Kirkland & Ellis advised companies on more than $443 billion worth of mergers and acquisitions transactions last year, surpassing Wall Street’s Wachtell Lipton Rosen & Katz and other law firms as the largest global dealmaker.
Chicago-founded Kirkland handled 946 transactions in a record-breaking year for global M&A activity. Perennial top dealmaker Wachtell came in second in deal value by principal with 105 transactions worth nearly $403 billion, while Latham & Watkins, Simpson Thacher, and Skadden Arps Slate Meagher & Flom rounded out the top five.
Global M&A activity reached $5 trillion last year, up from $3.5 trillion in 2020, according to Bloomberg’s M&A advisory league tables. The top twenty firms collectively worked on nearly $3.7 trillion worth of deals this year, or nearly 75% of all transactions.
Law firm M&A leaders said continued investor confidence and “cheap money” drove the pace of transactions across sectors and geographies, which is expected to continue into 2022. Deals in the technology and life sciences sectors also contributed to the heightened activity, lawyers said.
“Our current view is that we don’t foresee any significant slowdown in the first six months of the year,” Latham & Watkins global co-chair of M&A Luke Bergstrom said in an interview. “That can obviously change if the financing markets tighten up or if there’s another change in the way the pandemic impacts dealmaking or the economy generally.”
Simpson Thacher pulled ahead of the pack in the third quarter, advising on nearly $342 billion in deals over the first nine months of the year. The firm missed the deadline for submitting deals data for the final quarter. Simpson Thacher said the data does not include several deals the firm worked on in the fourth quarter.
Billion Dollar Deals
Kirkland sealed the top spot by working on a wide range of deals, including a large number of private equity transactions.
“In light of how broad and deep our client base in our industry is, our platform really is set up to go where the market goes,” corporate partner Sarkis Jebejian said in an interview. “If people are doing big deals, we’re set up to do big deals. If our clients are doing medium or small deals, we’re set up to do that as well.”
Kirkland—a fast-growing behemoth that is the world’s largest law firm by gross revenue—worked on nine times as many deals as Wachtell to surpass the firm in total transaction value.
Wachtell was second to only Wall Street competitor Cravath in terms of average value per deal among the top firms at $3.8 billion and $4 billion, respectively. Their averages were nearly double the average deal size of any other firm in the Top 10.
“What we are very attuned to is year-over-year market share,” Wachtell executive committee co-chairman Daniel Neff told Bloomberg Law in October. “Are we appearing in the most significant deals on a constant basis? That’s what we are managing toward.”
Private Equity Persists
More than half of Kirkland’s transactions involved private equity, according to Bloomberg data. The same is true for firms like Simpson Thacher and Latham & Watkins.
Private equity deals, including minority investments and venture capital investments, nearly doubled between 2020 and 2021, according to Bloomberg Law legal analyst Grace Maral Burnett. Those transactions totaled $2.1 trillion last year, compared to $1.2 trillion in 2020 and $1.1 trillion in 2019.
As of early August, deals involving at least one private equity party comprised roughly 40% of all transactions last year as investors sought new growth opportunities.
“Private equity sponsors and other sources of private capital had and continue to have a significant amount of ‘dry powder,’” said Skadden global co-head of transactions Steve Arcano. “All of those capital sources are certainly actively contributing to the environment.”
Deals in the technology and software sectors also drove much of the year’s M&A activity, firm partners said. Many of those deals also involved private equity.
“If you look at some of the major private equity firms, those that are focused on technology and software were extraordinarily active in the market this year,” Kirkland & Ellis corporate partner Ed Lee said.
Lee and Jebejian said increased shareholder activism after a slowdown in 2020 also contributed to the high volume of M&A last year.
“As soon as people got out of the eye of the storm, the activists would come back with a vengeance because they would look at companies and say, ‘Well, the uncertainty around Covid was really a test. Who made it through really well, and who made it through less well?’” said Jebejian. “In some ways, that was how they picked what their next round of opportunities could be.”
Between a booming technology sector and active shareholders, law firm leaders said they don’t expect the pace of M&A activity to slow in 2022. They also acknowledged some risks.
“The savings that people built up during 2020 and part of 2021 and in the stimulus packages that governments enacted, all of those things have contributed to the environment that we’re in now,” Latham & Watkins’ Bergstrom said.
As those savings and available dry powder burn off, Bergstrom said, there could be a slump in deal activity.
“But you don’t know if that’s all going to end up being a net negative,” he said. “We’re trying to be cautious in our approach. We see in the immediate near term, the next six months, that it’s likely to stay extremely busy. But beyond that, we’re not entirely sure.”