Raid By NY Law Firm Points To Coming M&A Boom?
A recent raid by one big New York law firm of a team of top acquisition finance lawyers from a rival firm may foreshadow a mergers and acquisitions boom.
Last week five partners left Latham & Watkins’ New York office for the New York office of Milbank, Tweed, Hadley & McCloy. The lawyers, led by legendary banking lawyer Marc Hanrahan, are specialists in acquisition finance. They represent banks such as Barclays , Credit Suisse , Royal Bank of Scotland and, especially, Goldman Sachs , with which Hanrahan has especially close ties. (Full disclosure: I worked with this team when I was an attorney.)
The hires represent a bet by Milbank Tweed that debt financing for takeovers is about to take off. In 2004, the same team—although only three were partners at the time—was poached from Skadden Arps Slate Meagher & Flom in the lead up to a tidal wave of M&A activity. At the time, Latham—which is best known for its high yield debt work—was building a “one-stop shop” for investment banks providing debt financing to M&A deals. Hanrahan is considered one of the most important bank finance lawyers in the world.
The credit crisis put an end to a long boom in mergers that had become a frenzy in 2006 and 2007. Since then the M&A market has been largely dormant and debt financing for M&A scant. Last year was the slowest on record since 2003, when the markets were still grappling with the after-shocks of the dot com bust and the 9/11 attacks.
This took a heavy toll on law firms. Last year, Latham laid off nearly 200 junior lawyers for lack of client work.
Raids of law firm partners are rare for Wall Street firms. A raid of five partners is almost unheard of. No doubt many junior lawyers who worked with these partners will also be tempted to jump to Milbank.
The move of the Hanrahan team from midtown’s Lipstick building to One Chase Manhattan Plaza, in the heart of the financial district, shows that New York law firms are prepping for a big comeback for M&A debt financing. It seems likely that the clients of these lawyers—big financial institutions—are letting them know that lending standards may once again be easing and credit becoming more available for leveraged finance driven deals.
This is anecdotal evidence, of course. Milbank and the Hanrahan team could be making the wrong-bet on the market. But with corporate cash piling up to record levels—the last time they were near current levels was 2005, which led to the last M&A boom—it’s not hard to understand their confidence that M&A is poised to retake the markets.