us acquisition finance great inventions - iflr.com · us acquisition finance t ... with sungard and...

22 IFLR/December 2006 www.iflr.com

US ACQUISITION FINANCE

The flood of multi-billion dollarleveraged buyouts (LBOs) raises anumber of questions for bidders,perhaps the most urgent being:

how are you going to pay for that? Acquirersin traditional strategic mergers andacquisitions are usually able to put up theirown equity as collateral and use bank loans tofund any gaps. Private equity firms in LBOsby definition cannot follow this route andmust instead turn to the debt markets tosupport their takeover bids, often issuinghigh yield bonds via the target company.

The sheer scale of many recent deals,combined with pressure from targets, hasincreased the challenges of putting togetherfinancing packages. Fortunately for bidders,investment banks and lawyers are on hand toprovide a tasty menu of innovative financechoices.

Covenant-litePerhaps most indicative of the private equityboom has been the recent growth of so-calledcovenant-lite financings, which combinebank loan and high yield bond technology.They have arisen in an environment wherecash-rich private equity funds are chasing anincreasingly small number of suitablecompanies while investment banks andlawyers chase their lucrative transaction fees.In this context target companies, startingwith SunGard and Hertz in 2005, have beenable to pressure buyers into accepting limitedor non-existent financing conditionprotections. In turn, these valuable privateequity clients have been bringing pressure tobear on the banks to provide them with thefinancing they need on the terms they want.

In this spirit, covenant-lites essentiallyenable borrowers to take out loans thatbehave like high yield debt. They are difficultfor lenders to be able to press claims againstbut also offer greater flexibility, with floatingrather than fixed interest rates. In modelcovenant-lites, lawyers take a standard bankcredit agreement and replace themaintenance covenants, which prevent theborrower from holding debt except undercertain conditions, with incurrencecovenants, which allow the borrower to holddebt but not to incur new debt, as typicallyused in high yield bonds.

According to acquisition finance lawyers,however, more often borrowers use what onelawyer describes as “covenant-lites indisguise”. In these instruments, rather thanreplacing maintenance covenants withincurrence covenants, the maintenancecovenants are written to include a carve-outwhereby the borrower is allowed to increasethe amount of debt it holds provided it

maintains certain financial ratios, such as aleverage test. This achieves the same ends asthe model covenant-lites but does so withouthaving to make substantial changes to thelayout of the loan documents. The carve outsare less obvious to a casual observer than awholesale swap of the covenant, which maybenefit borrowers if investors are concernedabout falling down the creditor peckingorder.

Although there are few available statistics,lawyers active in the field say that covenant-lites in various guises are increasinglycommon, often in combination with asset-based loans (ABLs) or other products. “Idon’t think covenant-lites are taking over, butif you want to do it there’s an opportunityamong investors that traditionally was notthere,” says Neil Cummings, a partner withProskauer Rose in Los Angeles. In addition totheir added flexibility, covenant-lites may bepreferable to high yield bonds, in that asloans rather than capital market instrumentsthey avoid the need for expensive and time-consuming roadshows and compliance withsecurities laws. By doing so they also giveborrowers greater control over when theyraise money, which is key in takeovers.

SecuritizationCovenant-lites are not the only new string tothe acquisition financier’s bow. As well aslooking for volume, bidders want flexible andlow cost alternatives to traditional loans andhigh yield debt. Private equity funds need tosecure debt against the target’s assets, and aretherefore keen to extract as much value aspossible. ABLs, which are often used inconjunction with covenant-lites, are onemeans of doing this.

Another tool that helps monetize the targetcompany is securitization. The use of asset-backed securities (ABS) came to prominence

last year when a private equity consortiumraised almost $5 billion though ABS issuanceas part of the $15 billion Hertz LBO. WeilGotshal & Manges advised the banks onfinancing the deal. Similar methods had beentried before but the Hertz deal was the firsttime that securitization had been used as theprimary means of financing a buyout, andthe structure spurred a lot of interest.

Aside from the higher advisory fees itinvolves, securitization can offer a cheapermeans of raising capital than traditional debt,particularly when the target company has

Great inventionsUS lawyers are responding to the needs of private equitywith innovative financing techniques

Rank Attorney Value Number $ billion of deals

1 Skadden Arps Slate Meagher & Flom 390.7 1652 Sullivan & Cromwell 358.2 973 Wachtell Lipton Rosen & Katz 326.5 524 Cravath Swaine & Moore 230.4 445 Latham & Watkins 221.4 1696 Davis Polk & Wardwell 210.9 657 Fried Frank Harris Shriver & Jacobson 201.8 428 Shearman & Sterling 199.3 749 Cleary Gottlieb Steen & Hamilton 175.7 3810 Weil Gotshal & Manges 121.2 103

Includes work for financial advisersData processed November 14Source: Dealogic

Legal advisers to US targets and acquirers YTD

“The Dunkin’Brands deal was ashot across the bowthat helped peopleunderstand that thisis a real alternative”Gregory Woods, Debevoise & Plimpton

www.iflr.com IFLR/December 2006 23


poor credit ratings. It does rely, however, onthe company having suitable assets. InHertz’s case that was a fleet of rental cars, butobservers have suggested that receivablesincluding real estate, casinos, intellectualproperty (IP) rights and even wine harvestscould all be used.

Dunkin’ Brands made new breakthroughsover the summer when it raised $1.7 billionthough the securitization of assets in itsfranchised fast food chains. The offeringhelped finance the company’s buyout by theCarlyle Group, Thomas H Lee Partners andBain Capital. Paul Weiss Rifkind Wharton &Garrison advised underwriter LehmanBrothers on the deal, Ropes & Gray acted forDunkin’ Brands and CadwaladerWickersham & Taft represented monolineinsurer Ambac.

The Dunkin’ deal was the first time that abuyer had securitized franchise royaltypayments, IP, leases and other licensingreceivables. It was described as being as closeto a whole business securitization as ispossible under US law, potentially showing

the way for a number of businesses for whichsuch a structure would be necessary. “TheDunkin’ Brands deal was a shot across thebow that helped people understand that thisis a real alternative,” says Gregory Woods, anacquisition finance specialist at Debevoise &Plimpton.

Securitization deals such as these alsocreate opportunities for law firms that havetop-flight structured finance teams but noequivalently strong M&A practice to get afoothold in a new area of work. Until now,however, the relatively small number ofcompanies in buyouts with suitable assets haslimited the number of deals being done.

HybridsSimilarly, the use of hybrid securities to fundacquisitions has not been as successful in theUS as it has been in Europe, although thatmay change over the next year. Hybridsecurities combine features of debt andequity to enable issuers to gain bothfavourable credit ratings and tax treatment. Anumber of European companies have used

them for acquisition financing but so farthere has been little such activity in the US.In late 2005, however, Stanley Works soldhybrids to help pay for its acquisition ofFrench company Facom Tools, with Sullivan& Cromwell advising the banks. Then earlierthis year Swiss Re used hybrids to help payfor GE Insurance Solutions, with Paul Weissand Willkie Farr & Gallagher the US lawadvisers.

Very few other deals have taken place in

“The success ofcovenant-lites showsthe convergence ofthe high yield andbank debt markets”

Top 10 club deals in the US YTD

Target

HCA

Clear Channel

Communications

(Bid No 2)

Harrah's

Entertainment

Kinder Morgan

Freescale

Semiconductor

(Bid No 2)

Univision

Communications

(Bid No 2)

VNU

Philips

Semiconductors

(80.1%)

Aramark

General Motors

Acceptance Corp -

GMAC (51%)

Acquirer

Bain Capital; Kohlberg Kravis Roberts;

Merrill Lynch Global Private Equity

Bain Capital; Thomas H Lee Partners

Apollo Management;

Texas Pacific Group

GS Capital Partners;

AIG Global Asset Management

Holdings; Carlyle Group; Riverstone

Holdings

Blackstone Group; Carlyle Group;

Permira; Texas Pacific Group

Madison Dearborn Partners;

Providence Equity Partners;

Texas Pacific Group; Thomas H Lee

Partners; Saban Capital Group

AlpInvest Partners; Blackstone Group;

Carlyle Group; Hellman & Friedman;

Thomas H Lee Partners; Kohlberg

Kravis Roberts

Kohlberg Kravis Roberts; Silver Lake

Partners; AlpInvest Partners; Apax

Partners; Bain Capital Partners

Goldman Sachs Capital Partners;

JP Morgan Partners;

Thomas H Lee Partners;

Warburg Pincus

Cerberus Capital Management;

Citigroup Venture Capital Equity

Partners;

Aozora Bank

Target adviser

Shearman & Sterling;

Bass Berry & Sims;

Sullivan & Cromwell;

Cravath Swaine & Moore

Akin Gump Strauss

Hauer & Feld;

Sidley Austin

Latham & Watkins

Skadden Arps Slate

Meagher & Flom

Wilson Sonsini Goodrich

& Rosati

Skadden Arps Slate

Meagher & Flom

Simpson Thacher &

Bartlett;

De Brauw Blackstone

Westbroek


De Brauw Blackstone

Westbroek

Shearman & Sterling;

Skadden Arps Slate

Meagher & Flom

Weil Gotshal & Manges;

Kirkland & Ellis

Acquirer adviser

Simpson Thacher &

Bartlett

Ropes & Gray;

Dow Lohnes &

Albertson

Cleary Gottlieb Steen &

Hamilton; Wachtell

Lipton Rosen & Katz


Davis Polk & Wardwell;

Vinson & Elkins;

Wachtell Lipton Rosen

& Katz

Skadden Arps Slate

Meagher & Flom;


Hamilton


Hogan & Hartson;


Hamilton;

Latham & Watkins

Clifford Chance;

Latham & Watkins

Clifford Chance;

Simpson Thacher &

Bartlett;

Kirkland & Ellis


Wachtell Lipton Rosen

& Katz


Hamilton; Debevoise &

Plimpton; Schulte Roth

& Zabel; Freehills

TargetNationalityUS

US

US

US

US

US

Netherlands

Netherlands

US

US

Value $million32,675.0

26,535.8

25,717.7

21,558.2

17,600.0

13,632.9

10,998.0

9,479.9

8,300.3

7,400.0


the US to date, in part because regulatoryconfusion has meant that hybrids havelargely been issued by banks for regulatorycapital purposes. With that confusionexpected to be resolved this month, privateequity funds may be able to bring a new waveof corporate issuers to market to raise moneyfor their LBOs.

Among other less familiar products in theUS markets, mezzanine financing foracquisitions has also shown a slight upsurgethis year, and is particularly favoured bycompanies that wish to keep sensitive pricinginformation, which they would be requiredto disclose if they issued public bonds, fromtheir competitors.

