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Mega-merger activity in New Jersey took a beating in 2001, but local deal-making lawyers aren’t bothered by the falloff because most of that work is done by out-of-state firms. Sure, corporate transactional work was down in 2001, but the downturn was nowhere near the magnitude of the 80 percent drop reflected in Thomson Financial/Securities Data Corp.’s index of the largest deals involving New Jersey corporations. Thomson reported that the 30 largest mergers and acquisitions in 2001 totaled $30.7 billion in value, compared with $155.4 billion in 2000. In 2000, New Jersey had four of what Thomson calls “mega-mergers” of more than $10 billion involving household names. Honeywell International of Morristown, N.J., was acquired by General Electric for $50 billion; Bestfoods of Englewood Cliffs, N.J., was acquired by Unilever for $23 billion; Nabisco Holdings of Parsippany, N.J., was acquired by Philip Morris for $19 billion; and GPU Inc. was bought by an Ohio utility company, First Energy, for $10 billion. In 2001, only one New Jersey deal fell into the mega-merger category: Johnson & Johnson’s purchase of a California drug company, ALZA, for $10 billion. Still, the more common type of work in New Jersey — real estate and sale of closely held businesses that don’t involve high capitalization — was steady in 2001, says Peter Spirgel, a partner at Cherry Hill, N.J.’s Flaster Greenberg, who does transaction work. While out-of-state law firms, mostly from New York, handled most of the big deals, Roseland, N.J.’s Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone broke into the top 30 by negotiating Denholtz Management’s $226 million purchase of a portfolio of properties from Illinois-based Banyan Strategic Realty Trust. Bruce Kleinman, the partner who handled the transaction for Denholtz, says Brach Eichler saw no reduction in real estate deal-making volume in 2001, thanks in part to record-low financing rates. He says he expects only a slight softening in the first quarter of this year. Fewer of the deals being completed are speculative and more are being done for strategic reasons, says William Connolly, a partner at Riker, Danzig, Scherer, Hyland & Perretti in Morristown, N.J. Clients entering into such deals are noticeably more deliberate than before, says Connolly. “The tenor has changed, in that you definitely get a sense it’s no longer a boom time,” Connolly says. “People are kicking the tires. People are concerned that things might get worse, and attorneys have to be sensitive to that.” James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, says reduction in business investment is at the heart of the latest recession, and he sees that ending in the first or second quarter of this year. “Businesses overinvested in ’98, ’99, 2000. Part of that overinvestment was too much acquisition, buying too much fiber-optic cable, too many computers,” Hughes says. “All that caught up with us in 2001.” Drug and health-care companies were the hottest category for corporate deal-making in New Jersey last year, accounting for nine of the 30 deals; real estate accounted for six deals, as did telecommunications and technology. In 2000, telecommunications and technology was the hottest sector, with drugs and health care a distant second. The firm most in demand among New Jersey businesses entering into mergers was Simpson, Thacher & Bartlett in New York. The firm represented American Water Works of Voorhees, N.J., in its $7.9 billion acquisition by a German company, RWE AG; medical products maker CR Bard of Murray Hill, N.J., in its acquisition for $3.1 billion by Tyco International; and Hovnanian Enterprises of Red Bank, N.J., in its $240 million purchase of a California homebuilder, Forecast Group. Other firms active firms in the New Jersey merger and acquisition market are New York’s Skadden, Arps, Slate, Meagher & Flom; Clifford Chance Rogers & Wells; and Weil, Gotshal & Manges, each of which participated in two of New Jersey’s 30 largest deals.

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