Wall Street M&A Lawyers Vie for Piece of Shrinking Deals Market

Sullivan & Cromwell was the top legal adviser for mergers and acquisitions in the first quarter, as overall deals activity continued to plummet.

S&C worked on more than $61 billion worth of deals as principal adviser, according to Bloomberg league tables data. Wachtell, Lipton, Rosen & Katz followed with more than $57 billion in deals work.

“In times of perceived economic instability, it’s natural that you would see a flight to quality, and so the big firms that are most seasoned at handling large M&A transactions are probably getting an outsize share of the work right now,” said Melissa Sawyer, global head of mergers and acquisitions at Sullivan & Cromwell.

M&A activity dipped for the fifth consecutive quarter, thanks to rising interest rates and regulatory pressure. Global mergers and acquisitions volume reached $787.7 billion for the quarter, down 38% from the same three-month stretch last year.

Sullivan & Cromwell and Wachtell were propelled by work on Pfizer Inc.’s $43 billion acquisition of cancer drug maker Seagen Inc., the largest deal announced so far this year. S&C advised Seagen, while Wachtell represented Pfizer.

“The data is very clumpy because one or two deals can probably change the rankings quite a bit, just because there hasn’t been a lot,” said David Lam, a Wachtell corporate partner who advised Pfizer.

Other large deals in the quarter include Japan Industrial Partners’ $15 billion acquisition of Toshiba Corporation. Microsoft Corp. $10 billion investment in OpenAI Inc. and the CVS Health Corp.’s $10.6 billion acquisition of Oak Street Health Inc.

Banking Uncertainty

The banking crisis has also kept Sullivan & Cromwell busy.

Lawyers at the firm are working on several matters stemming from recent bank failures in the US. S&C also advised Credit Suisse Group AG in the Swiss bank’s $3 billion sale to UBS Group AG.

The crisis, and some of the deals designed to stop other banks from failing, are likely to ratchet up attention from regulators.

The UBS-Credit Suisse deal is already raising antitrust concerns, said Emily Rouleau, a legal analyst at Bloomberg Law.

“You have the emotional reactions to it outside the banking industry, and then different practical considerations for banks themselves if they’re looking to participate in M&A activities,” Rouleau said.

Bright Spot in Sciences

Companies with cash on hand are shielded from high interest rates and other conditions that make borrowing money to finance transactions expensive.

The value of deals in healthcare products increased a whopping 178% compared to the same time last year, according to Bloomberg data. Biotechnology jumped 89.2% over the same period. Both sub-industries benefit from the ability to finance their own deals.

“Life sciences is very active right now,” said S&C’s Sawyer. “I’ve been seeing a lot of activity in that sector, a lot of calls from clients who are starting to think about potential deals there. I think it’s early days for a lot of those transactions.”

Pfizer has cash to make deals from the sale of Covid vaccines and therapies, Wachtell’s Lam said.

Deals in basic materials, which includes mining and chemicals, increased 55% over the year, according to Bloomberg data. Utilities deals, which include electric, gas and water, increased 63.7%. Meanwhile, technology and financial deals both plummeted 60%.

Fears of long and complicated regulatory timelines have stifled dealmaking across industries, according to M&A lawyers. They say deals that would have gone through without a hitch in previous years are now facing additional antitrust scrutiny, which makes transactions slower and more expensive.

“Strategics are cautiously looking at transactions where there might be a very long regulatory timeline, or resistance from the antitrust regulators,” said Ann Beth Stebbins, an M&A partner at at Skadden, which was the primary adviser on 39 global deals worth $24.5 billion in the first quarter, according to Bloomberg data.

“You don’t want to announce a deal if it is not ultimately going to get done, or it’s going to take you a year and a half, or two years, to get done,” she said.