Payment-in-kind (PIK) bonds are alsofeaturing on the menu in a small number ofdeals. PIK bonds allow the issuer to choosebetween making payments on its notes ineither cash or additional bonds duringspecified periods. In the buyout of NeimanMarcus last year, for example, the issuer wasable to secure the option that it would makePIK payments on one of its tranches of highyield bonds on a quarterly basis. Thisflexibility comes at a cost in terms of higherinterest rates but is deemed to be worth it byissuers as protection against default in timeswhen cash flow is tight. Like covenant-lites,PIK bonds are seen as a useful tool for when

the next liquidity crunch inevitably strikes.

The right teamFor law firms, the emergence of newacquisition finance techniques is just anotherpresent on the seemingly evergreen privateequity Christmas tree. LBOs, andparticularly club deals, require firms to bringto bear a wide array of resources. They mustdeploy an M&A team, a private equity teamand a leveraged finance team, which in turnwill often be divided into bank lending,capital markets and regulatory teams. Theneed to use such large numbers of lawyersacross different practice areas, combined withclose-knit institutional relationships, meansthat a limited number of large full, servicefirms tend to advise on the majority of largeLBOs.

The developments in acquisition financerepresent a particularly welcome challengefor finance partners at a time when lawyersacknowledge that it is not necessary toreinvent the wheel on the pure M&A sidewith each new multi-billion dollar club deal,even as they continue to represent enormousachievements for the law firms involved.

However, new products such as covenant-lites also raise questions for firms over how touse the specialist knowledge of their lawyersin the most efficient way. High yieldspecialists and banking lawyers, for example,have different skill sets, the formerdemanding experience in US securities lawsand their associated disclosure requirements.But the market is changing. “The success ofcovenant-lite financings shows theconvergence of the high yield and bank debtmarkets,” says Gregory Woods. “As theseproducts converge it will put more emphasison lawyers being broadly based.” The trendtherefore poses a dilemma for firms wherelawyers are separated into high yield andbanking teams. Woods says that Debevoisetries to overcome this divide in covenant-litework by grouping lawyers together whospecialize in covenants.

According to Phillip Mills, an M&Apartner with Davis Polk & Wardwell, highyield lawyers in his firm work closely with

banking lawyers but are still separate.“There’s always been a substantial overlapbetween high yield lawyers and acquisitionfinance lawyers,” he says, and formallymerging teams is not necessary, at least fornow. But Mills acknowledges that the firmmight consider restructuring if covenant-litesbecame the norm.

The demands of the blockbuster LBO,including its financing, offer great rewards tolaw firms but can also place high demands. Inparticular, it requires firms to be moreflexible, not least because arranging financepackages is now often left until a winningbidder and/or consortium structure aredetermined. How that package will bestructured, the products it will use and evenwhen it will need to be prepared may all beunknown until the last minute, particularlyas targets limit or remove financingconditions.

The twists and turns of the auction processthat leads up to the formation of consortiacan lead to law firms putting large teamstogether that ultimately do not get used fullyif the client does not mark a successful bid orend up in a lead role. As Creighton Condonof Shearman & Sterling, who has acted onthe SunGard and HCA deals, notes: “You’llhave a certain number of hits and a certainnumber of misses.” For the potential fees andexposure to high-profile active clients, mostlawyers would agree that the hits are worththe misses. BM


“I don’t thinkcovenant-lites aretaking over, butthere’s an opportunityamong investors thattraditionally was notthere” Neil Cummings, Proskauer Rose

UUSS MM&&AARecommended firmsTier 1

Cravath Swaine & MooreDavis Polk & WardwellSimpson Thacher & BartlettSkadden Arps Slate Meagher & FlomSullivan & CromwellWachtell Lipton Rosen & Katz

Tier 2

Cleary Gottlieb Steen & HamiltonLatham & WatkinsShearman & Sterling

Tier 3

Cadwalader Wickersham & TaftDebevoise & PlimptonFried Frank Harris Shriver & JacobsonGibson Dunn & CrutcherWeil Gotshal & Manges

UUSS pprriivvaattee eeqquuiittyy –– ttrraannssaaccttiioonnssRecommended firmsTier 1

Debevoise & PlimptonKirkland & EllisSimpson Thacher & Bartlett

Tier 2

Davis Polk & WardwellLatham & WatkinsSkadden Arps Slate Meagher & FlomWeil Gotshal & Manges

Tier 3

Cleary Gottlieb Steen & HamiltonFried Frank Harris Shriver & JacobsonGibson Dunn & CrutcherRopes & GraySchulte Roth & ZabelWachtell Lipton Rosen & KatzWillkie Farr & Gallagher

UUSS pprriivvaattee eeqquuiittyy –– ffuunndd ffoorrmmaattiioonnRecommended firmsTier 1

Debevoise & PlimptonSimpson Thacher & Bartlett

Tier 2

Kirkland & EllisRopes & GrayWeil Gotshal & Manges

Tier 3

Akin Gump Strauss Hauer & FeldCleary Gottlieb Steen & HamiltonDavis Polk & WardwellGibson Dunn & CrutcherLatham & WatkinsSchulte Roth & Zabel

Everyone knows Asia’s private equitymarket is growing. It now makes up15% of China’s M&A market,compared with 5% in 2003. But less

reported are the problems for both law firmsand investors, with the latter finding that onoccasions, mere capital and enthusiasm do notguarantee success. Carlyle, the US private equitygroup, announced last October that it hadagreed to pay $375 million for 85% of Xugong,a state-owned machinery company. After facingresistance from authorities, the deal was reducedto a 50% joint venture.

So while private equity investors have beendrawn to China over the last twelve months,they’ve encountered difficulties, from thesometimes entrenched attitudes of their targetsto the burdensome nature of recent regulations.Law firms have felt the effects of both.

Private equity is relatively new in China and,understandably, it may have tried to grow uptoo quickly. “There has been a change of M&Adynamic, with lots of money chasing a fewideas,” says Paul Strecker, partner at Shearman& Sterling in Hong Kong. Pricing is also anobstacle. Lots of private equity houses believethat domestic targets have set unfeasible prices,aware of the queue of investors. “Chinese sellershave to become more realistic in their askingprice,” says Gary Lock, managing partner atHerbert Smith in Hong Kong.

However, investors are not blind to the risksinvolved in China. Undeniable market growthaside, there are legal challenges involved thatmany private equity investors are not used to.“China’s legal market is not as sophisticated orreliable as that in London or New York. We’re atthe higher end of risk analysis, there’s certainly adifference,” says Roger Denny, partner atClifford Chance, Hong Kong.

The question is whether there are enoughquality start-ups that can clear the hurdle rate.Investors have to be convinced they’ll receivetheir usual rate of return. “Investors arelooking for the potential of the businessmodel and the quality of the managementteam, and whether they (Chinese companies)can successfully combine their local savvy withthe demands of international investors lookingfor certain corporate governancerequirements, so as to prepare the companyfor an exit,” says Andrew McGinty, partner atLovells, Beijing.

The problem of marrying separate businessand legal frameworks has its roots in the waydomestic targets are funded. Many youngChinese companies have trouble gettingfinancing when starting up, because there is aconsiderable bias among banks towards state-owned enterprises. “Consequently, these youngcompanies have to use various other means offinancing. Many of the targets will not be clean

companies,” says McGinty.For law firms representing investors in China,

this can be a challenge. “Private equity houseslike to go into a deal with their eyes open, but inChina there is a tradition of not fullyappreciating due diligence. There are concernsfor us in getting access to full information forthis. There’s certainly an education involved,”says Denny. Investors want varying degrees ofdue diligence. “The firm’s role can be as big oras small as the investor wishes. Some want fullbelt and braces, others just want the basics,” saysMcGinty.

But investor confidence and unfamiliarbusiness practice were not the only thingsaffecting law firms involved in private equity inChina in 2006. Regulatory changes were thebiggest challenge.

In August 2006, the Ministry of Commerce(Mofcom) issued new regulations on Chinesemerger and acquisition transactions. Theybecame effective on September 8 2006. Whilethe regulations were marketed as an attempt toprovide a clearer framework for the deluge offoreign investors entering the country, someelements (particularly the National EconomicSecurity test) have had the opposite effect. Theregulations are certainly vague, and have beendissected in previous issues of IFLR, mostrecently by Paul Chow in November’s issue andRobert Lewis in this issue. But for private equitylawyers in China they are just anotherburdensome regulation to get to grips with.

“China has always been a country where theability to anticipate and quickly interpret ruleshas been important. This year, that’s beenparticularly challenging,” says Denny. Somemarket observers have even noted both theCarlyle deal and the politicised regulations as a

return to economic nationalism. This is perhapsa little extreme, but there is certainly a hint ofretreat in the air. Li Deshui, former head of theNational Bureau of Statistics, spoke in a pressconference of the dangers in allowing “malicioustake-overs” of Chinese enterprises to go on.

Investors are largely biding their time. “Thereare a lot of funds looking to invest in China. Butthere could be more. They’re sitting on thesidelines with money, wanting to invest,” saysLock. Firms in China are hoping that 2007 willbe the year they do. TY


CHINESE PRIVATE EQUITY

“This year anticipating andquickly interpretingrules in China hasbeen particularly challenging” Andrew McGinty, Lovells

Teething troublesHow uncertainty has made it hard to build a private equitypractice in China

China M&ARecommended foreign firmsTier 1

Clifford ChanceFreshfields Bruckhaus DeringerLinklatersShearman & SterlingSullivan & Cromwell

Tier 2

Allen & OveryBaker & McKenzieCleary Gottlieb Steen & HamiltonHerbert SmithMilbank Tweed Hadley & McCloySkadden Arps Slate Meagher & Flom

Tier 3

Latham & WatkinsLovellsO’Melveny & MyersPaul Hastings Janofsky & WalkerPaul Weiss Rifkind Wharton & GarrisonWhite & Case

China M&ARecommended local firmsTier 1

Commerce & Finance Law OfficesHaiwen & PartnersJun He Law Offices King & Wood

Tier 2

Jingtian & GongchengFangda PartnersLlinks Law Office

Tier 3

AllBright Law OfficesBoss & YoungDeHeng Law OfficeGlobal Law Office Grandall Legal GroupJin Mao Law FirmZhong Lun Law Offices


JAPANESE M&A

I n March this year, telecommunicationscorporation SoftBank acquired mobilephone provider Vodafone’s Japanesebranch for $15.1billion.

Understandably, it took the limelight andcolumn inches within Japan’s M&A market.But the SoftBank deal represented more thanmere good publicity and huge fees. Ithighlighted changes in both the financial andlegal M&A market.

