Money-go-round kept turning by mergers

Date: 07/02/02

By Peter Chapman

THE merger mania of the 1990s may have slowed down a little, but nobody should shed tears for the hordes of EU lawyers who continue to make a very healthy living from a continuing drip-feed of massive merger and acquisition (M & A) fees.

Exact earnings for merger cases are a closely guarded industry secret. Firms also tend to offer varying arrangements according to client needs.

For instance, long-standing clients are likely to benefit from discounted rates, while some prefer to agree on a fee in advance. In most cases, though, it will come down to an hourly rate that would make most people's hair stand on end.

Mergermarket, an internet research company that specialises in M & A, draws up annual tables ranking the highest earning legal firms in Europe (see below).

Gawn Rowan Hamilton, chief financial officer of Mergermarket, says clients can expect to pay hourly rates ranging from €650 to €1,300 for the services of a partner in a leading competition firm, depending on the nature of the deal and the jurisdiction.

Rates can easily stack up to €3,250 an hour for a typical deal involving five or six other experts including a senior assistant and junior.

Add economists and other professional advice and this figure could more than double. Big deals may run into the high hundreds - or even thousands - of billing hours.

'We normally guesstimate that a deal that doesn't raise any competition issues will cost the parties between €115,000 and €165,000 in legal fees,' says one Brussels-based partner.

'A difficult merger can be many times the multiple of that when you include fees for specialist economists, lobbyists, press agencies, etc.'

The biggest earners are the so-called 'merger factories' such as Freshfields Bruckhaus Deringer, Linklaters & Alliance and the US powerhouse Shearman & Sterling, which dominate the Mergermarket charts.

The tables show which lawyers presided over the most valuable European deals in 2000 and 2001, although the authors say the data should be treated with caution. One or two big mergers in a year can skew the figures and the total size of the deal does not give a precise idea of how difficult it was to get it past the merger watchdogs - or the lawyers' fees involved.

In addition, some of the biggest deals are not included because of their US origin. These include GE's doomed take-over of Honeywell, in which GE was advised by Clifford Chance's Simon Baxter; and Hewlett Packard's successful merger with Compaq, in which HP was advised by Freshfields' Jenny Connolly.

Also missing is lucrative business advising disgruntled third parties in merger cases. Freshfields' Rachel Brandenburger helped de-rail the GE/Honeywell deal, acting for staunch opponents Rolls Royce and Rockwell Collins.