Anna Reynolds examines how a City blue blood landed a role on the juiciest corporate deal of 2013 

It was the moment when Macfarlanes' idiosyncratic international strategy paid off – and when Linklaters surprisingly lost out on a role on one of the biggest M&A deals of the decade.

Vodafone's $130bn (£79bn) sale of its stake in Verizon – not only by far the biggest deal of the year but also the largest US-based corporate transaction since 2001 – was always likely to be a feeding frenzy for law firms.

Accordingly, a number of the usual suspects landed roles on both sides of the Atlantic. Wachtell Lipton Rosen & Katz and Debevoise & Plimpton acted for Verizon in the US, while Simpson Thacher & Bartlett took the Vodafone mandate.

In the UK Vodafone plumped for Slaughter and May, a blow to its other most regular City adviser Linklaters. But it was the appointment of Macfarlanes as Verizon's UK adviser that raised the most eyebrows – and proved a feather in the cap for a firm that has stood staunchly against the trend for international expansion. 

The mandate, a first-time instruction from the client, came about through Macfarlanes's long-term relationship with Wachtell – another famously domestic firm. For senior partner Charles Martin (pictured, below), who led on the deal, the moment was a vindication of the Macfarlanes strategy.

"For plenty of clients a global 'one-stop shop' law firm makes good sense," he explains. "However, for some complex work for sophisticated clients, a small group of outstanding independent firms will be a great solution. IT advances, market forces and internal pressure on clients to find smart solutions mean that corporate counsel are confident that this kind of arrangement can work very well. They also don't need to pay what some of them see as an integration premium."

The deal itself had been bubbling for a while. Verizon Wireless was formed in 2000 as a joint venture between Vodafone and Verizon, with Verizon as the senior party. Over the years several discussions had taken place about a potential acquisition of Vodafone by Verizon and, in 2011, there came talk of a possible merger. 

Simpson Thacher had been advising Vodafone throughout the talks and seemed the natural choice when Verizon offered to buy out Vodafone's 45% stake in January 2013. As the deal took shape, Slaughters emerged as the company's English legal advisers. 

While Slaughters and Linklaters are both on Vodafone's panel, the latter has tended to be its go-to firm for large M&A transactions. Furthermore, Linklaters had taken a lead role on Vodafone's acquisition of German cable TV firm Kabel Deutschland, a €7.7bn (£6.6bn) deal taking place at the same time as the Verizon decoupling. But while Linklaters lawyers were wrapping up the German transaction, Slaughters already had a head start on the Verizon deal, having advised Vodafone on various tax transactions it had been considering years before deciding to sell its stake.

Rosemary Martin, Vodafone GC, explains the decision: "It made sense for us to use people who already knew the parties and had worked together before. The team made up from Slaughters, Simpson Thacher and our in-house lawyers worked seamlessly together. It would have been more surprising if we had moved away from the firms that were already advising us on our main US investment and suddenly switched to a global firm."

Verizon took a similar view in appointing Wachtell and Macfarlanes. As one lawyer working on the sale puts it: "This combination is better than any other international offering – Freshfields and Linklaters just don't have good enough US offices."

Unsurprisingly for a deal of this size, there were complications along the way. In March 2013 Vodafone rejected Verizon's initial offer of $95bn (£57.7bn) for the 45% stake, which included the transfer of its interest in Omnitel (a Dutch mobile and telecoms business) back to Vodafone, on the grounds that the price was too low. It suggested Verizon consider an acquisition of Vodafone in its entirety instead. 

Vodafone was clearly a reluctant seller – preferring a bid for the whole of the company, rather than losing its US arm, which was regarded its most important asset. But Verizon continued to bid for the stake, upping its next offer to $120bn (£72.9bn), including $60bn (£36.5bn) in cash, with the rest made up of shares plus the Omnitel business.

Vodafone countered by demanding a purchase price for the stake of $135bn (£82bn), which included $3bn (£1.8bn) for Omnitel – and requested that it be paid entirely in cash.