For foreign law firms, the decades-longeffort to exploit the country’s tightlyprotected legal services market was rewardedwith the mandate. Lovells acted forSoftBank, Linklaters acted for Vodafone.Lovells got the business from a long runningrelationship with SoftBank; but Linklaters’won the mandate largely because of 2005’sintegration with Japanese firm, MitsuiYasuda Wani & Maeda. The integration hadfacilitated an influx of bengoshi (Japanqualified lawyers) into Linklaters, and thusenabled the firm to handle the Japanese, aswell as US and English legal issues of the dealin-house.

Two few lawyersWhile the two firm’s method of winning workdiffered, they are facing the same problem:Japan’s M&A market is growing, but theavailability of Japanese lawyers is not.Encouraged by the country’s economicrecovery and its government’s positive lawchanges, foreign investors are starting togather. With both international and localfirms scrabbling to recruit, the legal situationin Japan’s M&A market is a volatile one.

Outbound acquisitions by Japanesecompanies have been roundly impressive inthe past twelve months. Domestic companiesannounced $17.5 billion worth of overseasacquisitions – nearly three times the level oftransactions in the opposite direction. Butwhile the financial press has been squealingabout hostile takeovers and poison pills, thelaw firms have had more pressing concerns, alack of quality lawyers.

These concerns were highlighted on May 12006, when the majority of the provisions inthe country’s far reaching commercial lawcame into effect and opened up M&A inJapan. Designed to encourage both foreignand domestic acquisitions, the rulescontained a few provisions that are openingdoors for investors and consequently drivingwork for law firms.

Having only come during May this year,the effects of these reforms are just beginningto be felt. While there is not a great amount

of domestic opposition at the moment, thereforms should increase friendly takeoversand, in the long run, more hostile activity aswell. “The changes will hopefully increaseprofitability of domestic companies, and thusspur on foreign interest [which will start asfriendly takeovers]. Over time this willprobably shift into more hostile takeovers,”says Tim Lester, partner at Lovells in Tokyo.

If the M&A regulations kick-start activityas expected, they will exacerbate the situationfor law firms in Japan. The problem issimple: there are just not enough qualityJapanese speaking lawyers in Japan. “Findinggood people is very hard. Europe is booming,and it is very tight here,” says Lester. Tocomplicate things further, the law changed inApril 2005 to give foreign firms permissionto establish offices in Japan that could consistof both domestic and foreign lawyers, givingthem more freedom to practice and expandwithin Japan. The new rules mean thatforeign law firms can now stand alone inJapan, with Japanese lawyers providing legaladvice on Japanese law and foreign lawyersproviding advice on foreign law under thesame roof.

Linklaters, which became the first foreignlaw firm in Japan to operate withoutamendment to its internationally recognizedname, has taken advantage of the rule changesand others are hoping to follow. But anotherapproach of international firms, and one thathas been favoured by US firm SimpsonThacher & Bartlett, is to carry on practicingits own law and run deals on an ad hoc basiswith Japanese law firms. Lovells is alsodabbling with such a process. “It works on atransaction by transaction basis. It’s hard totie yourself to one law firm,” says Lester.There are, he says, 30-40 lawyers in thebiggest firms in Japan, and five to 10 in thesmaller ones. “This isn’t enough for largeM&A.”

Japanese in the ascendancyAnd local firms are still getting the mandates.Japanese firms expect record profits this year.Indeed, in April this year, Nishimura &Partners and Asahi Koma Law Offices agreedto merge and will become Japan’s biggest lawfirm. It will create a legal powerhouse in Japanwith 350 lawyers. This fact is not lost oninternational firms, who are aware of thediscrepancy between demand and supply oflocal lawyers, and the doubling up ofdomestic firms. “On the international side it’shard to find people with the right languagequalifications,” says Alan Cannon, partner at

Simpson Thatcher & Bartlett, Tokyo.Although, as Cannon says, there is a need

for international experience (the mergerbetween The Bank of Tokyo-Mitsubishi andUFJ Bank needed two US counsel for the USlistings), local law firms will remain central.And Japanese firms, aware of the openingM&A floodgates, are recruiting local bengoshias well as doubling up. Daniel Hounslow,attorney at Clifford Chance, was recentlyquoted as saying that when he asked a leadingJapanese partner why he was hiring so manyjunior lawyers, he replied: “because of youlot.” When Hounslow pressed him, he saidthey were trying to grow themselves largeenough to prevent the international firms“swallowing them up.”

Up until now, growth has been fairlypedestrian. The new regulations have takentime to settle. “Their intention is to provide aclear framework. But it may be unhelpful atthe moment because things are changing andpeople are trying to keep up with the newregulations,” says Cannon. Yet firms arealready preparing for the deluge. The signs areclear: a reviving economy, an invitinggovernment with inviting regulations, and anascent private equity market. But with theabsence of bengoshi, the question is, when themandates do come, which firms will be betterprepared? TY

Defending home turfRising M&A is intensifying the fight for Japanese lawyers

“It’s hard to tie yourself to one lawfirm. The smallerones only have five to10 corporate lawyers,which isn’t enough forlarge M&A” Tim Lester, Lovells


EUROPEAN PRIVATE EQUITY

Private equity in Europe has nowgrown to such an extent, both involume and size of targets, that noM&A practice can afford to be

without private equity expertise. The differentapproaches to gaining that expertise have beensharply divided between US and UK firms. Theformer has tended towards hiring super-specialized partners while the latter, like manycontinental European firms, has simplyexpanded the role of more generalist corporatelawyers.

But what is the result for the client? Shouldthey choose the super-specialized or thegeneralist lawyer? Opinions are as sharplydivided as the attitudes. The head of theLondon office of one US firm says: “I don’tthink the more specialized approach can lastfor long. It just doesn’t make sense and allowsfor less overlap. You end up stuck in abubble.” By contrast Richard Youle, a privateequity specialist in Linklaters’ London office,says: “You need private equity lawyers becausethe big clients aren’t idiots. They know whatthey’re talking about and will know thedifference between a corporate and a privateequity lawyer.” Other senior lawyers,including Christophe Eck at Gide LoyretteNouel and Laurent Legein at Cleary GottliebSteen & Hamilton, insist that bothapproaches are valid.

Theoretically, the growth in private equitydeals, in volume and value, should hand theinitiative to the specialized UK firms. Theycan specialize because, on the simplest level,they have larger European offices – the highnumber of partners means that they canafford to have a series of lawyers withnarrowly-defined practice areas. Not so forAmerican firms. “US firms often have only ahandful of corporate partners in Europe,” saysa leading private equity specialist. “Lawyersdo the work that’s available and in smalloffices that means a wide variety of deals andlittle specialization.”

But the causes of the specialist/generalistdivide go beyond simple partner numbers.“It’s also to do with the way we’re

remunerated,” says Youle. “Magic circle firmshave a fixed lock-step so we get paidaccording to how many years we’ve been atthe firm. If I’m not best placed to do a job I’llhappily pass it on to, say, a public equityspecialist. In the US there is more of an ‘eatwhat you kill’ approach, so lawyers mayaccept deals in areas where they are not super-specialized.”

This hints at a more abstract culturaldifference between British and Americanlawyers that defies material explanation. “It isin the DNA of Wall Street lawyers to be broadbased, just as it is the English lawyer’s natureto be super-specialised,” says Legein. “Icouldn’t say what the cause is. We could gointo sociological trends but I’m really notqualified to talk about that.”

And some US firms take a different route,opting for a specific private equity focus, suchas Simpson Thacher & Bartlett. These firmscompete with UK specialists by working byproxy. If a deal is in a major Europeancountry they will work alongside a bigEuropean firm for aspects of local law. Inmore remote jurisdictions smaller local lawfirms are used. This tactic is also employed bythe likes of Weil Gotshal & Manges, Latham& Watkins and Kirkland & Ellis.

“US firms appear on European deals butthey may not have actually done much,”comments one private equity specialist. “Ineach jurisdiction US firms can’t do things likethe tax, IP, pensions, environmental law andso on. They are almost superfluous.”

Whichever way it is done, law firms are allreacting to the need for private equityspecialists. Over the last couple of years themarket has witnessed a series of lateral hires,some of which are particularly high profile.Christophe Eck points specifically to DavidAcknin joining Weil Gotshal from Linklatersin late 2003, and Ashurst’s hire of ThomasForschbach from Latham & Watkins inSeptember 2004. Laurent Legein had justmoved to Cleary from Clifford Chance whenhe spoke to IFLR in November. Also, as dealsizes grow year on year partners havegravitated towards private equity whileremaining in the same firm.

That growth in deal size shows little sign ofslowing: “A lot of money is being invested andthe market will continue to thrive” predictsEck. Youle agrees: “Private equity representssomething like 40% of UK M&A and 20% ofEuropean M&A. You can’t ignore that.”

Law firms certainly have not ignored that,and private equity is now considered a crucialelement of any M&A practice. “A firm doesnot need to advise on private equity to have athriving M&A practice, but it does give morebalance if a firm has capabilities in public and

private equity,” says Laurie McFadden, aprivate equity specialist at FreshfieldsBruckhaus Deringer in London.

Youle goes further: “It is feasible to have anM&A division without a large and focusedprivate equity element but it wouldn’t make alot of sense. There’s no way an M&A divisionwithout private equity experience will windeals at the high end of the market. Thatcould mean sacrificing something like 20% ofthe market.”

That is 20% of a very valuable market.When private equity deals began to take off inEurope they were not worth a great deal. Butnow transactions valued at more than $2billion are routine. The large US privateequity houses are investing in Europe, and thegrowing number of club deals has multipliedthe resources of these companies. Privateequity houses are increasingly willing to lookat listed companies and take on public M&Aprocesses. As recently as September aconsortium of KKR, Silver Lake Partners,Bain Capital, Apax Partners and AlpInvestPartners completed a $9.5 billion deal to buy80% of Royal Philips Electronics’ microchip-making unit. Clifford Chance and SimpsonThacher & Bartlett advised the consortium.

Yet as the deals grow and take on morepublic companies, the divergence shows nosign of eroding. It remains to be seen whetherthis blurring of the lines between privateequity and M&A will benefit the specializedUK firms or their generalist Americancounterparts. PJ

“I don’t think themore specializedapproach can lastfor long. You end upstuck in a bubble”London managing partner of a US firm

“You need specialist privateequity lawyersbecause the bigclients aren’t idiots”Richard Youle, Linklaters

The great divideUS firms think the UK approach to private equity workcan’t last. English lawyers disagree

UUKK pprriivvaattee eeqquuiittyyRecommended firmsTier 1

Clifford Chance

Tier 2

AshurstFreshfields Bruckhaus DeringerMacfarlanesTravers Smith

Tier 3

Allen & Overy

Tier 4

LinklatersLovellsSJ BerwinSkadden Arps Slate Meagher &FlomWeil Gotshal & Manges


EUROPEAN M&A

Europe is now the main driver of theglobal M&A market. And theperformance of one firm shows howthe international ambitions of the

elite US firms are changing.The business model is built on teams.

