Health, Energy Deals Push Kirkland to Top of M&A Legal Advisers

Kirkland & Ellis was Big Law’s top mergers and acquisitions adviser in the first half of the year, expanding its share of the market as global deals continued to slow.

Kirkland advised on 282 global deals worth $149 billion in the first half, while Latham advised on 184 deals worth $134 billion. Paul Weiss Rifkind Wharton & Garrison, Wachtell Lipton Rosen & Katz, and Cleary Gottlieb Steen & Hamilton rounded out the top five legal advisers in volume by principal. Simpson Thacher, last year’s leading M&A adviser, fell out of the top 10 in the first half of this year.

Deal activity reached $1.6 trillion through June, down almost 40% from the first half of last year, according to Bloomberg data. Kirkland’s share of the market jumped to 17.8% over the year, up from 10.2% in the first half of last year, thanks in part to work on health and energy transactions.

“Unquestionably it’s down and that’s disappointing,” Daniel Wolf, a partner at Kirkland, said of the overall deals market. “But if you look at all the drivers—things that favor M&A and run counter to M&A—it’s probably not a terrible number, in light of all those factors.”

High interest rates and regulatory pressure have continued to dampen dealmaking.

“The impression is that the FTC and DOJ are being much more vigorous in their reviews, and some of those reviews are taking longer, and that creates deal risk,” Tulane University law professor Ann Lipton said in an interview. “Completion risk and the length of time will make mergers that present any kind of antitrust problem challenging.”

The Federal Trade Commission in June unveiled a proposal that would triple the compliance to-do lists for merging companies, which lawyers said will increase costs.

Health, Energy Ahead

Kirkland edged up the M&A league tables with work in health and energy, two industries among the most active on the deals front.

The firm’s lawyers advised Oak Street Health Inc. on its $10.6 billion sale to CVS Health Corp in February. Kirkland three months later advised natural gas company ONEOK Inc. in its $18.8 billion agreement to acquire Magellan Midstream Partners LP, which transports, stores, and distributes refined petroleum.

Deals activity in biotechnology, healthcare, life sciences, pharmaceuticals, oil and gas, and energy has remained steady, Bloomberg data show. That’s compared to software-related technology transactions, which have taken a nosedive.

“A lot of the innovation has moved to the smaller biotech side and that’s why I think you see a lot more transactions in this space,” said Krishna Veeraraghavan, an M&A partner at Paul Weiss, of healthcare deals.

“A lot of the smaller biotech companies don’t necessarily have the commercial capability, once their drugs are approved, to get it out and to the patients who need it,” he said. They turn to larger companies that have the cash and scale needed, he said.

PE Buyers Skittish

Private equity deals have also been down sharply over the year.

Private equity sponsors have been slower to move than anticipated, said Mark Bekheit, global vice chair of Latham & Watkins’ M&A practice. Strategic buyers continue to look for opportunities, he added.

“Given the reset in valuations, sponsors are being much more cautious,” he said. “I would have expected them to be more aggressive in the current market, given where valuations are and the fact that there are more willing sellers.”

High interest rates impact private equity buyers more than others, like individual companies, or strategics, with cash on hand that are less reliant on debt, said Veeraraghavan of Paul Weiss.

“In the private equity market, transactions are very sensitive to interest rates, especially for those deals that need debt financing,” he said.

Some large private equity deals are still taking place, said Kirkland’s Wolf, including two transactions the firm worked on in June.

Kirkland advised Thoma Bravo on its $10.5 billion agreement to sell software company Adenza to Nasdaq Inc. It also represented EQT Private Equity in its planned purchase of the UK’s Dechra Pharmaceuticals for £4.5 billion (about $5.72 billion).

“Because these deals are relying less on debt they’re actually spending more capital,” Wolf said. “The less debt, the more equity, and the more of their dry powder they’re using.”

The FTC is also starting to take a closer look at private equity deals, according to Bekheit.

“They are hyper-focused on PE and interested in understanding how PE is driving consolidation,” he said of federal regulators, “and how it may or may not be harmful to the market for consumers.”