Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The year-enddealmaking uptick notwithstanding, much of 2003 was characterized by the samecaution and uncertainty that haunted 2002. Potential acquirors and would-betargets circled each other nervously, then backed away amid worries aboutvaluations. Meanwhile, capital markets lawyers spent much of the year in anall-too-familiar holding pattern. The restrained natureof the recovery is demonstrated in the 2004 edition of the Corporate Scorecard, The American Lawyer‘s annual rankingof top transactional practices. “In many ways, 2003 was similar to 2002,” saysSullivan & Cromwell mergers and acquisitions partner Keith Pagnani. “Wekept busy, but that level of activity was not reflected in the numbers.”M&A deals were withdrawn before announcement due to concerns that the risein the markets may not be sustainable, lingering worries about the integrity ofpotential merger mates’ financials, and even the Sarbanes-Oxley Act — beforeexpanding, corporations wanted to make sure their houses were in order, Pagnanisays. In 2002 Pagnani helpedadvise Pharmacia Corp. in its $61 billion acquisition by Pfizer Inc., thebiggest M&A deal announced that year. “After Pharmacia-Pfizer, everyonethought the floodgates would open up, but it just didn’t happen,” Pagnani says.”I did finish a lot of smaller deals in 2003, but we didn’t see the megamergerslike Pharmacia-Pfizer.” According to ThomsonFinancial, worldwide announced M&A volume last year was $1.3 trillion, an8.3 percent increase from $1.2 trillion in 2002. M&A activity in the UnitedStates rose 19.6 percent, to $525.6 billion in 2003, from $439.5 billion in2002. But much of that activity occurred in the fourth quarter of 2003, givingthe year a feast-or-famine quality. About 32 percent of the year’s worldwidedeal volume — $415.1 billion — came during the last three months of the year,Thomson says. The story was much thesame in the equities market. After a first half that saw the lowest number ofIPOs — six — by U.S. companies since the mid-seventies, the market went manic inthe second half, when 62 offerings priced. The bulk of those offerings, 43,priced in the fourth quarter; it was the busiest quarter for IPO issuance inthree years, according to Renaissance Capital, which tracks IPO activity. Andeven within the frenetic fourth quarter, the momentum was back-loaded: December2003 was the busiest month for IPO pricings since November 2000, according toRenaissance Capital. “For a large part of2002 and 2003, everything was a struggle,” says Simpson Thacher & Bartlett’sAlan Schnitzer, who divides his practice between M&A and capital marketswork. “There had been so many body blows — the accounting scandals, 9/11, thedot-com collapse. Deals had to get done, but the markets did not have a lot ofconfidence in financials. It put a huge cloud over dealmaking.” But by the endof the year, he says, “a lot of people started to go back to the markets, andwe saw more and more deals.” Despite the economicchill, some specialized practice areas enjoyed a strong year in 2003. Long-termnew issuance of municipal bonds, for instance, was $379.1 billion last year — anew record — according to Thomson Financial. It was a 6.5 percent increase from$355.9 billion in 2002, which itself had set a record. Roger Davis, head ofthe public finance practice at Orrick, Herrington & Sutcliffe, attributesthe strong showing to a confluence of factors that includes continued lowinterest rates, an increased need for borrowing (due to declines in publicrevenues), and the relatively good credit ratings of many state and localgovernments. “Their prospects were good enough that increased borrowing had noeffect on their credit ratings,” Davis says. In addition, the ten-year callprotection on bonds issued in 1993, a banner year for issuances, ended in 2003,and conditions were good for the restructuring of outstanding public debt. The securitizationarena was strong too. “Last year was off the charts,” says Paul Tvetenstrand, amortgage-backed securities specialist and managing partner of Thacher Proffitt& Wood. “Our firm had a record year in structured finance, based both onthe number of deals and their volume.” Adds Edward DeSear, a structured financepartner at McKee Nelson: “This office has been like a closing machine. Theconference rooms here are continually full.” The top three issuer’scounsel on Thomson Financial’s asset-backed securities league table (ThacherProffitt; McKee Nelson; and Orrick, Herrington & Sutcliffe, respectively)handled 475 issues with a combined value of $208.8 billion last year. The topthree firms for 2002 handled 270 issues, with a combined value of $115.3billion. On the mortgage-backed securities side, 2003′s top three issuer’scounsel (McKee Nelson; Thacher Proffitt; and Cadwalader, Wickersham & Taft,respectively) handled 344 deals, with a combined value of $159.7 billion. Thetop three firms for 2002 handled 289 deals, with a total value of $126.5billion. Because issuers wholose access to unsecured debt markets often turn to the asset-backed market,the asset-backed market benefited from 2003′s economic uncertainty, says McKeeNelson partner Reed Auerbach. The size of deals grew because issuers sought theefficiency of larger transactions, he adds. Meanwhile, the mortgage-backedsecurities market continued to be driven by low interest rates and therefinancing craze, he says. When borrowers didturn to the unsecured debt markets, they increasingly were looking to thehigh-yield sector. The Bond Market Association, a trade group, says that $122.9billion in new high-yield debt was issued in 2003, up 113.6 percent, from $57.6billion in 2002. The rate of increase far exceeded that on the investment-gradeside, where $620.6 billion in new debt was issued in 2003, up just 4.3 percentfrom $595.1 billion in 2002. The top five firms on Thompson Financial’s leaguetable ranking high-yield issuers counsel handled 100 issuances in 2003, doublethe 50 issuances they handled in 2002. The total value of issuances handled by2003′s top five firms was $36.4 billion, a 166 percent increase from $13.7billion in 2003. Because the upturn inM&A and broader capital markets activity that began in the second half of2003 carried over into the first quarter of 2004, M&A and equities lawyerssay they are optimistic that the year as a whole will be strong. “I think thiswill be one of the busy years,” says Latham & Watkins equities partnerChristopher Lueking, a partner at the firm’s Chicago office. Pagnani echoesthat sentiment, but leavens it with a dose of caution. “We’ve been fooled before,but this [recovery] seems to have legs to it,” he says. “I’m quietly confidentthat 2004 will be less like 2002 and more like the late nineties. But, ofcourse, not exactly like the latenineties.” Related chart: Top Corporate Practices in 2003

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.