After a few years of hard times for Washington attorneys who handle mergers and acquisitions, the practice may have turned the corner. The M&A practices at major firms, which suffered in the wake of the financial crisis, have seen an increase in activity during the latter part of 2012 — which in turn has led to an increase in work for antitrust attorneys advocating those deals.
"I’m not sure that we’ll return to the peak years that we saw around the mid-2000s," said Eric Berman, a D.C. partner at Williams Mullen who handles antitrust and M&A work. But during the fourth quarter of 2012, he said, "we definitely saw an uptick in deal activity. So far in 2013, there has been more M&A activity at this point in the year since 2005."
Jones Day partner David Wales, who oversees the firm’s antitrust and competition law practice, said that he’s seen a rise in such work, particularly in the number of large-scale deals, during the past six to nine months. "I think a lot of companies had cash on hand," Wales said. "They wanted to spend it and do it in a way to create more synergy and efficiency."
Baker Botts partner Charles Webb, whose mergers-and-acquisitions practice has an international slant, said that activity in the United States has outpaced that in Europe.
According to a 2012 report by the U.S. Justice Department and the Federal Trade Com­mission, the number of mergers in the past decade peaked in 2007, with 2,201 transactions reported. Mergers bottomed out in 2009, with only 716 — but they have been on an increase since. During the 2011 fiscal year, the year for which the most recent data exists, 1,450 merger transactions were reported to the agencies. Similarly, the DOJ reported 90 merger investigations during 2011, the most since 2007.
"I can’t speak for my colleagues or the profession, but my practice is significantly busier now than a year ago and my pipeline is looking great," Webb said. "If you look at mergers as an investment, that gives some confidence as to what the economic outlook has in store."
Not everyone is optimistic that growth in the merger and antitrust sectors is here to stay.
"It is too early to tell if this is the beginning of a trend or a blip in activity," said Joseph Kattan, an antitrust litigation partner at Gibson, Dunn & Crutcher. Despite the recent headline-grabbing merger announcements between Office Depot Inc. and OfficeMax Inc., as well as US Airways Group Inc. and American Air­lines parent AMR Corp., he said, he’s not sure if this is a sign of an M&A resurgence.
"I think it’s true that there are cases that are getting a lot of publicity and it happens because they’re high-profile mergers," Kattan said. "That tends to be the case when the mergers involved tend to be products consumers use."
Steven Sunshine, the Washington-based leader of Skadden, Arps, Slate, Meagher & Flom’s antitrust and competition practice in North America, said the M&A climate hinges on consumer confidence in the economy. "The open question is what the M&A deal climate will be," he said. "If consumer confidence stays strong, we will continue to see increased deal activity. The real concern is what happens if the economy starts heading in the wrong direction."
As more mergers and acquisitions are announced, a subset will draw the attention of regulators with the DOJ and FTC — meaning more work for firms.
The day-to-day priorities of the DOJ’s Antitrust Division are being set by its newly confirmed chief, William Baer. During a July 2012 Senate Judiciary hearing, Baer signaled no substantial shift in either prosecution or enforcement. "I would take this job, if confirmed, with a little bit of humility about what might need to be changed," he testified. If true, the division is poised to remain on an aggressive tack.
Last year, the Antitrust Division successfully halted the $39 billion proposed merger between AT&T Inc. and T-Mobile USA Inc. In 2011, a federal judge sided with the DOJ and blocked a proposed $287 million merger between H&R Block Inc. and 2SS Holdings Inc., the latter of which markets the TaxACT product.
Since his confirmation at the end of December, Baer and his team have been busy. In January, the DOJ filed suit to block the $20.1 billion proposed acquisition of Grupo Modelo SAB de C.V. by Anheuser-Busch InBev S.A./N.V. Teams from Skadden and from Cravath, Swaine & Moore are representing InBev and Grupo Modelo, respectively.
Wales and a team from Jones Day are representing third parties in the same deal.
"DOJ was active before Bill [Baer] got there and since he’s arrived DOJ has brought two additional cases," Sunshine said. "DOJ has more cases pending now than any time in recent history."
On the proposed airline merger, Wales and a team from Jones Day represent American Airlines. Paul Denis and other Dechert attorneys are representing US Airways. Denis has also had his hand in the Office Depot/OfficeMax merger, representing the latter.
Last year, Denis litigated on behalf of Whole Foods Market Inc. during its $565 million acquisition of Wild Oats Markets. The FTC filed a preliminary injunction, which was subsequently denied. The case ultimately settled, but it showed that both clients and regulators were willing to litigate their claims.
Wales said that cases before the FTC can be particularly difficult because it requires parties to win in multiple venues.
"It just means you face a higher hurdle because you may have to win in both venues," Wales said. "They get two bites at the apple. I don’t think clients’ willingness to challenge deals in general has changed dramatically, but as you see more deals challenged there will inevitably be more litigation."
Matthew Huisman can be reached at email@example.com.