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In the weeks following the Nasdaq’s mid-April slide, Cooley Godward’s Eric Jensen was hard-pressed to close a deal. Many technology companies lost the appetite for swallowing smaller competitors as their stocks lost value. But as the market settled and the first half of the year came to a close, Jensen and mergers and acquisitions lawyers at tech-centric firms were back in action. “I’ve represented buyers who felt they had pretty good leverage — there are definitely bargains out there,” Jensen added. Overall, most Bay Area firms were closing deals at a healthy clip in the first half of this year, despite some worrisome hiccups in the market that briefly put the brakes on deal making. When it comes to handling larger deals, Cooley, along with Wilson Sonsini Goodrich & Rosati, Brobeck, Phleger & Harrison, Orrick, Herrington & Sutcliffe and Morrison & Foerster, are poised to outstrip their 1999 totals by a wide margin. And most other firms appear to be holding their own. “In the last month, it’s taken off like a rocket,” Jensen said. Mergers and acquisitions typically pick up as the market for initial public offerings slows, leaving companies to look for alternatives to an IPO for growth capital. And M&A lawyers are already seeing the initial signs of deals driven by desperation for cash. Not only has the market for IPOs slowed, but traditional sources of cash — like venture capitalists — are shying away from Internet deals. Start-up executives who are able to score financing are facing unfavorable terms that either devalue the company or dilute their holdings. “Companies that are public or private are seeing financing sources dry up. It’s more dire on the private side,” said Jensen, who has represented both buyers and sellers doing deals in the current environment. M&A lawyers say the pace for deals is picking up, and they predict a busy second half of 2000. Jensen, for example, said he heard in late June from a large client that was launching bids for six companies. Venture Law Group’s Steven Tonsfeldt witnessed the same fits and starts among his clientele after they sat out most of April and May. In late June, Yahoo! Inc., one of his largest clients, was back in the buying mood. The company announced its $420 million acquisition of eGroups Inc. That deal will likely close later this year. Some firms have bulked up recently to handle the increasing M&A activity. Wilson, for example, has aggressively been building its M&A prowess, luring talent away from competitors to swell its own capabilities. And Orrick last year partnered with VLG to give it a deeper reach into Silicon Valley deal making. “Out here, there is a growing appreciation for the need for specialized M&A capability,” said Rod Howard, a Brobeck M&A partner. And with companies partnering at an increasingly hectic pace, Bay Area firms may have bulked up just in time. Related Chart: California M&A Practices

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