “It has definitely led to a slowdown of private equity and M&A deals. One major consequence is the move away from Russian-sources oil and gas, the price there has gone up and this means there is a big increase in the cost of living which drives inflation.”
Looking forward, partners acknowledged fears about a possible recession, but remained upbeat about future work levels.
Infrastructure deals, such as the Atlantia deal are one area that several corporate heads do not expect to show down any time soon. Hengeler’s Moeritz said that there is “a change happening in the market” and that deals are not always going through, but also that “transactions driven by strategic combinations will continue to do well”.
Sullivan added: “The summer will be slower until the lending market responds, but you need to remember we’re going against historic highs from the prior year. You’re not comparing it to an average year, but to a bumper one. For us, there’s still plenty to do but the pipeline is thinner. There’s a lot of doom and gloom out there, but we continue to be busy across asset classes.”
U.S.-headquartered Sullivan & Cromwell came fifth in the Europe table, but first in the worldwide rankings, just ahead of Simpson Thacher. Skadden Arps Slate Meagher & Flom, Wachtell Lipton Rosen & Katz and Freshfields completed the top five globally.
Julian Pritchard, head of global transactions at Freshfields, said: “The growth of our U.S. business has continued to power our global position, as we see more and more clients needing sophisticated M&A and regulatory advice on both sides of the Atlantic. The next period is likely to be quite a dynamic environment as relative valuations move, with leading businesses running their slide rules over a new set of acquisition targets and other businesses feeling vulnerable.”