As many of you are slowly trying to shake off your St. Patrick’s Day hangovers, there comes a bit of good news from Jon Ogg on the blog 24/7 Wall Street. Exxon Mobil announced that it had received approval from the DOJ for its acquisition of XTO Energy.
Despite the pervasive perception that the Obama administration was going to be a ginormous thorn in the side of Wall Street with regard to regulation, Exxon Mobil managed to get this approved without having to answer a second request. Second requests are commonly launched by either the DOJ or FTC during proposed mergers so that the government can make certain a company will not grow to monopolize a certain industry.
So why is this good news? After the jump I will explain why this may end up being a boon to both the legal and legal technology industries. If Ogg’s predictions are any indication, a cash cow may be coming to an antitrust division of a law firm near you.
There is an old saying used frequently in politics and business that “money begets money.” Well, something similar can be said on Wall Street: mergers beget mergers. Ogg comes to this conclusion as well. In fact, he mentions two other mergers that are currently in the works: Baker Hughes acquiring BJ Services and Schlumberger buying Smith International.
It seemed [...] during the private equity boom that mergers only brought on more mergers. This is true regardless of private equity. The notion that this expiration period has passed is a strong signal that cross mergers between oil and gas for larger economies of scale are going to be approved. If Exxon Mobil, the #1 by far on our 24/7 Wall St. Real-Time 500 by market cap, can get approval to buy a large gas producer then any other major domestic fully integrated or exploration & production player can too.
How Exxon Mobil escaped a second request on this is anyone’s guess, and I am not about to speculate. And it seems unlikely that other mergers will get off that easy. But whether or not it’s an indicator of the level of government oversight of such transactions Exxon/XTO approval does seem likely to be a bellwether of whether the transaction will ultimately succeed. It is sure to light up corporate heads with the idea that “if they can get their deal approved, then we can too!”
And don’t think this will be limited to the energy industry. More than most any other industry, Wall Street is a herd. I don’t mean they are like a herd or personify a herd, I mean they ARE the herd. If this isn’t self-evident to you then clearly you have not lived on this planet in a last couple of years (should you need a refresher, click here). If energy mergers begin to roll, it’s a good bet that the acquisition bug could spread to other industries as well. Perhaps we are already seeing this with the current takeover of NBC by Comcast, a review which is employing hundreds of attorneys as we speak. More mergers mean more litigation. More litigation means more jobs. More jobs mean more money all around.
Now, here is what I would watch out for in the world of legal technology. The big players will probably continue to be big players, i.e. Kroll. That being said, watch out for other players in the e-discovery industry to be participating heavily if there is a litigation upswing. Iron Mountain’s Stratify and Anacomp’s Caselogistix have been getting good press as of late with their participation in the Valukas report on the fall of Lehman Brothers. Also, I would keep an eye on kCura’s Relativity. I think you will be seeing them around more often. Relativity is still fairly young among review platforms, but they have done an excellent job marketing themselves to various legal processing vendors for strategic partnerships.
How ironic that today is the beginning of the NCAA’s March Madness. If Ogg is correct and the Exxon Mobil acquisition of XTO serves as a catalyst for a merger spree on Wall Street, Biglaw — and everyone that works under it — will be a direct beneficiary. With that, I say, let the madness begin.
Gabe Acevedo is an attorney in Washington, D.C. and owner of the e-discovery blog, GabesGuide.com. He also writes on legal technology and discovery issues for Above The Law. He can be reached at email@example.com.