Specifically, teams in the world’s top financialcentres that are big enough to handle big crossborder projects, but small enough toconcentrate on the firms’ core business. It is amodel that certainly differs from the globaldomination of UK international firms; butSkadden Arps Slate Meagher & Flom’sorganisation and strategy are also distinct fromits top-tier New York rivals.

“The top investment banks are not present inevery city in Europe but rather the key financialcentres,” says Scott Simpson, a US-qualifiedpartner in Skadden’s London office. “Ourapproach is very similar.”

Investment in European space and lawyerscontrasts with the other elite New York M&Afirms; on the whole, these firms staff theirEuropean offices with US lawyers. Skadden’sapproach is not unique – Latham & Watkins,Shearman & Sterling and Cleary Gottlieb arealso recognized for their investment in the bestEuropean M&A lawyers. (And these firms arehiring even more international lawyers.) ButSkadden is arguably the most successful. As onepartner at a UK magic circle firm says:“Skadden Arps is superb on cross-borderEuropean deals; it is rightly ranked as theleading US firm in Europe.”

Skadden is the only first tier US M&A firm toalso be ranked in the top two tiers in the UK andFrance for M&A advice. Standout M&Ainstructions for the firm include advisingArcelor, on its bid from Mittal; Banco ComercialPortuguês, in its unsolicited acquisition of BancoBPI; and the financial advisers to Endesa, on itsbid from E.ON. Skadden is also representing theNasdaq stock market in its bid for the LondonStock Exchange.

The planning for Skadden’s present M&Apractice began in 1990. Says Simpson: “Weaimed to build a team focussed on high-endcross-border work, through a combination ofUS partners and the finest domestic guys from

the main jurisdictions. We think this hascreated a well positioned global practice.”Simpson says that the firm sought to emulatethe way in which US investment banks hadorganized themselves in Europe.

“The leading US investment banks arepopulated by people who include some of thebest European talent,” says Clive Wells,banking partner at Skadden London, whomoved over from Allen & Overy in April 2006.“The global head of M&A at one of these bankscould be Portuguese, French or Italian; itdoesn’t matter because they have the rightpeople on the ground in Europe, who know thelocal markets but, importantly, are integratedwith the best guys in the US. To an extent wetry to emulate that model, to combineexcellence across the major European marketswith the benefits of a fully integrated networkof Skadden offices in the US and worldwide.”

“It is not about having offices in everyrelevant jurisdiction,” says Simpson. “In fact, itis about not having offices in every relevantjurisdiction. Instead, you have to have acreditable presence in the internationalfinancial centres and the main jurisdictions –UK, France and Germany. One seamless unit iswhat you must strive for.”

The rule on expansion, according to aSkadden type model, is that you do not open anoffice unless convinced it will operate at the topend of the market. Otherwise, the risk is thatprofitability in the partnership will be uneven,preventing the development of a collegiateculture – seen as vital to an integrated practice.

The Skadden model (sometimes referred toas the global boutique) also dictates that mid-market M&A deals are referred to other firms.But the firm needs the client to feel confidentabout going elsewhere; Skadden hasestablished referral links with firms in Europe.“Clients appreciate this sort of referral andtake comfort from knowing that Skadden willrecommend a good firm and an individuallawyer who is a leader in his or her field in theparticular area of law and particularjurisdiction,” says Wells. The referral networkis informal and non-exclusive, but Skaddenmaintains an alliance arrangement withChiomenti in Italy.

The alternative is to go native: establish lotsof offices all over the world, which do a varietyof legal work alongside your core acquisitionspractice. The approach is described by oneM&A partner in London as “dots on the mapand bums on seats”.

The problem is that so-called globaldomination leads to the firm attempting to bethe best at everything, everywhere. This is

unrealistic: a firm cannot hire the best person inevery practice, in every jurisdiction. Often thebest lawyers in Europe are independentlyminded; they will not want to join your firmand will end up on the other side on your deal.

Others say that the debate aboutinternational strategy ignores the fundamentals:US firms have access to a big domestic market,which European firms do not have. US lawfirms therefore do not have the same impetus togrow, and can afford to be more selective intheir approach to international expansion.Different models demand a different approachto expansion, say lawyers, and there is no one-size fits-all approach.

Lawyers are tight lipped when it comes to thefirms having problems with integrating practicesteams across jurisdictions; but most concede itis easier to provide an integrated effort whenyou grow your practice organically, rather thanthrough mergers.

Latitude wantedDeals have certainly become more complexover the past 12 months. The involvement ofdifferent types of M&A players (hedge funds,private equity and infrastructure funds)coupled with the return of strategic buyers,demands a more flexible approach by deallawyers. “The legal and regulatory maze isgetting more complicated, particularly giventhe growth in cross-border transactions,” saysClifford Chance partner David Pudge. “Youcannot simply take national rules off the shelfand apply them to your deal.” The basic dealmanagement skills are the same says Pudge, butthere is now a greater onus on the application ofthose skills to cross-border work.

“Flexibility and an awareness of how theclient wants to operate are vitally important,”says Allen & Overy corporate partner AlanPaul. Paul says that these abilities areimmediately apparent in how a lawyer addressesthe issues: “Lawyers must offer solutionstailored to the approach and position of theirclients. Confidence, experience and resourcesall vary, depending on who you are acting for. IfI was a buyer, I would expect my lawyer not justto be technically proficient, but to be able to tellme how the seller is going to behave, and howto tailor my own behaviour.”

M&A values have been high this year thanks tocongenital economic conditions: steady interestrates, strong earnings, high business confidenceand low rates of corporate default. This may notalways be the case, with some in the marketalready detecting evidence of a slow down andforecasting some big defaults next year.

Stick to yourknittingM&A practices should learn the lessons of Skadden

“Skadden is superbon cross-borderEuropean deals”

UUKK MM&&AARecommended firmsTier 1

Freshfields Bruckhaus DeringerLinklatersSlaughter and May

Tier 2

Allen & OveryClifford ChanceHerbert SmithSkadden Arps Slate Meagher & Flom


EUROPEAN M&A

The argument against that is that the globalmarket is now more balanced, less dependenton the US economy (US domestic M&A nowrepresents under 40% of global volume).Some are predicting that financial institutionswill pick up from where the energy sector leftoff, and produce some big cross-border dealsin Europe next year. Furthermore, oil moneythat would previously have been invested inthe US is now being channelled into Europedue, in part, to Sarbanes-Oxley.

The flight of capital from the US to Europe

has not dampened the performance of US M&Apractices. The top European firms are keenerthan ever on US merger partners. But even the

most profitable European firms will struggle tomake this objective a viable proposition for theelite US operations such as Skadden. DA

EUROPEAN DEAL SIZE

European announced mergers andacquisitions have exceeded $1.2trillion this year. Just three Europeandeals had a combined value of around

$156 billion and leveraged buyouts have risenby 42%. But European law firms are failing tomatch their US counterparts on the average sizeof instructions.

The league tables for European mergersadvice make for familiar reading. Dealvolume tables regularly feature six or sevenUK firms at the top, with the top four placesreserved for the four biggest firms.Composing equivalent rankings for averagedeal size paints a different picture. WhileFreshfields Bruckhaus Deringer heads thelatest Mergermarket league table forannounced transactions (with €310 billionover 215 deals) and Skadden Arps is in fourthplace, the US firm worked on €238 billion ofM&A over just 83 deals.

Skadden is not an exception. CliffordChance has advised on over €243 billion

worth of deals this year, over 221transactions, and Linklaters acted on 220deals worth €258 billion. Sullivan &Cromwell and Davis Polk & Wardwell,meanwhile, acted on just 45 and 24 dealsrespectively, on values of €191 billion and€143 billion. Skadden’s average deal size is$2.8 billion; Freshfields’ average is $1.4billion, while Linklaters and Clifford Chanceaverage $1.2 billion and $984 millionrespectively.

Data from Thomson Financial tell a similarstory, with Freshfields, Linklaters andClifford Chance ranked first to third in termsof value. Freshfields is accredited with 211deals worth $324 billion. Skadden is rankedfourth in Thomson’s table with $246 billionover 72 qualifying transactions.

Some say that the league tables are tooblunt an instrument to use in assessing firms’performance; they fail to discriminatebetween roles of differing significance, andare distorted by big one-off instructions. And

US firms’ figures in particular are distorted bythe size of the US domestic market. Despitethese reservations, by September the tablesrepresent a reliable guide to the topperforming M&A practices.

Average M&A deal size is not an exactcorrelate of profitability, but it is a goodindicator. When the firms in Mergermarket’stop 20 are ranked according to average dealvalue, only one European law firm, BredinPrat, makes the top five. (Italy’s ChiomentiStudio Legale and Bonelli Erede Pappalardo,and Germany’s Hengeler Mueller are theother European firms to figure in the deal sizetop 10.) League tables for firms’ profit perequity partner reveal a similar pattern, withUS firms dominating the industry tables.

So what are the implications of the data forlaw firm strategy? Some in the market thinkthe data demonstrate the power of thenetwork, with firms that did not believe inthe network approach are trying to replicatethe model as best they can. Others think thisanalysis is too simplistic, pointing out thatsuccessful networks take various forms, onlyone of which is the multiple office model.Confusingly, lawyers on each side of thedebate point to the success of Slaughter andMay and Hengeler Mueller to support theirassertions. DA

“If I was a buyer, I would expect my lawyerto be able to tell me how the seller is going to behave”

Are you average?Why US firms make more money out of M&A

Top 20 firms in Europe by total value YTDRank Firm Value Deal

(€million) count

1 Freshfields Bruckhaus Deringer 309,551 2152 Linklaters 257,548 2203 Clifford Chance 242,941 2474 Skadden Arps Slate Meagher & Flom 237,571 835 Sullivan & Cromwell 191,179 456 Allen & Overy 159,047 2127 Davis Polk & Wardwell 143,190 248 Herbert Smith, Gleiss Lutz, Stibbe 143,136 889 Hengeler Mueller 138,712 4610 Bredin Prat 120,805 3011 Slaughter and May 115,179 7412 Cravath Swaine & Moore 114,300 1313 Shearman & Sterling 105,016 6414 Chiomenti Studio Legale 102,477 3615 Latham & Watkins 100,886 6616 Cleary Gottlieb Steen & Hamilton 98,263 7017 Simpson Thacher & Bartlett 96,583 2318 Bonelli Erede Pappalardo 89,224 3619 White & Case 86,297 9020 Debevoise & Plimpton 83,435 36

Source: mergermarket

Top 20 firms in Europe by average deal size YTDRank Firm Average deal

size (€million)

1 Cravath Swaine & Moore 87922 Davis Polk & Wardwell 59663 Sullivan & Cromwell 42484 Simpson Thacher & Bartlett 41995 Bredin Prat 40276 Hengeler Mueller 30157 Skadden Arps Slate Meagher & Flom 28628 Chiomenti Studio Legale 28479 Bonelli Erede Pappalardo 247810 Debevoise & Plimpton 231811 Shearman & Sterling 164112 Herbert Smith, Gleiss Lutz, Stibbe 162713 Slaughter and May 155614 Latham & Watkins 152915 Freshfields Bruckhaus Deringer 144016 Cleary Gottlieb Steen & Hamilton 140417 Linklaters 117118 Clifford Chance 98419 White & Case 95720 Allen & Overy 750


COUNTRY ANALYSIS

Recommended firms Tier 1

Machado Meyer Sendacz eOpice – AdvogadosMattos Filho Veiga Filho MarreyJr e Quiroga AdvogadosPinheiro Neto Advogados

Tier 2

Barbosa Müssnich & AragãoTozzini Freire Teixeira e Silva Advogados

The takeoff in Brazil’s equitycapital markets has been mirroredby a leap in M&A. According toDealogic, in the first 10 months of2006 there were 193 dealsinvolving a Brazilian target, upfrom 123 over the same period in2005. These have been worth$47.6 billion, more than six timesthe value for last year.

