As M&A deals wane, law firms compete for shares of shrinking pie

Oct 4 – The cooling of the global mergers and acquisitions market continued in the third quarter of this year, with an accompanying slowdown in the M&A advisory work that helps power many of the world’s largest law firms.

The combined value of global announced M&A deals through the first nine months of 2022 reached $2.81 trillion, down from more than $4.2 trillion for the same period last year, according to the latest figures from Refinitiv.

New York-founded Sullivan & Cromwell once again advised on the largest share of that total, working on $373 billion worth of announced deals in the first three quarters of 2022, according to Refinitiv. That is down about 40% from this time last year, when the firm had handled more than $619 billion in deals.

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In all, 20 of the top 25 M&A legal advisors ranked by Refinitiv saw year-over-year declines. Some firms — including Allen & Overy; Fried, Frank, Harris, Shriver & Jacobson; Paul, Weiss, Rifkind, Wharton & Garrison; and Weil, Gotshal & Manges — saw their combined deal values ​​drop 50% or more, according to the Refinitiv data. Representatives for the firms had no immediate comment.

The figures partly signal a return to earth after a record-breaking year.

“We’re in a resetting time period right now, where we’ve had a pretty tremendous historical run of eight consecutive quarters of $1 trillion or more in announced M&A activity,” said Matt Toole, director of deals intelligence at Refinitiv. M&A activity this year is on par with 2019, he said.

Some law firms fared better year-over-year. Cleary Gottlieb Steen & Hamilton, which ranked 29th this time last year with $124 billion in advised deals, cracked the top 10 with $175 billion so far this year. O’Melveny & Myers ranked 54th this time last year with $50 billion in deals but broke into the top 25 with $90.8 billion in advised deals through the third quarter this year.

Most of Refinitiv’s top 25 firms saw declines in the number of deals they handled along with their combined value. Goodwin Procter advised on the most global announced deals this year: 819 transactions through September, with a combined value of $98 billion. In the same period last year, the Boston-founded firm worked on 887 deals worth $147 billion.

Eric Swedenburg, head of Simpson Thacher & Bartlett’s M&A practice, said in an email he would “not be surprised if M&A remains subdued for the remainder of the year, but deals with a strong strategic rationale will continue to move forward.”

Swedenburg’s firm ranked second in terms of deal value, advising on $309 billion of announced deals worldwide so far this year, a drop from $427 billion at this point last year.

Rising interest rates have forced lenders to pull back from financing large deals. And despite a soaring dollar, US companies have not been snapping up foreign targets amid ongoing geopolitical tensions.

Asked about the declines since last year, Melissa Sawyer, global head of Sullivan & Cromwell’s M&A group, said the changed climate calls for especially skilled counsel. “In this market, clients need good strategic advice, not just deal execution capabilities,” she said in an email.

Read more:

Global dealmaking plunges as financing market hits rock bottom read more

Pandemic recovery fuels deal crash as third-quarter M&A breaks all records read more

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David Thomas

Thomson Reuters

David Thomas reports on the business of law, including law firm strategy, hiring, mergers and litigation. He is based out of Chicago. He can be reached at [email protected] and on Twitter @DaveThomas5150.

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