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M&A lawyers cautious about year ahead

M&A lawyers cautious about year ahead

M&A saw the strongest opening to the year since 2008 this year, but lawyers working in the area now remain cautious about what lies ahead.

MERGERS and acquisitions saw the strongest opening to the year since 2008 this year, but lawyers working in the area remain cautious about the year ahead. 

New figures obtained by The New Lawyer reveal Allens Arthur Robinson had the best month by value and volume in M&A in August. The MergerMarket statistics show the firm did 7 deals worth $13,713 million in that month. 

Guy Alexander, head of M&A and equity capital markets at Allens Arthur Robinson, told The New Lawyer that while the firm has seen a steady flow of work, it's too early to say whether Australian M&A work is set to increase. 

The firm has seen strong activity in the resources sector and some other large announced deals outside resources like the bid for Fosters and the consortium offer for Charter Hall Office REIT. "But I think think it is more a continuation of the same than a big pick up," said Alexander. 

A number of issues are influencing the M&A volumes at the moment, said Alexander. "[There are] market uncertainties around sovereign debt and the high Australian dollar, but I'm cautiously optimistic."

Figures show that overall M&A volumes are down on prior years, said Alexander. "Though internally we've had quite a busy time our clients are looking at a lot of different opportunities, I think we're likely to see a continuation of the same."

Earlier this year law firms claimed the first quarter bode well for M&A activity. First quarter Bloomberg and Thomson Reuters Legal Advisory Tables showed a strong range of announced M&A activity including the Centro Property Group sale of its US assets and the merger of the Seven Group with West Australian Newspaper Group.

The Bloomberg results reveal that globally, the majority of M&A transactions occurred in the mid-market range, below $500 million in size. Just three deals reached the mega-deal category, which is classified as any deal worth more than $10 billion. 

In the same results, cross border activity accounted for more than 52 per cent of global M&A volume, a 35 per cent increase from the same period in 2010. 

Freehills corporate practice group head, Richard Loveridge, said at the time that it had been the strongest opening to the year since 2008 before the Global Financial Crisis led to a substantial drop in M&A activity.

"According to Thomson Reuters the value of M&A deals on which Freehills has advised is almost 60 per cent higher than that of first quarter 2010 and more than four times the value recorded in the first quarter of 2008," he said in April.

"Announced deals can be a good indicator of where the market is going. It is particularly pleasing to see that Freehills has almost double the value of announced deals compared to its nearest rival for the first quarter of this year."

Freehills, which did 4 deals worth $435 million in August, ranked third by volume of deals, just behind Minter Ellison which did 5 deals worth $450 million. Blake Dawson did 3 deals worth $1,587 million, ranking it fourth in the August tables by value. 

But Alexander said most law firms remain cautiously optimistic about the year ahead in M&A. Most firms are keeping their teams the same size, and hoping things pick up, he said. "I don't think people are out there hiring madly. They are maintaining their teams," he said. 

Law firms have said they are busy in recent months, advertising work as it comes it. But there is a general consensus in the legal market that work levels are  down on prior years. 

Clients are "looking at lots of things, and that's been a feature of the last 24 months", says Alexander. But he says not all of these investigated deals go ahead. 

"We seem to look at a lot of deals in order to get a few through to announcement," he said. 

The resources sector has been the strongest area in M&A, said Alexander, and elsewhere there have been pockets of activity.

"There's continuing strong activity in the resources space. That has continued at pace and that's underwritten the M&A base workload."

Equity capital markets, by comparison,"has been relatively slow", said Alexander.

"The last major IPO was Queensland Rail, which was the end of last year. So capital markets is quite slow.

"There have been pockets of activity in media and general industrial work - One Steel and the Foster's transaction are examples. There are isolated pockets of that - but there is not the same strength outside the resources sector," he said. 

While acknowledging it's been a great year for the firm, Alexander said M&A lawyers will have to "wait and see" about how the next six months will transpire. 

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