Among the highlights this yearhas been Arcelor Mittal’s attemptsto include subsidiary ArcelorBrasil in its global merger. TheBrazilian securities regulator,Comissão de Valores Mobiliários(CVM), ruled in September thatthe parent company must make a

buyout offer to Arcelor Brasil’sminority shareholders. MattosFilho Veiga Filho Marrey Jr eQuiroga was Brazilian counsel toMittal on the merger, BarbosaMüssnich & Aragão representedArcelor.

Machado Meyer Sendacz eOpice was local counsel to UBSon the Swiss bank’s acquisition ofBanco Pactual for a total of $2.5billion. Barbosa Müssnich actedfor Pactual.

Last year Lojas Renner becamethe fist Brazilian company to nothave a controlling shareholderwhen JC Penney sold 98% of thecompany’s stock. Since then, afurther 12 companies have got ridof their controlling shareholder orgroups, raising the prospect oftender offers for the first time.Earlier this year shareholders inPerdigão, which was representedby Mattos Filho, rejected a tenderoffer from rival Sadia andcompanies have begun to adoptpoison pills. Observers are askingthe CVM to clarify its tender offerrules.

The first real M&ABrazil


Allens Arthur RobinsonBlake Dawson WaldronClayton UtzFreehillsMallesons Stephen Jaques

Tier 2

Gilbert + TobinMinter Ellison

Tier 3

Atanaskovic HartnellBaker & McKenzie

Australia’s M&A market hasenjoyed strong growth this year,almost doubling its total dealvalue from the same period in2005.

Private equity fundedtransactions have seen an increasein both size and value oftransactions. While the Januaryto November figures for 2005show 48 deals, with a total valueof $3.2 billion, the same periodfor this year shows a neardoubling of deals, to 85 and athree-fold increase to $9.2

billion, according to figures fromdata provider Dealogic.

However, straight company-to-company M&A has remainedalmost identical in the number oftransactions, while generatingalmost twice the amount ofcapital. The 953 deals fromJanuary to November 2005compare with 977 in the sameperiod this year. But the totalvalue has risen from $39.4 billionto $68.5 billion this year.

Major deals include TollHoldings’ $4.4 billion off-markettakeover of the PatrickCorporation. Clayton Utzadvised Toll Holdings.

The firm is also advisingMayne Pharma on its $2.6 billionacquisition by US hospitalproducts manufacturer Hospira.Rod Halstead is the M&Apractice head. The firm isestablished in tier one of IFLR’srecommended M&A firms thisyear along with Allens ArthurRobinson, Blake DawsonWaldron, Freehills and MallesonsStephen Jaques.

The law firm rankings included in this Review are abridgedversions of the tables in IFLR’s annual guide, the IFLR1000,which is published every October. To see the full rankings, visitIFLR1000.com. A CD-Rom of the full guide will be sent out toIFLR subscribers with the January edition of the magazine.

The IFLR1000 is the foremost guide to the leading financiallaw firms in 114 jurisdictions. Now in its 18th year, the guidecovers the best firms specializing in banking, capital markets,securitization, M&A, private equity, project finance, and insol-vency and restructuring.

As well as ranking firms by practice area – for activitybetween May 2005 and May 2006 – the IFLR1000 containsfeedback from the firms’ clients and competitors about theirscope and competence.

To compile this information, a team of specialist legaljournalists, based in London, New York and Hong Kong,conducted telephone and face-to-face interviews with theleading financial lawyers in each jurisdiction. They also inter-viewed in-house legal counsel, heads of banking, financedirectors, and other clients from a wide range of commercial andfinancial institutions.

In addition, all the firms were invited to submit details of theirpractice. Such details included deal information, specialistareas of practice, and the key contact partners in each juris-diction.

Submitting this information does not guarantee entry intothe IFLR1000’s rankings; nor can firms pay to be included in theguide. Instead of being a comprehensive directory, the guideaims to reflect the market’s opinion of which firms are the mostcapable of practising international financial law in each of thecountries it covers. The result is a unique and authoritativeresource for buyers of financial legal services across the globe.

IFLR rankings

Private equity doublesAustralia


Davies Ward Phillips & VinebergOsler Hoskin & HarcourtStikeman ElliottTorys

Tier 2

Bennett JonesBlake Cassels & GraydonGoodmansMcCarthy TétraultOgilvy Renault

Canadian M&A had a record-breaking 2006 as foreigninvestment and private equitytransactions drove further growth.

Deals targeting Canadiancompanies more than doubled invalue in the first 10 months of2006 compared to the same periodlast year, thanks to some notableinternational bids.

Swiss-based Xstrata finalized its$21.2 billion takeover ofFalconbridge, the largest all-cashoffer in Canadian history, after rivalCanadian bidder Inco was itselfbought by Brazil’s CVRD for $17billion.

National M&A also remainsstrong. Barrick Gold acquiredPlacer Dome for $10.4 billion inthe largest-ever unsolicitedCanadian transaction to becompleted, while Goldcorp boughtAmerican Glamis Gold in a dealworth $21.3 billion.

Law firm Osler Hoskin &Harcourt confirmed itsinternational status, advisingGlamis Gold throughout itsacquisition and representing Texan-based ConocoPhillips in its $10.7billion joint venture with EnCana.The top tier firm made the highestcollective value of completed dealsinvolving Canada for a secondconsecutive year.

Davies Ward Phillips &Vineberg also had a successful year,advising Xstrata and Barrick Goldin their high-profile deals.

The boom comes as part of aglobal increase in private equitytransactions - although NorthAmerica and the UK continue tolead the way, private equity activityis rapidly increasing in continentalEurope, China and India.

Foreign investment drives M&ACanada


COUNTRY ANALYSIS


Bech-BruunGorrissen Federspiel KierkegaardKromann ReumertPlesner Svane Grønborg

Tier 2

AccuraJonas Bruun

Danish M&A had a solid 2006 asmoderate investment from privateequity firms encouraged steadygrowth.

The value of completed dealsinvolving a Nordic country roseby 7.4% in the first nine monthsof 2006 compared to the sameperiod last year, just short of the8.1% increase experienced byEuropean M&A as a whole.

Deals were overshadowed by2005’s big acquisition – TDC’s$16.7 billion takeover by aconsortium of private equityinvestors – the largest leveragedbuyout in European history.

Smaller-scale private equitytransactions continued to drive

M&A in 2006. UnlistedNycoMed acquired AltanaPharma, an Altana spin-off, for$5.8 billion in September, and inAugust CVC Capital Partnerssold DT Group, the buildingmaterials retailer, to Wolseley for$2.5 billion.

Medium-sized deals have alsodominated the public M&Amarket. Danske Bank took overFinnish-based Sampo Bank for$5.2 billion in November 2006,while Phonak announced a $2.7billion deal to acquire GNReSound.

Phonak was advised in its bidby Bech-Bruun, which is rankedin the first tier of IFLR’srecommended firms and had aparticularly successful year actingfor CVC Capital Partners andannouncing the eighth largestnumber of deals in the Nordicregion in the first nine months of2006.

Optimism is high that 2007will bring an increase in thenumber and value of M&A dealsin Denmark.

A little private equity spurDenmark


Hannes SnellmanRoschier Holmberg

Tier 2

Borenius & KemppinenWhite & Case

Tier 3

Castrén & SnellmanFennicaMerilampi Marttila Laitasalo

The Finnish M&A market hasbeen rather slow in 2006 despite aboom in Scandinavia as a whole.The total number of deals fell16.6% in the first 10 months of2006 compared to the sameperiod in 2005, according toDealogic figures. The combineddeal value dropped by acomparable percentage and thelosses have been similarlyproportioned across private equityand company-to-companytransactions.

But there is a large deal inprocess in Finland that willsignificantly change such

comparisons. The ¤25 billionNokia-Siemens joint venture isexpected to complete on January 12007. Clifford Chance has beenjoined by Hannes Snellman inadvising Siemens, while RoschierHolmberg is acting as Finnishrepresentation for Shearman &Sterling on the Nokia side.

Naturally, it is no surprise to seethat the two Finnish firms involvedin the Nokia Siemens Networksventure exclusively make up thetop tier firms for M&A. HannesSnellman and Roschier Holmbergare considered the best in the sectorand both have been rewarded tierone rankings for many consecutiveyears. However, it remains to beseen how the latter’s M&A arm willreact to losing its best-knownpersonality. In mid-2006, Ulf-Henrik Kull was seconded fromRoschier Holmberg in Finland tothe firm’s new Stockholm office.

The second tier for M&A ismade up of two strong practices forboth public company and privateequity transactions: Borenius &Kemppinen and White & Case.

A market in waitingFinland


COUNTRY ANALYSIS


Bredin PratCleary Gottlieb Darrois Villey Maillot BrochierLinklaters

Tier 2

Gide Loyrette NouelSkadden Arps Sullivan & Cromwell

International firms Linklaters andCleary Gottlieb joined domesticrivals Bredin Prat and DarroisVilley in the top tier for FrenchM&A advice the first time. Themessage from the market is thatthere is no longer an upper echelonof French M&A that is off-limits tointernational firms. Respondentsto IFLR’s researchers identified theinflux of private equity money intoFrance as the main reason thesebarriers have come down.

