The development of a top-tier New York-based, US M&A practice is central to the strategy of Clifford Chance (CC). Deals involving a US company accounted for more than 40% of global M&A activity in 2006 and the total value of US M&A transactions grew faster than the rest of the world. Looking ahead to the remainder of 2007, it seems likely that activity will, if anything, escalate as there has already been a significant number of US mega-deals and the increasing cross-border nature of US M&A will continue.

CC's strategy during the past three years has been to support the US practice in playing an assertive role in a vibrant market that is being driven by a number of factors. Globalisation is a powerful influence and CC's Americas M&A practice has been involved in large numbers of cross-border deals during the past year. A mix of economic factors are also playing their part, none more so than the massive levels of liquidity in the market.

Whereas previously there might have been five to 10 banks available to provide debt financing for each deal, debt finance is now much more widely available, thanks to the scores of hedge funds that have entered the market. On the equity side, private equity and hedge funds firms are major players. With ever-larger funds being raised and more hedge funds willing to make private equity-style investment, financial sponsors have enormous amounts of capital available, enabling them to chase deals of increasing size and complexity. This has given them a pronounced advantage in a market where growing numbers of deals are made with cash, rather than stock. Private equity houses made five of the six largest acquisitions announced in the US in 2006, and with investment in mega-funds accelerating, these firms will have no shortage of capital needing to be put to work in 2007 and beyond.

The amendments by the Securities & Exchange Commission (SEC) late last year to its longstanding tender offer 'best-price' rule are expected to have a positive impact on the use of tender offers in negotiated public company acquisitions. These have been on the decline in recent years, mainly because of unfavourable rulings in litigation over whether employment compensation or other arrangements with target company managers violate the SEC's best price rule. As a result of the SEC amendments, which help to delineate the rule's limits, there should be renewed growth in the use of tender offers which, in public M&A deals, present a number of benefits – increased speed, potentially greater certainty of closing and the likelihood of simpler disclosure and lower cost.

Looking ahead, when the next downturn arrives – as it inevitably will – we expect to see a very different restructuring market. We anticipate CC will be advising on deals which, thanks to the unprecedented levels of liquidity, will provide sponsors with much greater flexibility to reach solutions out of court. Changes in the debt markets should also provide ways for companies to avoid defaults that were unavailable in the last downturn. This should lessen the number of bankruptcies resulting from distressed deals.

Strategic priorities

CC's strategy for becoming a significant presence in the US M&A market is built on three key pillars. First, leveraging the firm's global network to advise on high-profile inbound and outbound cross-border deals. No deal better exemplifies this aspect of CC than our representation of Lenovo in its acquisition of the IBM PC business. Second, developing our profile and depth of expertise in the domestic M&A market by actively seeking to grow our representation of US corporates. We recently hired the co-head of M&A from King & Spalding to help us further this objective. And third, drawing on our leading reputation in private equity markets outside the US to advise on private equity deals – one of the principal drivers of current activity in the US market – such as the Tommy Hilfiger acquisition.

Our core team of approximately 10 partners and 30 associates has achieved great success in each of these three priority areas. Cross-border transactions in which we have been involved recently include advising TDC on the US aspects of its $12bn (£6bn) acquisition by Apax, Blackstone, Carlyle, Kohlberg Kravis Roberts & Co and other private equity firms and advising Barclays on the sale of its stake in First Caribbean to CIBC for $1bn (£506m). We have made inroads into domestic M&A, advising American Power Conversion on its $6.1bn (£3bn) acquisition by Schneider Electric, Merrill Lynch on its acquisition of First Franklin for $1.3bn (£658m) and SL Green Realty Corporation in connection with its $4bn (£2bn) acquisition of Reckson Associates Reality Corporation. And in the private equity sphere, we have recently advised Apax on its $1.6bn (£809m) acquisition of Tommy Hilfiger Corp, as well as advising Ashmore Energy International on its acquisition of Prisma Energy International for $2.9bn (£1.4bn).

We made strategic decisions to invest in our New York practice and transactional work in general. We have grown the number of lawyers in our US practice by 20% in the last year (with greater growth in revenues and profitability). We plan to grow by a further 35% over the next two or three years. Since January, 2006, the US practice overall has added 12 partners and counsel laterally, promoted eight internal candidates to partner and relocated two partners to New York from outside the region.

Our tactic has been to target a defined type of hire: all hires – whether lateral or associate – must fit in with our global culture. They have to be comfortable working from a global platform, where teaming is the defining factor (as compared to the 'eat what you kill' philosophy that characterises many of our US-based competitor firms). US firms with lockstep compensation such as ours do not tend to take on many lateral hires, so we stand out in the US market. Looking ahead, once we have established strength and depth in our priority areas, organic growth will define our future development.

Punching above our weight

Without doubt, the backing of the firm's global network has helped us to punch above our weight – we were ranked eighth by M&A deal volume in North America by Mergermarket, as well as being the only non-US based firm to achieve a top 10 placing in the The Vault's US M&A Prestige Rankings (based on a survey of 15,000 associates at 150 US law firms). CC had the sixth-most top 10 rankings in the American Lawyer's most recent Corporate Scorecard. No other magic circle firm was in the top 15. In the last year, we have advised on more than a dozen $1bn-plus deals. These deals were led by six different partners, underlining the spread of capability within our M&A practice.

For clients and potential recruits, this network continues to be an important differentiator for us. Most of our US-based competitors have strength in New York and perhaps one or two non-US jurisdictions. None has anything approaching our level of global coverage. Meanwhile, the other magic circle UK firms, while having comparable levels of non-US global coverage, have at most a token M&A presence in New York. This is proving to be a strong selling point for CC in an increasingly cross-border marketplace.

During the past 12-18 months, the US market has become increasingly receptive to our proposition. The breadth of deals we have undertaken shows the extent to which this is happening. Our core capabilities – among domestic corporations, corporations with a network relationship and a US presence, private equity firms, financial institutions and insurance companies, as well as in distressed M&A – position us strongly to take advantage of the trends driving the US M&A market.

Brian Hoffmann is co-head of Clifford Chance's M&A practice in the US.