What’s the Deal with Deals?
The M&A groups at New York law firms have a lot more time on their hands these days, with that whole economic downturn thing, and the disappearance of credit. This article in the New York Law Journal discusses the fall-out so far this year:
Several major firms saw a significant decrease in global M&A activity in the first quarter of 2008.For example, Sullivan participated in 34 announced deals in the first quarter, down from 46 for the same period in 2007. Deals declined to 44 from 69 at Skadden, Arps, Slate, Meagher & Flom, to 60 from 98 at Clifford Chance, to 17 from 32 at Simpson Thacher & Bartlett.
Hunton & Williams, McCarthy Tetrault, and Sutherland Asbill & Brennan, spurred by the $113 billion spin-off of Philip Morris, took the first-, second- and third-place rankings for global announced deals in the first three months of this year, while stalwarts like Sullivan, Clifford Chance and Skadden respectively came in third, fourth and fifth on the Thomson [Financial] list.
On the upside, maybe some transactional lawyers actually get to see sunlight at the end of their work day. Or maybe not.
A little more, after the jump.
M&A groups are finding ways to pass the time, mainly by looking abroad:
Following strategic opportunities, law firms have increasingly turned to transactions involving “cross-border” or foreign investments in the U.S. and sovereign wealth funds, “in that order,” [Frederick S. Green, co-chairman of Weil Gotshal & Manges’ mergers and acquisitions practice] said.“Cross-border inbound investors, as well as sovereign wealth funds, are areas of great opportunity for law firms, not only in the current market, but will continue to be good opportunities even after the credit markets return,” Green noted.
And while no one can predict when the credit crunch will abate, [Brian Hoffmann, co-chair of Clifford Chance’s M&A practice in the Americas] said that he has witnessed a slight increase in activity over the past month.
While things were “quite slow” in the United States from December 2007 until February of this year, “it seems like things are picking up a bit,” Hoffmann said. Sometimes, “somebody has to crash and burn before … you hit bottom,” he said. Some people think that with the demise of Bear Sterns, the market hit a bottom, he said. Then again, he added, “it could be a dead cat bounce.”
Crash and burn… hit bottom… dead cat bounce…
Metaphor overload… shutting down…
As Deals Plummet, Law Firms Focus on New Opportunities [New York Law Journal]
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Which firm is next to drop summers/3Ls/associates?
Kash: Serious question - which is more important, length or gerth?
Congratulations Hunton & Williams and White & Case on having your M&A business up 50% over Q1 2007!
"it could be a dead cat bounce."
Nice. The evolution of English oratory reaches a new low.
@10:52: Not a new low, just a dead cat bounce.
My M&A practice is so slow, I did doc review for litigation!
forget the metaphors...where does one find a snazzy belt like the guy in the pic?
10:52 - you're obvously not schooled in financial market lingo - there is nothing new about the dead cat bounce, we just haven't seen one in a while. Spend some time over at Dealbreaker and you might learn a thing or two.
You can find that belt in any gift shop in Deadwood, SD.
The bottom is nowhere in sight. The DOW will have to retrace to 9,000 before we can start moving higher.
Today's GE earnings basically confirmed that the post-bear pop was indeed a dead cat bounce. Lots more pain to come. Some firms may even go under; there just isn't enough transactional work to go around anymore.
Keep in mind we have been in a bull market cycle since the 1950's. Well the U.S. growth story is over. And we lawyers will not be immune from the pain.
11:37,
Just enough knowledge to sound stupid.
If I'm ever shopping for a gift in Deadwood, SD, I'll buy that belt and hang myself.
Dead cat bounce -
From Wikipedia, the free encyclopedia
A dead cat bounce is a term used by traders in the finance industry to describe a pattern wherein a moderate rise in the price of a stock follows a spectacular fall, with the connotation that the rise does not indicate improving circumstances. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".
The phrase has been used on the trading floors for many years. However the earliest recorded use of the phrase dates from 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. The Financial Times reported a stock broker as saying the market rise was a "dead cat bounce".
The reasons for such a bounce can be technical - investors may have standing orders to buy shorted stocks if they fall below a certain level, to cover certain option positions, or for speculation. Since bounces often occur, investors buy into what they hope is the bottom of the market, expecting a bounce and thus make a quick profit. The very act of anticipating a bounce can create and magnify it.
A market rise after a sharp fall can only really be seen to be a "dead cat bounce" with the benefit of hindsight. If the stocks starts to fall again in the following days and weeks, then it is a true dead cat bounce. If the market starts to climb again, it was not a bounce but a bottom.
The phrase has also been used in politics in reference to primary election poll figures for United States presidential elections.
