M&A 2011 – despite the gloom, global bid activity edges upwards with number of European deals up 9%

Allen & Overy (A&O) has emerged as the top-ranked UK M&A adviser in 2011 in the strategically key Asia-Pacific market, securing an apparent vindication for its sustained push in the region.

Figures from Legal Week's exclusive data provider Mergermarket show A&O leading the Asia-Pacific rankings (which exclude Japan) in value terms after advising on 53 deals with a combined value of $50.5bn (£32.7bn) in 2011, well ahead of international rivals. The firm was also the highest ranked City practice according to number of Asia deals, in sixth place overall.

In a year that saw numerous UK law firms invest heavily in the much-touted Asia and Australia markets, A&O secured roles on three of the 10 largest deals in the region last year, including brewing giant SABMiller's multibillion-dollar bid for Australia's Foster's.

A&O Asia corporate head Gary McLean commented: "We've done a lot of Chinese outbound work, particularly negotiations on a bilateral basis and intra-Asia trade has also been buoyant, looking at areas like India-Australia, China-Australia and Japan-Australia – lots of that pushed by energy and resources."

Yet despite continued optimism and investment in Asia by leading UK and US law firms, Mergermarket figures show that activity levels dipped slightly, with 2,077 announced deals over the year compared with 2,212 in 2010.

Outside Asia, arch-rivals Freshfields Bruckhaus Deringer and Linklaters vied to lead the European rankings, with Freshfields heading both value and volume rankings for 2011, thanks to roles on 220 deals worth $215.8bn (£140bn).

Linklaters advised on 202 deals worth $192.2bn (£124bn) to place second by value and third by volume. Sullivan & Cromwell, A&O and Shearman & Sterling make up the rest of the top five by value in Europe. By volume, DLA Piper, Linklaters, CMS and Clifford Chance (CC) respectively comprise the rest of the top five. Linklaters and DLA Piper topped the UK value and volume rankings respectively.

European M&A activity increased by 9% in 2011 compared with 2010, with deal values rising by 5.3%. However, the second half of the year saw volumes drop significantly as the full impact of the eurozone debt crisis was felt. The UK saw a modest improvement in announced bids, with a 10.4% increase in deal activity on 2010 to hit a total of 1,016 announced deals, though total deal value fell slightly to the lowest level since 2001.

charlie-jacobsActivity remained subdued globally, though a number of markets saw increases on 2010 and bid activity remains well up on 2009, when deals plunged in the wake of the banking crisis and a steep recession. Overall, global deal activity was up 2.7%, with 12,629 announced bids on Mergermarket's methodology.

Linklaters corporate partner Charlie Jacobs (pictured) commented: "The first six months of 2011 were alright on the M&A front but then summer passed and volumes slowed due to all the macro-economic uncertainty. There is still uncertainty but we are more confident than during the second half of 2011 – there is a lot of pent-up M&A activity and companies are in better shape than at the start of the last downturn. Some consolidation is inevitable."

Sectors expected to remain active in 2012 include financial institutions, mining and natural resources as well as retail, where restructurings and administrations such as La Senza and Blacks are set to prompt M&A opportunities.

CC UK corporate head Simon Tinkler (pictured top) told Legal Week: "We'll see a lot of financial sector reshuffling, a lot of restructuring on the UK high street. There is concern over the slowdown in Asia, but I think activity there will remain strong nevertheless."

Elsewhere, Mergermarket's M&A rankings show Sullivan & Cromwell and DLA Piper topping the global tables by value and volume respectively, with US law firms once again dominating the worldwide tables. Linklaters was the highest ranked UK-based firm globally by value, ranked in sixth place.

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More partner reaction to the rankings

Freshfields corporate head Edward Braham: "We're seeing a lot more cross-border work and work in high growth markets, such as Asia. More than a third of what we do now is in high growth markets and the reported drop in deal activity in Asia doesn't tally with our experience there of high levels of China M&A, joint ventures and private equity deals. Asia is still very busy and the Middle East has picked up strongly since October.
 
"For what ought to be a dead market it's remarkably busy at the moment – there's just higher risk around the transactions getting done. With corporates it's all about how confident boards are – there are bound to be assets coming onto the market which they will want to secure; it's whether they have the confidence to do it. Restructuring will pick up and that will lead to M&A and there's a lot of pent up demand in the private equity world."
 
Linklaters corporate head Jeremy Parr:  "You need confidence and cash or leverage – the list of issues which dent confidence is very long; reduced economic growth, sovereign debt issues, the Eurozone crisis, regulatory change and stalled growth in the emerging markets are not conducive to huge levels of M&A activity. That said the same was true last year and there are still deals happening and hopefully more pent-up activity will be released.
 
"There's a growing question mark over whether it's appropriate to look back at 2007 boom times for comparisons – those were always fuelled by a few mega deals and it's hard to envisage those coming back even if confidence returns."

Click here for the yearly UK M&A activity chart and click here for the top Asia-Pacific and top UK M&A advisers for 2011.