Skadden on corporate/M&A

Global giant Skadden Arps on life as a corporate lawyer

SkaddenThe M&A practice entails advising clients on mergers, acquisitions, divestitures, spin-offs, proxy contests, joint ventures and consideration of strategic alternatives. Additionally, M&A attorneys advise clients on corporate governance, securities law and general corporate matters.

The practice affords the opportunity to represent a diverse array of U.S. and international, public and private clients, including multinational corporations, emerging companies, private equity funds and hedge funds, individual investors, sovereign governments and other stakeholders. Clients are often undergoing fundamental changes in their strategy and business, and M&A attorneys help them navigate this period of profound change.

Business Climate

Key Drivers of the M&A Market:

In 2015, the economic environment continued to be conducive to M&A activity, particularly in the U.S. Corporate balance sheets were in good shape, equity markets were relatively stable and access to debt financing was generally available on attractive terms, although there was some dislocation in the high-yield market in the fourth quarter.

Corporations face a continued imperative to grow at a rate that exceeds economic growth — and M&A is an important tool to achieve that goal. At the same time, there are risks and uncertainties in the global economy and equity markets that could impact activity levels. For example, finding financing on acceptable terms has become more difficult for lower-rated issuers.

On the regulatory front, robust antitrust enforcement and scrutiny will continue, but boards and advisers have shown resilience to sign deals, allocate risk and ultimately get deals done.

'Corporations face a continued imperative to grow at a rate that exceeds economic growth – and M&A is an important tool to achieve that goal.’

Many of the biggest deals in 2015 were stock-for-stock transactions, so financing considerations weren’t at the forefront. Investment-grade and the better ranked high-yield issuers continued to have favorable access to the credit markets. Private equity firms, which accounted for approximately 6 percent of global M&A activity in 2015, and other acquirers that rely on leverage weren’t key drivers of M&A activity in 2015 and aren’t likely to be in 2016.

Geographies and Industries:

2015 M&A activity was generally robust across the globe. The U.S. was particularly strong, but European and Asian activity also increased. Activity in Latin America was relatively slow.

In terms of industries, technology and health care were very strong. Within tech, the semiconductor space was a real standout, with long-anticipated consolidation finally happening in 2015 and expected to continue in 2016. With technology, products and markets evolve quickly. Entire industries emerge and disappear within a span of just a few years, so even very large, established companies have to constantly reinvent themselves, and that continues to be a driving force for M&A. In health care, mega pharma deals, as well as interest in biotech companies, were big drivers. Pharmaceutical companies face the challenge of patents expiring on big drugs in coming years, so biotech companies, particularly at current price levels and with only spotty capital market windows, present attractive buying opportunities.

On the private equity front, PE firms haven’t been as prominent in the current M&A landscape, but they’ve still been involved, perhaps in different roles. For example, Silver Lake played a significant role in the Dell-EMC deal. To a certain extent, we’re going back to a world where synergies and strategic imperatives are driving deals and valuations. That’s an environment which probably favors strategic over financial buyers. In 2016, it will also be important to see how the debt markets evolve and whether cheap financing remains available.

Looking Ahead:

There is a stratum of transactions that will remain difficult to get done, and private equity activity may continue to be constrained in 2016. Leveraged transactions are likely to be constrained if current conditions persist given where the high-yield markets seem to be, at least for now. Absent adverse developments, however, strategic transactions should continue because the needs for growth, consolidation and a global footprint aren’t going away.

Preparing for life as an M&A associate

Do you like being in the center of the action? Do you like being challenged and thinking on your feet? Do you enjoy making sense out of organized chaos? If so, you would most likely enjoy being an M&A associate.

'We’re going back to a world where synergies and strategic imperatives are driving deals...'

In the context of a deal, the M&A team serves as the quarterback — calling the play in consultation with the client and successfully executing with the help of legal specialist teams. Your job as an M&A associate is as complex as the clients you serve and, accordingly, M&A transactions are multifaceted. Each deal requires you to work closely with lawyers in other groups, such as corporate finance, banking, executive compensation and benefits, IP, labor, real estate, tax, antitrust and litigation, to name a few. Often, there will be a regulatory component that adds even more complexity. From the career development standpoint, a major perk of being an M&A associate is exposure to each of these areas of law.

In the height of a transaction, the M&A team’s role exists somewhere between emergency room triage and a good game of whack-a-mole. Although this can be stressful, it’s also completely exhilarating. Law school teaches you to issue-spot; being a lawyer requires you to find solutions. Some issues in the context of a deal are straightforward while others require out-of-the-box thinking and skillful creativity. The job is challenging to be sure, but ask any M&A lawyer why they enjoy their job and you’re likely to get a uniform response: It’s fun.

How should you prepare for life as an M&A associate? Look at your education as a chance to amalgamate the skill sets that will enable your success. Many of these skills won’t be listed in the course catalog, but don’t worry, you’ve unknowingly been preparing all along. Multitasking, setting and meeting deadlines, time management, attention to detail and the ability to think critically are all skills that are cultivated in law school and will prove immensely valuable as an M&A associate.

‘In the height of a transaction, the M&A team’s role exists somewhere between emergency room triage and a good game of whack-a-mole.’

Many law schools offer specific classes in M&A and contract drafting. These classes introduce you to the different sections of M&A agreements, expose you to relevant legal vernacular and provide you with an understanding of many key transaction drivers. Classes in securities law, corporations, business taxation, finance and accounting are all useful as well. However, these are suggestions, not prerequisites. There is no one class without which you will not succeed and there is no substitute for the real world experience you will gain at a firm. Given the diversity of deals and clients, there are always areas of law you will need to learn on the job. Perhaps the best preparation you can have is getting comfortable saying, “I don’t know, but I’ll find out.”

As an M&A associate, you will jump into different industries and have clients across varied geographies. You will learn to make sense of the unknown and leverage past experience to assist on your next deal. Remember, no transaction takes place in a vacuum — clients and their businesses exist within the wider, global business, financial and regulatory markets. To that end, start reading The Wall Street Journal, Financial Times and other business news publications. Neither your colleagues nor your clients will quiz you on the front page, but familiarity with the business world will pay dividends. As you will see when you draft M&A documents, your firm is regularly referred to as your client’s “advisor”; that role is based on legal expertise but often extends beyond.

How to be a corporate lawyer >>