Cleary Gottlieb moves upprimarily for its work representingMittal Steel in its €26.6 billion bidfor Arcelor. Pierre-Yves Chabert ledthe Cleary team on the battle forArcelor, steering his team through a

maelstrom of poison pills, Dutchtrusts, Canadian antitrust filings,government reservations, EUinterference, rival Russian biddersand shareholder activism.

Slaughters best friend BredinPrat also appeared on Arcelor-Mittal, acting as French counsel toArcelor and advised on Suez’sproposed €40 billion merger withGaz de France; the two dealshelped Bredin make the biggestjump in the worldwide announcedM&A league tables of any law firmaccording to Thomson Financial.The Suez deal is occupying a goodportion of the Parisian corporatelaw elite: Darrois Villey is actingfor Gaz de France while Gide isrepresenting the government.

Linklaters’ success is founded onits representation of private equitylooking to invest parts of its recordfund raising in France. Linklaterslast year represented Axa on itspurchase of TLD, BridgepointCapital on its buyout of GroupeMoniteur and WendelInvestissement on its acquisition ofDeutsch Group.

National champions France


Clifford ChanceFreshfields Bruckhaus DeringerHengeler MuellerLinklaters

Tier 2

Cleary Gottlieb Gleiss Lutz Shearman & Sterling

Hengeler Mueller continued tolead the way in German M&A in2006. Standout deals includedadvising Schering on its €16.3billion bid from Bayer, acting forBoc Group on the $14.2 billionLinde deal and representing BearStearns on the financing forMerck’s €11.5 billion bid forSerono. And somehow the firmmanaged to find the time to act asGerman counsel to E.ON on its€48 billion bid for Endesa.

Hengeler’s links to best friendfirm Slaughter and May provedproductive this year: the firmsshared roles on Linde’s bid for Boc,and teamed up again on Frenchinvestment company Eurazeo’s

€3.1 billion acquisition ofEuropcar.

Not to be outdone, the top tierUK firms were also involved inGermany’s highest value deals.Freshfields Bruckhaus Deringerwas arguably the pick of the bunch:it capitalized on private equityinvestment into Germany, advisingKKR and Goldman Sachs on their€4 billion acquisition of Linde’sforklift truck division – Germany’sbiggest ever leveraged buyout.Freshfields also appeared on theother side to Hengeler andSlaughter and May, advising Lindeon its $14.2 billion bid for Boc.

Alongside private equity, the bigstory in European M&A is theemergence of mid-market Germancorporate buyers. Consolidationamong family-owned mid-sizedcompanies has long had potentialfor acquisitions specialists. Lastyear’s strong corporate earnings,influx of private equity andgrowing company confidencemeans 2007 will likely see mid-market takeover values soar.

A race to the middle Germany


A&L GoodbodyArthur Cox Matheson Ormsby PrenticeWilliam Fry

Tier 2

McCann FitzGerald

Tier 3

Mason Hayes & Curran

Irish M&A statistics for the lastyear provide interesting reading.Law firms have not enjoyed amassive growth in work, as thevolume of deals has been staticwhile the overall value soared.

While the number of publicequity deals rose from 95 in thefirst 10 months of 2005 to 98 sofar in 2006, private equity dealsdeclined in the same period, from19 to 15. This correlates with abroad pattern visible in manyEuropean economies this year asprivate equity transactions gentlyreduce in number.

The values of those deals havegrown though. Despite that drop

in the number of private equitydeals, their value leapt from $788million in 2005 to $1.3 billion in2006. The cumulative value ofpublic equity deals nearlydoubled in the same period, from$5.6 billion to $10.6 billion.

The top tier of firms for M&Aremains the same as last year:A&L Goodbody, Arthur Cox,Matheson Ormsby Prentice(MOP) and William Fry. ArthurCox is widely respected as theleading firm in Irish M&A, as itwas in 2005. It cemented thisreputation in the first quarter of2006, when leading lawyer JamesO’Dwyer and his team advised onthe Jurys Doyle Hotel Group’s$1.53 billion purchase by JDHAcquisitions.

Regarding mergers, both MOPand A&L Goodbody found workat the start of 2006 in closing the$1.65 billion merger betweenAllied Irish Bank’s Ark Lifedivision and Aviva’s HibernianLife & Pensions. MOP advisedAllied Irish Bank while A&LGoodbody represented Aviva.

Value not volumeRepublic of Ireland


Bonelli Erede Pappalardo Chiomenti Cleary Gottlieb Steen & HamiltonGianni Origoni Grippo & Partners

Tier 2

Clifford ChanceFreshfields Bruckhaus Deringer

Public equity activity in Italy hassoared over the last 12 months inthe face of a slight decline in thevolume and value of private equitydeals. The growth in the value ofpublic equity means that despite afall in the total number of M&Adeals from 2005 to 2006 theircumulative value has risen from$85.4 billion to $137.8 billion.

Eighty-two private equity dealsin the first 10 months of 2005 fellto 75 in the same period this year.The decline in total value of thedeals fell similarly, from $10.3billion to $9.7 billion.

The value of public equity dealstaking place in Italy over the lastyear has grown remarkably, despite

a fall in the number of transactions.The first 10 months of 2005witnessed 475 deals at a total valueof $75.1 billion. For the sameperiod in 2006, 454 transactionstook place (21 fewer than in 2005)but were valued at $128.1 billion.Public equity deals, therefore,constitute approximately 93% oftotal M&A activity in Italy in thefirst 10 months of 2006.

Cleary Gottlieb was the only firmto enjoy positive movement withinthe firm rankings. It moved fromthe second tier to first, to join 2005incumbents Bonelli EredePappalardo, Chiomenti and GianniOrigoni. Allen & Overy andGrimaldi e Associati (second tierresidents alongside Cleary in 2005)dropped to tier three in 2006.

Cleary stormed into the first tierwith a series of big deals in 2005,including the IFLR M&A Deal ofthe Year. In September the firmrepresented European Capital inAXA Private Equity’s acquisition ofthe household products division ofGuaber, a branded Italian consumerproducts company.

Booming public equityItaly


COUNTRY ANALYSIS


Allen & Overy LuxembourgArendt & MedernachBonn Schmitt SteichenElvinger Hoss & PrussenLinklaters Loesch

Tier 2

Kremer Associés & Clifford Chance

Luxembourg’s M&A market wasdominated by one merger this yearas steel manufacturer Mittal tookover Arcelor for €26 billion ($33billion).

Deals involving the Beneluxregion (Belgium, the Netherlandsand Luxembourg) announced inthe first nine months of 2006 roseby more than 50% compared tothe same period last year. Thenumber of completed deals,however, fell by 64% as the top lawfirms turned their attention toMittal.

Mittal’s hostile bid for Arcelor inJanuary proved controversial,prompting new nationallegislation.

The new law requires anyshareholder who acquires a third ofa Luxembourg company’s votingstock to make an offer to theminority shareholders, and protectsa management’s right to defend itscompany against hostile bidswithout consulting shareholders.

Arcelor yielded to an improvedMittal bid in June, after an attemptto merge with Russian-ownedSeverstal under less favourableterms provoked a backlash fromshareholders. Mittal is expected toown a 43% stake in Arcelor by theend of the second quarter in 2007,uniting the world’s biggestproducer of steel by volume withthe world’s most profitable.

Law firms Bonn SchmittSteichen and Elvinger Hoss &Prussen acted for Mittal andArcelor respectively.

International law firms,however, continue to dominatethe Benelux M&A market, withAllen & Overy making almosttwice as many deals betweenJanuary and September 2006 as itsnearest rival, Linklaters.

All about ArcelorLuxembourg


Anderson Mori & TomotsuneLinklatersMori Hamada & MatsumotoMorrison & FoersterNagashima Ohno & TsunematsuNishimura & Partners

Tier 2

Clifford ChanceFreshfields Bruckhaus DeringerJones DaySkadden Arps Sullivan & Cromwell

M&A activity has increased inJapan, though the total value ofinbound investment has decreased.Private equity-backed M&Aalmost doubled in the number ofdeals, with 127 in January toNovember this year, compared to72 in the same period last year.

However, the value of the dealshas fallen from $11.7 billion in2005 to $10.1 billion. This couldbe partly down to the recent flurryof regulations that have come in asan attempt to encourage foreigninvestment, but have initially

confused and deterred investors. Alan Cannon at Simpson

Thatcher & Bartlett in Tokyo, says:“It may be unhelpful at themoment because things arechanging and people are trying tokeep up with the new regulations.”However, inbound growth isexpected in 2007, and outboundM&A is already thriving. Japanesecompanies have announced $17.5billion worth of overseasacquisitions this year, according toThomson Financial.

International and domestic firmsare competing fiercely for themandates. The larger internationalfirms are trying to recruit localJapanese qualified lawyers, eitherthrough lateral hires or mergers.

Nagashima Ohno &Tsunematsu is among the leadersin M&A, along with Linklaters,Morrison & Foerster, AndersonMori & Tomotsune, CliffordChance and Freshfields BruckhausDeringer. Linklaters had a strongyear, advising Vodafone on the saleof its Japanese subsidiary VodafoneKK, to SoftBank, for $15.1 billion.

The calm before the stormJapan


COUNTRY ANALYSIS


Creel García-Cuéllar y MüggenburgGalicia y RoblesMijares Angoitia Cortés y FuentesWhite & Case

Tier 2

Jáuregui Navarrete y NaderKuri Breña Sánchez Ugarte Corcuera y AznarMartínez Algaba Estrella de Haro y Galván-DuqueRitch MuellerSantamarina y Steta

Tier 3

Baker & McKenzieBasham Ringe y CorreaGoodrich Riquelme y AsociadosHolland & Knight – Gallastegui y LozanoVon Wobeser y Sierra SC

The first 10 months of 2006 hasseen a boom in Mexico’s M&Aactivity. Company-to-companydeals have almost doubled from 65totaling $5.14 billion to 123 dealstotaling $9.77 billion. The rise on

the private equity side does notcontain such dramatic figures, butthe combined deal value has risenfrom $130 million (from eightdeals) to $229 million (from sevendeals).

One of the most impressive dealsin 2006 so far involved a couple oftop tier firms. In May, MijaresAngoitia Cortés y Fuentes advisedCapital International Research andGalicia y Robles represented AdventInternational in their $200 millionjoint acquisition of ControladoraMilano with FMO and BBVA. Tiertwo firm Kuri Breña SánchezUgarte Corcuera y Aznar scored acoup by advising the target in thisdeal. The buyout was funded with$110 million in equity and $90million in debt and was the first-ever leveraged buyout transaction inMexico.

The Mexican market has alsobeen buoyed by the transactions ofCarlos Slim in Latin America andthe Caribbean. Through ownershipof America Móvil and Telmex, hebought three of Verizon’stelecommunication operations.

First leveraged buyoutMexico

Independent consultancy services are crucial at this time for large companies.