Over the summer Vodafone's position hardened, increasing its asking price to $140bn (£85.1bn) and requesting further price adjustments to be made for the period between signing the agreement and completion. It also said that it wanted to structure the transaction using a UK-style tax vehicle. 

A lawyer working on the deal suggests the move may have been a way to put off the buyer: "Vodafone wanted to make it as hard as possible for Verizon, with the view at the time being that the tax hit on the sale in the UK would be huge." 

Verizon may not have liked the price hike but the game was far from up. It realised it could buy the Netherlands-based holding company that owned the stake using a Dutch tax vehicle that would be far more efficient.

Verizon put forward a 'best and final offer': an all-in price of $130bn (£79bn). This included Omnitel, which the companies had agreed to value at $3.5bn (£2.1bn), an amount large enough to trigger EU antitrust issues. The move further muddied the legal waters.

A partner working on the US angle comments: "Buying Holdco raised some difficulties as there were other assets underneath the company that were unrelated to the sale and had to be dealt with separately before the transaction. Although it was a private deal, they are both large public companies, which meant there were a number of shareholder approvals on both sides."

Partners on the deal said the tax structure was, ultimately, relatively uncomplicated. It was led out of the UK and US and proved to require little Dutch involvement. However, the sheer size of the deal meant that challenges were inevitable. 

"The complexity in the deal came in structuring and getting the US and UK regimes to work together," says Macfarlanes' Graham Gibb, who worked on the deal alongside Martin. "Verizon is listed in both the US and the UK, which made it more difficult because the US and UK securities laws rules and practices conflict, and we also needed to get documents approved by both regulators. Other areas were simpler; for example, there was no due diligence needed because Verizon already controls the asset." 

At the beginning of August 2013, Vodafone accepted an offer of $130bn and Verizon entered into discussions with JP Morgan and Morgan Stanley – which were advised by Davis Polk & Wardwell – on the terms of a bridging facility to finance up to $61bn (£37.1bn) to Vodafone. Debevoise advised Verizon on the financing. The terms of the stock purchase agreement were finalised on 1 September and the deal closed the following day.

The deal was responsible for making September the top month of 2013 by deal value, with global M&A value in Q3 totalling $653.7bn (£398.4bn) for the year.

The firms working on the deal also benefited, with Macfarlanes jumping to tenth place in the European league tables by value, and 18th globally, for the year, while Davis Polk & Wardwell, Wachtell and Simpson Thacher filled the top three slots in the global value tables. 

While such a mammoth piece of business always results in a spike, this is a deal that has sparked some genuine – and long overdue – optimism among lawyers in the M&A market. This year will show whether or not it proves to be a false dawn.

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Vodafone-Verizon timeline

April 2000 – Verizon Wireless formed, joint venture between Verizon and Vodafone

2004 – discussions over potential acquisition of Vodafone by Verizon

2011 – talks of a possible merger of the two companies

January 2013 – Verizon makes first offer of $95bn for Vodafone's stake; Vodafone turns it down

March 2013 – Verizon instructs Wachtell Lipton Rosen & Katz and Macfarlanes as legal counsel

June 2013 – Verizon ups its offer to $120bn; Vodafone proposes $135bn

July 2013 – Verizon revises its offer to $125.35bn

End of July 2013 – Verizon proposes a 'best and final offer' of $130bn

August 2013 – Vodafone accepts; Simpson Thacher & Bartlett and Wachtell exchange draft agreements; Verizon has discussion with JP Morgan and Morgan Stanley on terms of a bridge credit facility to provide $61bn to finance payment to Vodafone; Vodafone continues conducting due diligence with respect to Verizon

2 September 2013 – Verizon and Vodafone enter into the Stock Purchase Agreement

• Macfarlanes senior partner Charles Martin is speaking at the Legal Week Global Independent Law Firms Forum in London on 20 March