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If you went to sleep in 2000 and woke up today, you’d find virtually the same frenzied mergers and acquisition market as four years ago. “Your initial reaction might be that very little has changed in the M&A world,” said Richard Climan, who heads Palo Alto, Calif.-based Cooley Godward’s M&A practice. While deals are flooding in “at a pace reminiscent of the bubble period,” Climan said, there are a few key differences. “On closer inspection you’d find the deal climate today quite different than it was four years ago.” Current deals are more complex and cash-heavy, while buyers are more cautious. And after more than three years of belt tightening, hiring freezes and even layoffs at some law firms, many Silicon Valley shops say they are hiring again to keep pace with the surge in M&A and other corporate work. “We see the upturn is here, and we’re more worried about not having enough lawyers than having too many,” said William Sherman, a partner in Palo Alto office of San Francisco-based Morrison & Foerster. Morrison didn’t shed lawyers during the bust, so its current staff is absorbing much of the new business, Sherman said. Still, corporate lawyers recently found themselves pulling “all-nighters and all-weekenders, which hasn’t been the case for about two years.” Partners at New York-based firms Weil, Gotshal & Manges and Davis Polk & Wardwell also said they’re seeking new lawyers for their Silicon Valley practices. “Yes, we’re hiring . . . but Weil is a very slow, patient hirer,” said Rod Howard, a partner in Weil Gotshal’s Redwood Shores, Calif., office. “If we don’t have enough people in the Valley-we have a thousand lawyers” firmwide to help. M&A lawyers say consolidation activity is booming in the semiconductor capital equipment business, biotechnology and software. During one six-day span in late February, Cooley announced five deals, including Synopsys Inc.’s acquisition of Monolithic System Technology Inc. and Accelerant Networks for a total of $454.5 million. On Feb. 20, Morrison & Foerster announced that its client, Credence Systems Corp., acquired NPTest Holdings Corp. for $660 million. It’s not just the number of deals keeping lawyers working into the wee hours. It’s their complexity. Gone is the accounting method called “pooling of interests” that allowed two merging companies to combine their financial statements as if they were never separate entities. But pooling-of-interests accounting, advantageous to buyers and permitted only in pure stock swaps, was done away with in 2001 by the Financial Accounting Standards Board. Today, many buyers are choosing to use cash instead of their own stock as acquisition currency, in part because their stock is no longer valued at inflated boom-time prices. And so-called hybrid transactions involving cash and stock can raise myriad tax issues and may call for layered pricing formulations, Climan said. “In 2000, mammoth stock-for-stock deals were the order of the day, but today cash accounts for a much higher proportion of deal considerations in M&A transactions,” Climan said. Cautious buyers in today’s post-Enron marketplace are dedicating more attention to due diligence than they did during the boom. Tech deals are no longer the lightning-fast affairs they once were, said Weil Gotshal’s Howard. “Suddenly the stakes have gotten a lot higher and they are personal for board members, CEOs and CFOs. It’s not just other people’s money anymore,” he said. Buyers also are increasingly turning to the depth and financial expertise of more established New York firms that have experience in down cycle deals such as cash deals and hostile transactions, Howard said. “The last up cycle was so long there were many people [in Silicon Valley] who had never seen a down cycle,” he said. He pointed to Walt Disney Co. choosing New York-based Wachtell, Lipton, Rosen & Katz to defend it against Comcast Corp.’s $54 billion hostile takeover bid. “That’s an example of a company doing the conservative thing,” he said. “You won’t get criticized for doing that.”

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