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As private equity funds and major corporations continue to expand globally, the number of cross-border mergers and acquisitions that U.S. firms have a hand in are on the rise. The largest U.S.-based firms have the advantage of an increasing number of foreign offices, which makes using them more attractive to global companies and to companies looking to expand into other countries’ marketplaces. “There are more cross-border deals going on now than ever before in the past that I can recall,” said Ward Bower, a principal at the legal consulting company Altman Weil. The driving force behind the deals, he said, is globalization. Of the large firms handling cross-border deals, a handful are at the forefront, including Clifford Chance; Latham & Watkins; and New York-based Milbank, Tweed, Hadley & McCloy and Debevoise & Plimpton. Is cross-border mergers and acquisitions (M&A) work on the rise for U.S. firms? “The answer is absolutely yes,” said Michael Fitzgerald, a partner at Milbank Tweed. Mexico’s stock market, for example, has consistently averaged gains over the past few years, in comparison with a stagnant U.S. stock market, he said. As a result, he continued, “there’s a huge tidal wave of money flowing into the markets where there have been capital gains.” According to an analysis by Citigroup Inc., cross-border deals were the fastest-growing segment of the M&A market last year. Citigroup reported 184 cross-border deals valued at more than $1 billion in 2005, up from 104 such deals in 2004. Cross-border deals amounted to $907 billion in 2005, compared to $595 billion in 2004. According to Mergermarket, an M&A analysis firm, the top cross-border deal of 2005 was the $31.2 billion merger of Spain’s Telefonica S.A., one of the world’s largest mobile telephone companies, and O2 PLC, a wireless telephone company headquartered in the United Kingdom. The second largest was the $18.6 billion merger of European bankers UniCredito Italiano SpA and HypoVereinsbank A.G. Of the top 10 cross-border deals, according to Mergermarket, U.S.-based law firms advised in at least eight. Debevoise & Plimpton M&A partner Paul S. Bird said that a number of clients have turned to his firm for cross-border deals that do not involve U.S. companies. “Major non-U.S. companies have always used firms like Debevoise to handle their significant cross-border M&A transactions involving U.S. or [New York Stock Exchange]-listed targets. What we see increasingly in today’s market is those same companies, and other global companies and investors, using us and our international offices to handle their complex cross-border transactions involving non-U.S. targets,” said Bird via e-mail. Bird led a team that advised French-based Pernod Ricard in the acquisition of Allied Domecq PLC, a U.K. company. At $17.6 billion, it was the third-biggest cross-border deal of the year. Pernod Ricard has also agreed to sell some of the Allied Domecq brands to Fortune Brands Inc., a U.S. company, for $5.4 billion. Cross-border transactions often are more complex than mergers within a single country because of varying laws and cultures. “Cross-border deals are more difficult to get done because you have to harmonize the regulations,” Fitzgerald explained. “There’s tax and securities advice, often under very different rules.” For example, the Pernod Ricard/Allied Domecq deal created the second-largest wine and spirits group in the world. Pernod Ricard owns the Chivas Regal, Seagrams and Jameson brands. The structure, Bird said, was the most difficult aspect of the deal. It “involved a large French company listed on the Paris exchange taking over a major U.K. public company listed in both London and New York, using both cash and stock,” Bird said via e-mail. “Securities law and related takeover law issues under the laws of three jurisdictions were implicated in that deal.” In other deals, Debevoise represented the Rhode Island-based Providence Equity Partners Inc., one member of a consortium that successfully bid $15.3 billion for TDC A/S, the Danish telephone company. The firm represented another consortium led by Clayton, Dubilier & Rice Inc. in the $4.4 billion acquisition of Rexel S.A., a Paris distributor of electrical and datacom products, from PPR S.A. (formerly Pinault-Printemps-Redoute). In another of the major international deals of the past year, Fitzgerald led a Milbank Tweed team advising Minera Mexico S.A., Mexico’s largest mining company and the world’s ninth-largest copper producer, in its acquisition by Southern Peru Copper Corp., a Peruvian company with corporate operations in Delaware, for $4.2 billion. Latham & Watkins advised Southern Peru Copper. Shareholders approved the deal in April. The transaction required attention to regulations in three countries: Mexico, Peru and the