We are particularly well-versed in government policies concerning the implementation and enforcement of laws.

The firm’s approach to legal issues is frequently from a transactional perspective.We are generally responsible for assisting the client to negotiate, document andstructure commercial transactions as well as manage all the legal aspects, includ-ing tax issues of these transactions, we provide legal advise in the sale and pur-chase of businesses, recapitalization and reorganization of closely held and pub-licly held corporations, joint ventures, and the organization and financing of start-up companies.

We handle litigation at all judicial and administrative levels in tax, labor, commercialand intellectual property cases among other areas. We are involved in the acquisition, merger and restructuring of foreign owned interests in Mexico. Ourattorneys play an active role in national and international legal organizations andforums.

Contacts:Raul MoreyraTel: (52.55) 5525-6167E-mail: [email protected]

Rosario HuetTel: (52.55) 5207-5203E-mail: [email protected]

Goodrich, Riquelme yAsociadosPaseo de la Reforma 265Colonia y Delegación Cuauhtémoc06500 Mexico, D.F.Apartado Postal 93-Bis06000 Mexico, D.F.

Tels. (52 55) 5533-00-40(52 55) 5525-47-93

Fax: (52 55) 5525-12-27E-mail:[email protected]: www.goodrichriquelme.com

Mexico city recently witnessedthe first ever leveraged buyoutin the country, the $200 million

joint acquisition ofControladora Milano


COUNTRY ANALYSIS


Allen & OveryDeBrauw Blackstone Westbroek

Tier 2

Clifford ChanceFreshfields Bruckhaus DeringerNautaDutilhStibbe

Tier 3

Houthoff BurumaLoyens & LoeffSimmons & Simmons

The Netherlands has seen largeM&A increases in January toOctober (inclusive) compared to lastyear’s results, according to Dealogic.In private equity, the amount ofdeals has fallen by 14, but the totaldeal value has risen by almost threequarters. The past year’s 78 dealsyielded $21.97 billion, but the 64deals closed in 2006 have brought in$35.26 billion.

The transactions on thecompany-to-company side have notbeen as spectacular, but havecontinued to rise rapidly. Last year

saw 372 deals and this has risen to416 in 2006. The deal values followthe same trend: $42.08 billion hasincreased to $74.14 billion. Thismeans that the average deal valuehas grown 38% to $110.44 million.

Once again, the top tier firms inthe Netherlands have had a strongyear. For example, in August 2006,Jan Louis Burggraaf led an Allen &Overy team advising ABN Amro onits ¤1.7 billion div estiture ofBouwfonds to SNS Reaal andRabobank. In addition, De BrauwBlackstone Westbroek is the leadingadvisor on Benelux M&Atransactions. January to Juneinclusive saw the firm advise on 20transactions totalling ¤57 billion.

Tier two has also been chippingin with its fair share of M&A deals.This is especially the case withDutch firm Stibbe, whichrepresented Fortune Brands on the£2.6 billion ($4.9 billion)acquisition of Allied Domecq inJanuary. Eight months later the firmadvised the Dutch State on the ¤1.7billion sale of 87 million ordinaryshares in Royal KPN.

Bigger private equity The Netherlands


Dewey Ballantine GrzesiakWeil Gotshal & Manges

Tier 2

Allen & OveryBaker & McKenzie GrszczynskiClifford Chance Janicka NamiotkiewiczLinklatersSoltysinski Kawecki & SzlezakWhite & Case W Danilowicz W Jurcewicz

In Poland overall M&A activitygrew between the opening 10months of 2005 and the sameperiod this year. While the volumeof both private and public equitydeals grew, only public equity dealsenjoyed an increase in cumulativevalue. The combined worth ofprivate equity transactions actuallyfell from 2005 to 2006.

Public equity activity grew interms of both volume and value.The first 10 months of 2005yielded 244 public equity deals;that figure was 301 for 2006. Thecumulative value of those deals rose

correspondingly, from $5.6 billionto $6.7 billion. Private equityactivity, however, tended towards agreater number of deals at a lowervalue. Twenty transactions in thefirst nine months of 2005 became26 in 2006, but their overall valuefell from $1.2 billion to $962million.

The top tier of 2005 has beentrimmed to just two firms in 2006.White & Case has dropped to thesecond tier, leaving DeweyBallantine Grzesiak and WeilGotshal & Manges as theremaining tier one firms. White &Case’s slip to the second tier hasbeen attributed to client inactivity,while Dewey Ballantine and WeilGotshal have been busy in 2006.

Most notably, in May WeilGotshal advised PKN Orlen in thelargest foreign acquisition inPoland’s history. PKN Orlenacquired 53.7% of shares inLithuanian AB Mazeikiu Nafta,from Yukos International, foraround $1.5 billion. Pawel Rymarzand Rafal Zwierz were the lawyersinvolved in the deal.

Weil Gotshal sets the pacePoland


COUNTRY ANALYSIS


Freshfields Bruckhaus DeringerLeBoeuf Lamb Greene & MacRaeLinklaters White & Case

Tier 2

Akin Gump Strauss Hauer & Feld CGS&H Baker & McKenzieClifford Chance SalansSkadden Arps

M&A in Russia has been anunmitigated success this year. Thetotal number of transactions hasmore than doubled, from 493 to1,111, while the value of thosedeals leapt from $39.7 billion to$65.5 billion.

Public equity has been strongglobally and Russia is noexception. There were 476 dealsworth $39.7 billion in the first 10months of 2005; in 2006 thosefigures were 1,085 and $60.7billion. But it is in private equitythat Russia bucks the global trend,

reporting healthy growth in bothvolume and value of private equitytransactions. Seventeen deals in2005 became 24 in 2006, and thecumulative deal values roseaccordingly from $1.2 billion to$4.8 billion.

The tier one firms remainentrenched and unchanged from2005 to 2006. Salans and SkaddenArps Slate Meagher & Flom bothenjoyed a good year to move fromthe third to the second tier.

In April 2006 Freshfields actedas advisor to the majorityshareholders of food retailerPyaterochka on its merger withrival chain Perekriostok. The $1.1billion deal resulted in the creationof Russia’s largest food retailer.

White & Case has also beenbusy. In June 2006 the firmadvised Nordea Bank (through itssubsidiary Nordea Bank Finland)in the sale of its 23.42% holdingin ZAO International MoscowBank to Bayerische Hypo- undVereinsbank. Nordea received atotal cash consideration of $395million.

Bucking a global trendRussia


Bowman GilfillanWebber Wentzel Bowens

Tier 2

Cliffe DekkerDeneys ReitzEdward Nathan SonnenbergsWerksmans

South Africa experienced a healthygrowth in M&A this year asinternational involvement in themarket increased following Barclay’sacquisition of Absa in 2005, thelargest foreign investment evermade in the country.

Deals targeting South Africancompanies increased in value by22% in the first 10 months of 2006compared to the same period lastyear.

Foreign investors have once againgenerated the year’s most notabledeals. Goldman Sachs acquiredNorilsk’s share in Gold Field, worthR12.3 billion ($1.7 billion), in thelargest equity sale for a company inSouth African corporate history.More recently, Virgin Active bought

Holmes Place, a chain of fitness andhealth clubs, in a takeover worthR1.5 billion.

Law firm Bowman Gilfillanworked on both deals, confirmingits position in the first tier forM&A.

The South African legal markethas also seen its share of mergeractivity. Edward Nathan andSonnenberg Hoffman Galombik’shigh-profile merger in October2006 created Africa’s largest firmbut was only one of severaltakeovers. Cliffe Dekker mergedwith Jeftha Twala, whileWerksmans merged with NalaneManaka.

The legal profession can expectfurther large mergers as SouthAfrican law firms seek to broadentheir international appeal andattract more foreign deals.

Their goal will be furthered bythe 2006 budget’s relaxation ofexchange controls, whichrestricted South Africainvestment abroad. This opensthe door for South African M&Ato become truly international.

Rising foreign interestSouth Africa

Ge

off

:0695-

Am

IMy

Broth

er’s

Ke

ep

er?

To Some People

Success Just Comes Naturally.

At Webber Wentzel Bowens, you’ll find

you’re surrounded by people like this.

Clients and staff who don’t just thrive on

success, they seem to attract it. And

whether you envy them or admire them,

surely the best thing to do, is join them?

Attorneys

Tel: +27 11 530 5000 +27 21 405 5000 www.wwb.co.za

WWWWBB iiss rraannkkeedd aass oonnee ooff tthhee lleeaaddiinngg llaaww ffiirrmmss ffoorr ccaappiittaall mmaarrkkeettss,, aanndd mmeerrggeerrss aanndd aaccqquuiissiittiioonnss bbyy tthhee IIFFLLRR..


COUNTRY ANALYSIS

The M&A market in SouthKorea has benefited from a largeupsurge in deals in the first 10months of 2006 compared to thesame period last year, accordingto data provider Dealogic.

Private equity transactionshave especially improved as theamount of deals doubled and thedeal value came close to doingthe same. January to October2005 saw nine deals yield $4.62

billion, while the same monthsin 2006 saw 21 deals with a totalvalue of $8.73 billion. It is worthnoting, however, that theincrease in volume came with aparallel decrease in the averagedeal size for private equity. Thishas decreased from $513 millionin 2005 to $426 million in thefirst 10 months of 2006.

One important deal came inSeptember when a Macquarie

Bank fund bought a 40% stakein six overseas terminalsbelonging to Hanjin Shipping.The transaction saw the SouthKorean shipping firm receive$870 million whilst remaining incontrol of its Europeanoperations.

C o m p a n y - t o - c o m p a n ytransactions have not been asfruitful, but there has still been avast improvement in total dealvalue. The first 10 months of2006 have seen $39.30 billionworth of deals compared to only$24.97 billion last year.However, some analysts willworry about the average dealvalue. In 2006 there have been999 deals so far; in 2005 therewere 312. That means that theaverage deal value has fallen from$65.24 million to $30.59

million, in a similar fashion tohow the average deal size hasfallen in private equity.

Some analysts have targetedLone Star’s sale of KoreanExchange Bank as an issue.Kookmin Bank has been a longterm potential buyer and haseven signed a contract topurchase. But Lone Star hasshown an intention to withdrawfrom the transaction. Despitethis, there is confidence thatsome form of sale will gothrough soon and that themarket will be buoyed once theissue is resolved.

It must also be noted thatMarch 2006 saw Yoon & Yangmerge with Kim Shin & Yu. Theresulting firm, Yoon Yang KimShin & Yu, is now one of the fivelargest firms in South Korea.

