The rollercoaster continues lurching up and down. For private equity (PE) lawyers, it has been an eventful few years with advisers hard-pushed just to keep up with frenetic deal-doing during the boom years, only for the market to go into a sustained slump after 2007.

The industry went on to stage something of a modest comeback through 2011, but the latest indications confirm that buyout activity remains volatile to say the least – and 2012 has unsurprisingly proved a mixed year.

Deals have slumped for the fourth consecutive quarter, with PE transactions completed in Q3 standing at 77 – the lowest since Q2 2011, according to BDO's quarterly Private Companies Price Index and Private Equity Price Index.

The better news for M&A lawyers is that exits and overall deal volumes look more healthy as trade buyers, many of them with capital to spare after four years of hoarding cash, have stepped back into the market. On BDO's reading, the number of private company trade acquisitions closed in Q3 2012 tallied at 466 – its highest since the same period in 2011.

It is a similar picture according to research from Mergermarket. M&A stats for Q3 2012 show that European buyout activity totalled $62.5bn (£39.1bn), dropping 29.5% from the $88.6bn (£55.4bn) total from the same period last year, while global buyout exits amounted to $203.3bn (£127.3bn), down 16.4% in Q3 2011.

Reasons for the tough-going hardly need recounting: global uncertainty and the eurozone jitters hitting confidence; limited availability of debt funding; and the continued mismatch in pricing expectations between buyers and sellers. In addition, fund raising in general remains problematic.

Yet the picture is not as gloomy as the headline numbers first suggest. A glance at recent transactions shows a string of major deals have been done since the summer, with houses such as Carlyle, Kohlberg Kravis Roberts (KKR), Bain Capital and Permira doing significant deals.

Such trends underline the increasing consensus among private equity advisers that the market has evolved since the credit boom to materially favour top tier houses that have better access to funding and more room to shop globally, at the expense of mid-market shops. Mergermarket research confirms the extent to which active players such as Carlyle, Blackstone, KKR and EQT Partners are dominating deal activity in 2012.

chris-haleTravers Smith's Chris Hale (pictured) comments: "In the long term, I expect private equity will remain an important part of the portfolios of asset managers and others. They are unlikely to turn their back on what have, in many cases, been their best performers." 

As Simmons & Simmons funds partner David Williams observes: "One thing that's clear is managers today need to be able stand out from the competition – and law firms working in this sector need to be able to do the same."

There is also much riding on the private equity sector's expansion in Asia, though tremors in the initial public offering market in the region are problematic for the industry while sizeable deals still remain sporadic.

According to Mergermarket stats, the industrials sector made the top global exit deal of Q3 this year when Japanese air conditioning manufacturer Daikin Industries took over US rival Goodman Global from private equity firm Hellman & Friedman for $3.7bn (£2.3bn). Blake Cassels & Graydon advised Daikin, while Simpson Thacher & Bartlett represented the seller.

SJ Berwin head of corporate Steven Davis gives this take on the market: "A sign of increasing confidence is that the number of sectors sponsors are keen on is broadening. At the height of the crisis, healthcare and infrastructure were main focuses. But we have more recently seen private equity again branch out into the wider economy in terms of the number of consumer transactions and services sector deals increasing. This broadening spectrum should hopefully improve deal volumes." 

What all this means for lawyers is that providing you have the right kind of clients – admittedly, a very big if – private equity remains a strategically key area for deals teams, be they in New York, London or Hong Kong. Indeed, there has been no sign of buyout specialists moving down the pecking order over the past five years at benchmark legal practices focused in the area.

Weil Gotshal & Manges London managing partner and corporate partner Mike Francies sums up the mood: "There is still a lot of money to be spent out there from a wide range of private equity houses, so we remain mildly optimistic that, although all the figures show a decline in deals this year, we can expect an increase in deals next year."