United States. The acquisition created the largest publicly traded copper company in terms of reserves. “There’s a tremendous amount of M&A work in Latin America,” Fitzgerald said, and in both directions. Companies there are making acquisitions in the United States and vice versa. The Latin American commodities markets are especially hot, he said, with the Chinese looking to invest. “The commodity industry is so robust right now, you’d certainly have to put it on the short list of acquisition opportunities,” Fitzgerald said. “It’s one of the best commodity markets that we’ve ever seen, though there’s a lot of speculation as to whether or not that will continue.” Regardless of the industry, international companies are turning to U.S. law firms for several reasons. The top U.S. firms have successfully gone global and can serve clients with a need for expertise in multiple jurisdictions. “U.S. firms have prevailed over the U.K. firms in many of these situations,” Bower said. “They’ve expanded in London more effectively than the U.K. firms have in America, and as a result they can handle the laws under both jurisdictions better.” Additionally, the United States is an attractive venue both for U.S. firms merging with companies in other countries and for overseas companies seeking domestic merger partners. “Most M&A work now directed outside of the U.S.-this is sort of a recent development-are funds making acquisitions in Latin America, and they want it governed under U.S. law,” Fitzgerald said. “There is reluctance to subject themselves to foreign courts. New York is a safe jurisdiction for dispute resolution; the laws are more settled here.” Nearly 34% of all global M&A deals in 2005 were cross-border transactions, according to Mergermarket, a 30% increase from 2004. Milbank Tweed has had particular success bringing in cross-border deals, Fitzgerald said. “There is a word-of-mouth network that serves as the best advertising,” he said. Another Milbank Tweed project involved the $930 million Cerro Verde copper mine expansion financing in Peru. The firm represented China Construction Bank in negotiating investments by Bank of America Corp. and Asia Financial Holdings Ltd., and advised Arrow Electronics Inc. of Melville, N.Y., in its purchase of a computer products distributor, German-based DNSint.com, among other deals. Latham & Watkins advised numerous private equity and financial institutions in connection with many cross-border deals in the past year. Among the top deals was the firm’s counsel to Credit Suisse Group in the acquisition by Los Angeles real estate investment fund Colony Capital LLC of the hotel operations of Singapore’s Raffles Holdings Ltd., in connection with $700 million in credit to finance the deal. Latham advised Rothschild, the financial adviser to London’s Telewest Global Inc., which has agreed to buy British cable TV provider NTL Inc. in a deal valued at around $6 billion. And Latham advised UBS Securities LLC, the financial adviser to the Hilton Hotels Corp., in the chain’s acquisition of Ladbroke Hotels in the United Kingdom. “I think we’re seeing our global transactions increase fairly substantially,” said Mark Gerstein, a partner in Latham’s Chicago office and co-chairman of the firm’s global M&A group. “Our volume is up year over year in that regard.” Gerstein cited a deal in 2005 in which Latham counseled the private equity firm The Carlyle Group in its $375 million acquisition of Xugong Group Construction Machinery Co. Ltd., the largest construction machinery manufacturer and distributor in China. The company was owned by Xuzhou Construction Machinery Group, which is owned by the city government of Xuzhou, China. The deal created one of the largest foreign investments in the local province, Gerstein said. The Latham team was led by Hong Kong corporate partner David Zhang, finance partner Mitchell Stocks and New York tax partner Jed Brickner. Clifford Chance, based in London, was ranked first internationally for worldwide M&A in 2005, according to Thomson Financial and other analysts. The firm advised on 444 deals globally, valued at $490 billion. According to Mergermarket, Clifford Chance advised in four of the 10 largest cross-border deals, including the private consortium acquisition of TDC A/S; Clifford represented the target. The buyer’s advisers included Baker & McKenzie and three New York firms, Cravath, Swaine & Moore, Debevoise & Plimpton and Simpson Thacher & Bartlett. Clifford Chance was involved on the bidders’ side in Eiffage S.A. and Macquarie Infrastructure Group’s $14 billion acquisition of the French government’s interest in the Soci�t� des Autoroutes Paris-Rhin-Rh�ne, which operates toll highways. The Belgian firm Bredin Pratt and Australia’s Freehills also participated on the bidders’ side.

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