Glad it's not just me. Plenty of M&A/PE people I know have been billing <50 the past few months, and one guy managed to bill 4 (four). This particularly sucks if you're at a firm where "face time" is for some reason considered to be important, even though everyone just sits in their offices by themselves anyway, surfing the web but wishing they were home so they could go to the sites to which they really want to go.
While deal number is a proxy for activity, deal size/complexity are also important in noting how much work is required to get a deal done. So while the raw number of deals may have dropped off, in some cases, due to changes in financing, etc., there's still stuff to do...
Just a thought for folks who are worried. I would, however, point out that more junior M&A associates are probably not getting the level/quantity of deal training that some of their supervising attorneys had just a few years ago when they are juniors. This could lead to a midlevel talent vacuum in a few years, just like happened for junior associates a few years after the dot-com bust.
And on that note, happy weekend!
Commentista (12:34) is dead-on. Many of those people billing <50 (and, yes...it's definitely true...) aren't getting the work they normally would be because the people senior to them are hoarding the good stuff because they're slow, too.
I don't know what we're going to do with all of our summers interested in corporate...3-hour lunches? Movies during the middle of the day? We certainly have the time.
Most likely the "training" schedule will get beefed up, which will fill up everyone's time, including those of us who will be preparing and giving hte presentations.
On a related note, those of you who have applied to b-school or other graduate schools, who have you asked for recs and how have you gone about it? In addition to billing around 300 hours so far this year, I don't want to give them another reason to deactivate my key card.
What about current 1L's who are exclusively interested in transactional work, specifically M&A? We won't actually hit the workforce until Fall 2010, but we'll be interviewing in just a few months. Would it be a bad idea to just say you're interested in transactional work and leave it at that, hoping that there's enough restructuring/tax work to go around if M&A doesn't pick back up?
Need advice--I am a summer associate interested in corporate work, do I stick with it or do I try to go into a different area like bankrupcy or litigation just to have more security????
Posted by whoppers | Permalink
Friday, April 11, 2008 1:00 PM
Dead cat bounce not yet confirmed. RSI and MACD on $SPX at 50 and 0 respectively. Would wait to pull trigger.
"global ANNOUNCED deals"... what a crock. Jones Day has been the the leader in global COMPLETED deals for the past 30 quarters (according to the Thomson Financial scorecards quoted in the NYLJ article). ...of course why would a New York paper want to point that out?
Hmmm. This does not bode well for my prospects in sophisticated cross-border transactional work. Better stick with complex, bet-the-company litigation.
- T3-to-V5.
11:37,
Go back to your document review please.
1:28. I've seen that schtick a million times, and it still makes me laugh. It's so on.
Holy crap law students are dense. Look, if you're a 2L summer associate, hold off on changing your diapers. You will not be entering the workforce until a year from September or October--that's 18 months from now. The law firms are well aware that circumstances will change by then. They aren't going to no offer you because things are slow this quarter. And if they do offer you, your job security is entirely dependent on the state of the economy a year and a half from now. There is little you can do about right now beyond doing well in school and putting in a good summer performance. Or you could just crap your pants and drop out of law school.
To the 1L and summer associate interested in corporate / transactional work, why not tell the firms that you’re undecided, but leaning toward transactional work. There’s nothing wrong with that position, especially since you probably have no idea what transactional lawyers actually do (I know I didn’t). In any event, I don’t think it’s a big deal. Just because corporate work is slow right now, doesn’t mean it’ll be slow 1.5 or 2.5 years from now – and firms are definitely aware of this.
Imagine if you had started law school in the fall of 2001. At the end of your 1L year the tech bubble would have freshly burst and the country would have been still reeling from the financial fallout of 9-11. Transactional departments were extremely slow, there were layoffs and Brobeck was on the verge of a Bear-Stearns-like collapse. Fast forward to graduation in 2004 and private equity work was booming. Firms needed a ton of transactional attorneys and corporate departments were outrageously busy up until a few months ago. The same thing happened in the early nineties. Firms that didn’t recruit transactional attorneys during the recessionary years around 1993 were in bad shape as tech started booming from 1996-2000. The same thing will happen again. It might not be private equity (and it definitely won’t be securitization or the dot.com boom) but it will be something. If anything the comparatively lower number of graduates joining corporate groups will just make you more valuable as a midlevel when the next boom hits.
2:19--I bet you were the same when you were in law school; however, I do agree that Fall of 2009 is a long ways away and that you should just pick a practice area that you enjoy even if it is corporate.
"10:52 - you're obvously not schooled in financial market lingo"
Oh, the shame!
Actually, 2:53, 10:52's failure to recognize a term popularized by traders is egg on face, especially when this post addresses M&A work (or lack thereof). Anyone working or looking to work corporate and finance deals needs to keep up with financial news as well as legal. Otherwise, tough to garner respect from your financial clients.