Last year was bleak for private equity deal lawyers. Private equity–backed M&A in North America totaled $50.6 billion in 2009, a 34 percent decline from an already dismal 2008 and an 88 percent drop from 2007, according to mergermarket. And while many of the traditional private equity law firms once again topped the league tables, they did so with anemic deal totals. The top firm for number of announced deals, Latham & Watkins, advised bidders on only eight transactions, which pales next to last year’s volume winner: Kirkland & Ellis advised on 69 deals in 2008 and just seven deals in 2009. Cleary Gottlieb Steen & Hamilton advised on the largest dollar sum—$19.5 billion in private equity transactions—but that included only four deals. Perennial private equity leader Simpson Thacher & Bartlett advised buyers on six transactions that totaled $11.4 billion.
The first nine months of the year were particularly inhospitable to dealmaking, say private equity lawyers. Debt financing—the lifeblood of leveraged buyouts—was largely unavailable. The market turmoil made price negotiations between buyers and sellers nearly impossible. And the global recession forced private equity firms to restructure balance sheets and streamline the operations of their debt-laden portfolio companies. If private equity deals did happen, they tended to fall into one of three, less traditional categories, says Latham partner Edward Sonnenschein: buying distressed or bankrupt assets, such as a private equity consortium’s $13.9 billion purchase of IndyMac Federal Bank, FSB, announced in January; buying partial equity stakes, such as buyout shop BC Partners Limited’s $350 million investment in Office Depot, Inc., in June; or private equity firms selling portfolio assets to strategic buyers, such as GTCR Golder Rauner, LLC’s $900 million sale of Ovation Pharmaceuticals, Inc., to Danish pharmaceutical company H. Lundbeck A/S in March.
