Global M&A Activity for Law Firms Shifts in Third Quarter

London, October 17, 2011 – Global merger and acquisition activity is off to a slower-than-usual start in the second half of 2011, but that does not necessarily mean less work for M&A lawyers. Those are among the findings from the most recent M&A Trends & Insights Report from Thomson Reuters Governance, Risk & Compliance (accelus.thomsonreuters.com).

The report found that while the combined value of M&A deals in the third quarter fell 33 percent compared with the same period a year earlier, and was down 25 percent from the second quarter of 2011, the volume of deals was only down 10 percent and 13 percent respectively. The dampened M&A activity was mainly felt among the largest transactions, which are heavily dependent on the financial markets. The recent uncertainty and volatility in those markets likely contributed to the slowdown in high-value deals. In addition, the Thomson Reuters Accelus “M&A Hostility Index” has been rising over the past two quarters, suggesting that deals are becoming both more contentious and more legally complex. Possibly in response to the uncertain environment, the data show that buyers in U.S. public deals are more frequently accepting mechanisms such as reverse break fees to insure their own transactions. Meanwhile, a flurry of spinoff activity throughout the quarter also has kept deal lawyers busy, as companies look for ways to unlock value for their shareholders.

Among industry sectors, the data show that manufacturing, real estate and technology deal volumes have remained mostly steady year-over-year. The telecommunications sector had a particularly slow quarter, down 49 percent compared to last year’s volumes.

Private equity deals declined in the third quarter in line with the overall market. The largest increase in activity was in the financial services sector, while the greatest declines were in the telecommunications and energy sectors, compared to the same quarter a year ago.

Globally, M&A volume activity has slowed in a number of countries, including the U.S., India and Spain. In contrast, China, Japan, Canada and Russia saw their deal volume activity increase over the last four quarters.

Major regulatory changes in the third quarter included the UK Takeover Code coming into effect in September. The measure increases protections for potential target companies, and the new rules come at a critical time for British takeovers, as UK M&A activity was down sharply in the third quarter. The UK Takeover Code changes are a response to Kraft’s hostile takeover of Cadbury in 2010, which triggered debate about the weak position of UK target companies.

“The uncertain financial and economic environment is clearly dampening merger and acquisition activity globally, at least for the time being,” said David Craig, president, Thomson Reuters Governance, Risk & Compliance. “Buyers are becoming more selective and cautious in their deals. Law firms face an increasingly competitive environment where deep and timely analysis of market data can help them identify shifting trends to win new business and capitalize on opportunities.”

A copy of the report can be downloaded at: http://accelus.thomsonreuters.com/content/special-report-ma-trends