Outside firms winning in M&A
National law firms are winning the battle to represent Texas companies involved in the largest mergers, acquisitions and divestitures, according to new data.
Information from independent research firm Mergermarket shows Texas-based corporations are turning to law firms headquartered outside of the state to handle the biggest deals. Texas firms were largely limited to a range of mid-market deals.
There is one exception, according to Mergermarket: Houston-based Vinson & Elkins, which increased the number of deals it did for Texas companies by 31 percent in 2016 and more than doubled the total value of the transactions it handled to nearly $94 billion
But no law firm handled more Texas corporate transactions in 2016 than
Chicago-based Kirkland & Ellis, which opened its Houston office in April 2014. Kirkland advised Texas companies on 82 separate deals in 2016 — up from 47 in 2015. Kirkland has benefited greatly from the firm’s dominance in bankruptcy reorganizations in the oil patch, which resulted in dozens of subsequent M&A deals for Kirkland’s corporate clients. The third busiest firm, Latham & Watkins of Los Angeles, worked on 48 deals with a combined value of about $82 billion.
“Three law firms are now fighting to advise in the biggest and the best M&A in Texas — Kirkland, V&E and Latham & Watkins,” says Chad Watt, an M&A analyst with Mergermarket. “These three firms are taking more and more of the
The data show that Texas-based law firms are losing out to competition from outside the state. For example, 18 of the 25 firms handling the most transactions are headquartered out of state. In terms of the value of the deals, 24 of the 25 top firms have headquarters in other states.
The primary reason for the shift, according to legal industry specialists, is that the national firms have lured scores of the top M&A dealmakers away from Texas-based law firms during the past six years. M&A partners with significant books of business often see their annual compensation double or even triple when they move to the national law firms.
The most recent example occurred three weeks largest transactions.” ago when Gibson Dunn announced it would launch a Houston office by hiring away eight lawyers from Latham and Baker Botts. A week later Baker Botts announced that it snagged nine highly regarded partners from another Houston firm, Norton Rose Fulbright. It was unheard of only a decade ago for one of the big three — Baker Botts, Vinson & Elins or Fulbright, as it was known then — to poach partners from each other.
In addition, as Texas firms have grown into national and international companies, many have turned to national and international firms to handle the multibillion dollar deals.
“Once you start dealing with transactions in the ‘B’s’ is when you start hiring New York firms,” said Watt.
For example, New Yorkbased White & Case led all firms in terms of the value of deals — a combined $235.6 billion, in large part because it was involved in the two biggest deals of 2016 — representing Time Warner in its $105 billion sale to AT&T of Dallas and advising Sunoco Logistics in its $51.4 billion merger with Energy Transfer Partners, also of Dallas.
Locke Lord, which is jointly headquartered in Houston and Dallas, had a second straight year of strong M&A growth. The Texas firm advised on 41 deals in 2016 — a 30 percent jump from the year before. Norton Rose Fulbright ranks fifth in the deal count with 32, but that is down from 47 in 2015. Two Houston law firms, Baker Botts and Bracewell, saw a 30 percent decline in M&A deal count in 2016.
But Norton Rose Fulbright may gain ground in the future. The firm announced recently that it is swallowing New Yorkbased Chadbourne & Parke. Chadbourne lawyers worked on two of the 20 largest deals for Texasbased companies in 2016 — advising NextEra on its $18.4 billion acquisition of Oncor and the subsequent $6.8 billion formation of Vista Energy, which is the umbrella company for TXU Energy and Luminant.
Chadbourne advised in only three transactions involving Texas businesses in 2016, but those three deals had a combined value of $27.7 billion — compared with Norton Rose Fulbright’s 32 deals valued at $1.8 billion.