Weil Leads IPO Work That Hits Five-Year Low on War, Volatility

Initial public offering proceeds fell to at least five-year lows in the first quarter as the Ukraine invasion and a volatile stock market lessened appetites for share sales.

Global IPOs raised less than $30 billion in the first quarter, down nearly 90% from a record of more than $260 billion in the same period of 2021, according to data compiled by Bloomberg.

The slowdown offered a welcome breather for firms that worried about burnout and attrition from the torrid pace of IPOs last year. It also marks an abrupt turnaround for transactions that drove Big Law operations to record profits.

Law firms nonetheless say they are on track to grow the practice area.

“A quarter doesn’t make the year, that’s something for everyone to recognize,” said David Goldschmidt, global head of Skadden’s capital markets group. “The economy is strong.”

In the U.S., Weil Gotshal & Manges led Big Law firms by the value of funds raised as issuer’s counsel for IPOs in the first quarter, Bloomberg data show.

Virtually all Weil’s credited work came from advising private equity firm TPG Inc. on its January IPO that raised $1 billion. (Maples & Calder primarily advises on offshore aspects of IPOs by special purpose acquisition companies.)

Ellenoff Grossman led the way on the underwriter side in the U.S, thanks to its specialty in the SPAC market, which also cooled off during the first quarter. The firm advised the underwriters on Redwoods Acquisition Corp.'s $100 million SPAC IPO.

Ropes & Gray came in second with more than $2 billion, based in part on its role on TPG’s offering. Davis Polk was the only other firm to cross the $1 billion threshold on the underwriter side.

Before this year, IPOs raised more than $100 billion for the past six quarters in a row—any of which would have individually set a record for the best quarter since 2014, according to Bloomberg data.

The offerings have meant huge profits for law firms.

Latham, which led the IPO market last year, saw revenue rise nearly 27% to $5.5 billion in 2021 while profits per equity partner grew by more than 25% to $5.7 million, AmLaw reported. Davis Polk & Wardwell and Skadden saw revenue and profits per partner rise more than 10% last year, AmLaw reported.

This year, public markets paused to digest a worrying cascade of news, including inflation, a war in Ukraine, rising interest rates, and most recently, the recession-signaling inversion of yield curves. The Cboe Volatility Index, a gauge of market swings, hit a 13-month high March 7, Bloomberg News reported March 31.

“Those are all different ways in which uncertainty is injected into the market, and that causes deals to need to find the right moment to go out,” said John Vetterli, who leads the capital markets practice at White & Case. “You’re navigating these elements that didn’t exist six months ago.”

Reddit Inc. and Cohesity Inc. had each discussed listing shares as soon as the first quarter, Bloomberg News reported March 28, citing people familiar. While the companies did file paperwork for IPOs, neither has taken the steps toward their market debuts.

The drop-off in IPO activity adds to the difficulty law firms already face in navigating workload swings since the start of the Covid-19 pandemic. Firms went from overwork and frenetic hiring when deals hit a record pace to creeping concerns there won’t be enough business for lawyers.

“You hire, hire, hire, and then it slows down,” said Jeff Lowe, global law firm practice leader at recruiter Major, Lindsey & Africa. “It’s hard to get it exactly right.”

Firms have lessened their associate recruiting over the last six weeks, he said.

Skadden’s Goldschmidt said the “frenzied” associate hiring from previous quarters has “cooled down” and that the firm is taking a “measured tone” in the lateral market for junior lawyers. The firm’s partner-level lateral hiring is driven by strategic goals rather than short-term trends, he said.

“You’re never hiring on the lateral markets for that very moment,” he said.

Goldschmidt said there’s still time for IPOs to turn in a solid performance this year, noting the unexpected turnaround in 2020 after a pandemic-induced slowdown in the first quarter.

Ian Schuman, head of global capital markets at Latham & Watkins, said the firm will continue to invest in capital markets because it is one of the primary business drivers.

“We’re certainly not going to stop investing given short-term gyrations in the public markets,” he said.

Davis Polk has already grown its capital markets headcount in New York by 20% over the last year. Maurice Blanco, who co-chairs the firm’s capital markets practice, said, “We will continue to invest significant resources in the growth of our practice.”