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It doesn’t take much these days to be a leading player among law firms that handle initial public offerings. During the Internet boom, a firm had to handle as many as 100 IPOs to be considered a heavyweight. Now, Silicon Valley firms like Wilson Sonsini Goodrich & Rosati and Cooley Godward are lucky if they crack five deals in a year. In fact, despite an end-of-the-year uptick in the economy, 2003 was the worst year for IPOs since 1979, data from securities research company Thomson Financial shows. Just 82 companies went public this year — or roughly one-seventh the number that went public at the height of the Internet boom in 1999. However, securities lawyers see hope ahead. They say the deal pipelines are filling again, with many companies expected to file documents with the Securities and Exchange Commission in early January or February. The biggest IPO in the wings is the anticipated offering by Mountain View’s Google Inc. If securities industry expectations hold, the search engine company’s IPO could value it at a record $15 billion and reinvigorate the market for initial public offerings. “I expect to see more activity assuming that Google goes in the first quarter,” said Nancy Wojtas, a Cooley partner. A frothy first quarter would set a better tone for the year than lawyers experienced this time last year. Just 10 companies staged IPOs in the first half of 2003, according to Thomson. But Thomson market data also shows deal activity picked up in the last six months. Twenty-one companies went public in the third quarter, and 51 have staged successful offerings since Oct. 1. “We’re coming out of a three-year drought and ’04 is bound to be an improvement,” said Kenneth Guernsey, a Cooley partner. “The pipeline we’re all seeing suggests the winds are blowing in that direction.” Guernsey, who started practicing in 1978, shrugged off the downturn in IPO work, saying financial markets are cyclical and they always come back. Still, the most recent lull has been an eye-opener, Guernsey said. “There’s no question it’s been the most severe drought in the careers of most people who are practicing today.” At the height of the boom, Wilson Sonsini handled one-fifth of the nation’s initial public offerings and was the No. 1 IPO firm in the country. In 2003, the firm did four deals. Jeffrey Saper, a Wilson Sonsini partner, said he’s hopeful for a busier 2004, and if his pipeline is any indication, his firm should see a bump in activity. Saper said he has four deals in the pipeline, two each for issuers and underwriters. “We’re hopeful that some of the backlog will begin to work itself out,” Saper said. But unlike in the boom era, Silicon Valley’s homegrown firms may not enjoy a hammerlock on work if the IPO market returns. Bay Area outposts of New York firms have nibbled away at the hold Valley firms had on IPO work. They’ve made inroads into representing local technology companies, and they’ve capitalized on their expertise representing bankers, whom many Valley firms cut from their client lists during the Internet bubble. Take William Hinman, a Simpson Thacher & Bartlett partner in Palo Alto. He represented the underwriters in two IPOs this year. What’s more, one of his deals involved a local company that was represented by the Menlo Park office of New York’s Davis Polk & Wardwell. The Valley saw one other local deal go to a pair of N.Y. firms instead of homegrown players, and Davis Polk represented the issuer in that deal as well. On the underwriter side, Hinman said investment bankers have become more selective in recent years, choosing lawyers because of industry knowledge or longstanding personal ties rather than their availability. “It’s not like it was in 2000 when everyone was fully tapped out and it was easier to get deals,” Hinman said. “It’s a host of things that have to fall in your favor.” But topping the list are personal connections, Hinman said. Relationships are playing a more prominent role now that companies are facing more skeptical IPO investors than during the late 1990s, he said. “It’s a challenging market,” Hinman said. Bankers “want to go with the firms they have strong relationships with.”

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