© 2014 The Texas Lawbook.
By Mark Curriden, JD
Senior Writer for The Texas Lawbook
(January 30) – Texas-based businesses rediscovered their M&A mojo during the fourth quarter of 2013, ending an otherwise slightly above average year of mergers, acquisitions, joint ventures and initial public offerings with a flurry of deals.
The final quarter of 2013 witnessed the third most M&A activity in a three-month span among Texas companies since the start of the recession in 2008, according to new data that is scheduled to be released Thursday by mergermarket, an independent global research firm associated with the Financial Times.
There were 401 publicly announced business transactions with a combined value of $123.6 billion in 2013 – a decline of 13 percent in deal volume from the year before, mergermarket reports.
M&A experts attribute the year-over-year decline to the fact that 2012 ended with a fevered rush to close deals.
“The M&A numbers in 2012 were positively skewed on the high-end because businesses wanted to beat any major tax changes and were worried about the fiscal cliff issues,” says Ken Menges, an M&A partner at Akin Gump in Dallas.
The mergermarket data confirms Menges’ position. The fourth quarter of 2012 recorded 152 transactions valued at $46 billion. That was the largest volume of deals in any financial quarter in a decade. M&A activity slowed in volume and shrank in deal size or value during the first two quarters of 2013, only to regain speed during the second half.
Despite the modest M&A slump during the first half of 2013, last year still recorded the second most transactions since 2007.
Technology companies experienced the most significant slowdown in M&A activity – declining by more than 36 percent. However, mergermarket reports the tech sector had the largest financial transaction of 2013 – Silver Lake Partners and Michael Dell’s $20.1 billion acquisition of Dell Inc.
Corporations in both the energy and the industrial/chemicals sectors saw their deal counts decline by more than 13.5 percent in 2013.
By contrast, companies involved in business services, including computer, IT and consulting support companies, saw their M&A activity increase by nearly 9 percent last year.
“Texas has a robust network of business service partnerships and companies that have benefitted from the booming economy in major cities,” says Chad Watt, an M&A analyst with mergermarket in Texas. “Growth-oriented enterprises from other regions have noticed, and are looking to plant a flag in Texas and become trusted advisors to Texas businesses as they grow.
“You have a number of single-city partnerships, such as an accounting firm, which can benefit from being part of a larger network, and get some liquidity for their equity stakeholders by joining up with an East Coast or West Coast organization,” says Watt.
Law firms with strong energy M&A practices, led by Vinson & Elkins, Latham & Watkins and Bracewell & Giuliani, dominated mergermarket’s ranking of legal advisors who represented Texas companies that did deals.
V&E advised on 68 deals with a combined value of $70 billion. Latham was second with 42 deals at $65.9 billion. Chicago-based Kirkland & Ellis, which doesn’t even have a Texas office, had the third most deals – 39 valued at $17.2 billion.
Bracewell, Jones Day, and Akin Gump each advised on 32 deals. It should be noted that mergermarket data does not include many mergers and acquisitions because those transactions involved privately held companies and the deals were confidential.
Evercore Partners was the financial advisor in 37 transactions valued at $73 billion. Citi was second with 30 deals, followed by JP Morgan and RBC Capital Markets with 29 transactions each.
“There’s still a lot of cash out there and we think 2014 is going to be a good year for M&A,” says Menges of Akin Gump, which advised on 32 deals valued at $15 billion. “The qualifier, of course, being what happens in Washington, DC.”
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