Law firm mergerSouth Korea

Recommended foreign firmsTier 1

Cleary Gottlieb Steen & HamiltonLinklatersSimpson Thacher & Bartlett

Tier 2

Clifford ChanceDavis Polk & Wardwell

Tier 3

Allen & OveryMilbank Tweed Hadley & McCloyPaul Hastings Janofsky & WalkerSidley AustinSkadden Arps Slate Meagher & FlomWhite & Case

Recommended local firms Tier 1

Bae Kim & LeeKim & ChangLee & KoShin & KimWoo Yun Kang Jeong & Han

Tier 2

Horizon Law GroupHwang Mok & Park

Tier 3

Kim & CompanyKim Chang & LeeYoon Yang Kim Shin & Yu

Investing in Korea involves a myriad of issues relating to Korean laws, regulations, filings,reportings, deal structure, risk analysis, tax benefits and consequences, corporate governance,enforceability, indemnification, and exit strategy. Horizon Law Group specializes in advisingforeign companies to sort through the various issues and do so in a professional and costeffective manner.

Horizon Law Group is a leading full-service Korean law firm well known locally andinternationally as it has been involved in major transactions and litigious matters. We were alsorecognized by international legal organizations for significant transactions and disputeresolution.

• Mergers & Acquisition• Finance & Banking• Capital Markets• Corporate & Commercial• Bankruptcy• Information Technology• Intellectual Property• Environment

• Insurance• Taxation• Labor• Litigation & Arbitration• Anti-Trust & Competition• Real Estate & Construction• Securities• Maritime

Practice Areas

The Korea Chamber of Commerce & Industry Bldg. 11th Fl., 45 Namdaemunro, 4-ga Jung-gu Seoul 100-743 KoreaTel: 82 2 6050 1600 Fax: 82 2 6050 1700 Web site: www.horizonlaw.com Email: [email protected]

HORIZON LAW GROUP

“The market will be buoyedonce the Korean ExchangeBank sale goes through and the issue is resolved”


COUNTRY ANALYSIS

Singapore’s M&A market hasgrown in 2006. The total numberof M&A deals stands at 344, with avalue of $11.8 billion, showing animprovement from last year’s $8.2billion total within 300 deals,according to Dealogic.

Private equity deals haveincreased in value, not amount.The first 10 months of 2006 saw atotal of 11 private equity-fundeddeals, with a total value of $874million, compared to 14 dealsworth $513 million in 2005.

Standard M&A deals have alsoincreased, in both value andnumber of deals. There has been$10.9 billion worth of transactionsin the first 10 months of 2006,compared to $7.7 billion in the

same period during 2005. This steady, if not remarkable

growth has benefited law firms inthe area. Clifford Chance Wongand Linklaters Allen & Gledhill areviewed by many as the leaders inthe market, and are both ranked intier one of IFLR’s M&A rankings.

Clifford Chance Wong acted forToll Holdings on the voluntaryconditional cash offer by its whollyowned foreign subsidiary, Toll, forthe remaining shares in SembCorpLogistics. Linklaters Allen &Gledhill advised Temasek on itsacquisition of an 11.5% stake inStandard Chartered Bank from theTan Sri Khoo Teck Puat Estate,with Richard Good representingthe Singapore office.

Slow but sureSingapore

Recommended foreign firmsTier 1

Clifford Chance WongLinklaters Allen & Gledhill

Tier 2

Allen & Overy Shook Lin & BokHerbert SmithMilbank Tweed Hadley & McCloy White & Case

Recommended local firms Tier 1

Allen & GledhillWongPartnership

Tier 2

Drew & Napier Rajah & Tann Stamford Law Corporation


Advokatfirman VingeMannheimer Swartling

Tier 2

Gernandt & DanielssonLinklatersWhite & Case Advokat

Vinge and Mannheimer Swartlingstayed ahead of their rivals in 2006.Both firms made the most ofprivate equity funds looking toinvest in Sweden. Though financialsponsor deal count was down onlast year, value soared by 57% to$12.5 billion. Mannheimer advises3i, Altor and Accent Equity; Vingeacts for EQT, a private equityconsortium of the Carlyle Groupand Providence Equity Partners.

In the standout private equitydeal of this year, Vinge teamed upwith New York firm Davis Polk &Wardwell to advise investmentvehicle Indap on its €2.6 billionacquisition of health careequipment producer Gambro.Gernandt & Danielsson partnerDick Lunqvist advised Gambro.

But private equity is not the onlydriver of the Swedish market: non-financial sponsor M&A more thandoubled on last year according toDealogic. The biggest transactionwas Old Mutual’s €4.8 billionhostile bid for Swedish insurerSkandia. It was also the mostsurprising: hostile bids are rare inScandinavian M&A. Linklatersadvised Old Mutual throughpartner Fredrik Lindqvist.

Linklaters is the only UK-basedinternational firm to establish apresence at the top end of theSwedish M&A market (thoughsome expect this to change). Inaddition to advising Old Mutual,Linklaters’ Krister Hansen acted forCandover Partners on its €1billion buyout of bed manufacturerHilding Anders, while Lisa Edblomand Peter Sundgren advised TritonManagers on its buyout of Germanhousing constructor Kampa.

The only other internationalfirm at the top of the rankings isWhite & Case, with partner ClaesZettermarck’s work for NordicCapital impressing researchers.

Powered by private equity Sweden


COUNTRY ANALYSIS


Uría Menéndez

Tier 2

Clifford ChanceCuatrecasasFreshfields Bruckhaus DeringerGarriguesLinklaters

The volume and value of SpanishM&A activity have grown over thelast 12 months. Four hundred andsixty deals in the first 10 months of2005 soared to 550 in the sameperiod in 2006. The cumulativevalue of the deals rose accordingly,from just over $100 billion to$167.4 billion. The growth wasfuelled by booming public equitytransactions, while private equitydeals declined.

The opening 10 months of 2005yielded 93 private equity deals; thatfigure fell to 89 in 2006. Howeverthe drop in value was moremarked: from $17.9 billion to$11.3 billion. Conversely, thenumber of public equitytransactions rocketed from 367 to

461 in this period, fuelling agrowth in cumulative deal value of$73.9 billion.

Uría Menéndez maintained itshold on the top spot for M&A. Butthe international firms had aproductive year in 2006 and arecatching up with Uría. CliffordChance, Cuatrecasas, Garriguesand Linklaters made up tier twolast year, and in 2006 are joined byFreshfields Bruckhaus Deringer.

Clifford Chance is consideredthe main challenger to Uría’sdominance, but the other firmshave had plenty of success as well.Linklaters has had a strong impacton private equity in Spain led byAlejandro Ortiz, who heads thepractice.

In May 2006 Ortiz’s teamadvised Alteco and Mag-Import(investment vehicles of JoaquínRivero Valcarce, chairman ofMetrovacesa, and Bautista SolerCrespo, respectively) on the $2.7billion competing tender offer forthe acquisition of 26% of the sharesof real estate companyMetrovacesa.

Gaining ground on UríaSpain

NIEDERER KRAFT & FREYATTORNEYS-AT-LAW

Banking

Securities and Finance

Company

Commercial

Mergers and Acquisitions

Competition and Antitrust

Tax

EC Law

IT and Telecommunications

Litigation and Arbitration

Judicial Assistance

Insolvency and Restructurings

Insurance

Intellectual Property

Project finance

Aircraft Finance

Wills, Trusts and Estate Planning

Sports and Entertainment

Environment

Healthcare

Languages spoken: German, English, French, Italian, Spanish, DutchNumber of Fee-earners: 65

Established 1936

Bahnhofstrasse 13 CH-8001 ZürichTel: +41 58 800 8000 Fax: +41 58 800 8080

Web: www.nkf.ch E-mail: [email protected]


Bär & KarrerHomburgerLenz & Staehelin

Tier 2

Baker & McKenzieNiederer Kraft & FreyPestalozzi Lachenal PatryVischerWalder Wyss & PartnersWenger & Vieli

M&A deal value more thandoubled in Switzerland last year,rising to $40.3 billion from $19billion in 2005, according to datafrom Dealogic. Activity remainedremarkably consistent in terms ofdeal volume, with Dealogicrecording 227 transactions for2006 and 225 for 2005, revealingthat M&A instructions wereconsiderably more lucrative forbanks and their legal advisers.

Three law firms continued tolead the way in Swiss M&A: Bär& Karrer, Homburger and Lenz& Staehelin. Lenz & Staehelinemerged as the winner at IFLR’s

European awards in 2006 –taking home the Swiss law firmof the year award for its work oneBay’s acquisition of Skype andFrench energy company Suez’soffer for Electrabel. Morerecently the firm provided Swisslaw advice to the seller onGerman pharmaceuticalcompany Merck’s €11.5 billionbid for Swiss biotech companySerono.

But lawyers surveyed byresearchers of the IFLR1000directory, from which therankings in this Review are taken,found the three firms impossibleto separate for the quality of theirM&A advice.

And the standout M&A dealsof 2006 show that the two othertop tier firms each enjoyed aproductive year: Homburgeradvised cement companyHolchim on its $1.04 billionacquisition of a stake in India’sGujarat Ambuja Cements andBärr & Karrer acted for SwissInternational Airlines on itsmerger with Lufthansa.

On a roll Switzerland

Over 25 years’ of experience and editorial acumen has been honed and invigorated, todeliver more punch and clear thinking in our coverage:

■ Twice as many articles from regulators, in-house counsel and leading lawyers.

■ Now in four dedicated practice sections for M&A, capital markets, financial services, project finance andbanking, each with analysis of the most innovative deals, the trends in the market and the latest legislation.

■ New section on the legal market itself analysing which firms are winning the work on deals, and why -written by IFLR’s journalists in London, New York and Hong Kong.

■ More roundtables collecting opinion and debate on the hot topics, chaired by IFLR Consulting Editor Cliff Dammers, ex-Secretary General of IPMA.

■ Young dynamic Contributing Editors offering a sharp, fresh eye writing candid columns every month on their personal experiences and opinions, from firms such as Cravath Swaine & Moore, Linklaters, and Latham & Watkins.

■ Special feature cover stories looking at one topic every month considered from several angles, with opinions and articles from around the world, and angles from leading players that make you question your outlook.

■ Fresh new look making it easier to find the articles and opinions relevant to you.

See for yourself, take a two week trial at www.iflr.com/freetrial

Or call +44 (0) 20 7779 8999 quoting code 502 to subscribe.

www.iflr.com/clearthinking

INTERNATIONAL FINANCIAL LAW REVIEW is expanding.

“Today saying the transaction is legal is not enough. That’s thestart but not the end of the enquiry.” Ed Greene, Citigroup

Clear thinking for bankers’ counsel. IFLR.

“The Sarbanes-Oxley burden of alisting in the US can be as much as$3 million for foreign companies.”Ronald Kent, Morgan Stanley

us acquisition finance great inventions - iflr.com · us acquisition finance t ... with sungard and...

Documents