Deal lawyers' mood brightens as 2009 marks bottom of market
Exactly 12 months ago this column suggested that the M&A deal drought of 2009 would be reminiscent of the post-dot com gloom in 2003, and it was true. This year, however, is harder to call. The latest figures from Legal Week's exclusive data provider Mergermarket confirm what all M&A lawyers knew: 2009 was a bleak year for transactional lawyers, with global deal values just shy of $1,800bn (£1,103bn) compared to $2,427bn (£1,488bn) in 2008. The good news is that most signs suggest that the bottom has already been passed, with the final quarter of 2009 managing a modest if fairly broad revival. That revival looks set to trudge into 2010, even if there is little evidence of a dramatic rebound.
January 19, 2010 at 09:12 PM
4 minute read
2010 begins with optimism as January heralds a revival in deal activity
Exactly 12 months ago this column suggested that the M&A deal drought of 2009 would be reminiscent of the post-dotcom gloom in 2003, and it was true. This year, however, is harder to call.
The latest figures from Legal Week's exclusive data provider Mergermarket confirm what all M&A lawyers knew: 2009 was a bleak year for transactional lawyers, with global deal values just shy of $1,800bn (£1,103bn) compared to $2,427bn (£1,488bn) in 2008. The good news is that most signs suggest that the bottom has already been passed, with the final quarter of 2009 managing a modest if fairly broad revival. That revival looks set to trudge into 2010, even if there is little evidence of a dramatic rebound.
Even global private equity buyout activity, coming off its lowest base since the mid-1990s, picked up significantly in the last quarter, with 354 announced deals worth $45.4bn (£27.8bn). This year should herald the return of the leveraged deal as credit markets appear to have loosened up sufficiently to improve sponsors' access to debt. Deals will, however, be very heavy on the equity commitments – Apax's £975m purchase of Marken being a case in point – but that's to be expected.
Transactions like Kraft's hostile bid for Cadbury have proved to be just the kind of marquee deal the market was waiting for. However, it is telling that the largest European deal of last year was HM Treasury's $41.9bn (£25.7bn) stake in Royal Bank of Scotland.
Clifford Chance corporate head Matthew Layton (pictured above) comments: "The M&A market was distressed for the whole of last year but we did see some sort of uptick towards the year end and we are now seeing clients becoming more cautiously optimistic and looking for strategic opportunities that should drive activity levels over the next six months."
Public floats are also set to come to the fore again in 2010 after a late 2009 string of deals in Asia thawed the market a little. Still, many veteran deal lawyers think plenty of initial public offering (IPO) chatter will come to nought. As one partner says: "Every firm you speak to has about 10 IPOs on the block but no one knows how many will actually get away."
But even if the IPO market remains shaky, 2010 will surely continue a strong line in refinancing and restructuring, and January has already proved a busy month for companies looking to tap the bond markets. David Barnes, Linklaters corporate head, comments: "What we can see is that after two years some assets are in the wrong place. If that congestion clears this year, then I think we will all be a lot happier."
If the deal situation in Europe is on the cusp of returning to a semblance of normality then Asian markets are already not that far off full tilt. It was by far the best performing region globally last year with deal values picking up by over 80% compared to the fourth quarter of 2008. The domestic M&A market in the US also picked up towards the end of last year, with values not too far behind 2008 at $769.4bn (£471.7bn) compared to $827.9bn (£507bn).
With even the battered Alternative Investment Market and corporate real estate markets showing signs of life, the prospects for 2010 look much brighter than last year, barring some kind of major market shock. Fingers crossed.
[asset_library_tag 633,Click here for full details of 2009's top deals]
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