D.C. Stalemate Keeping Some Am Law Attorneys Busy Through the Holidays

Brian Baxter

The Am Law Daily

12-26-2012

President Barack Obama isn't the only one cutting short his vacation and getting back to work this week.

Am Law 100 firms in New York and elsewhere are doing what they need to this week to support corporate, real estate, tax, and trusts and estates lawyers working overtime in order to squeeze in big deals and prepare clients for the potential tax implications of a dive off the so-called fiscal cliff should Congress and the Obama administration fail to negotiate an agreement before January 1.

Linda Hirschson, chair of the estate planning group at Greenberg Traurig in New York, tells The Am Law Daily she has been "incredibly busy" over the past six weeks working with clients seeking to take advantage of the roughly $5 million personal gift tax exemption wrapped into the two-year-old Bush tax cut extension now set to expire. (The New York Times reported in November on how changes to the gift tax as part of any fiscal cliff deal were causing some individuals and their legal and financial advisers to act now.)

"There's a last-minute rush of people trying to make various gifts, whether it's with residences that need leases or cash and securities," says Hirschson, whose three-lawyer team in New York is working closely with attorneys from various other practice areas in Greenberg Traurig offices in California, Florida, Phoenix, and McLean, Virginia. "Everybody is stretched thin, and all of this needs to be done in the next two to three business days."

Trusts and estates specialists aren't the only attorneys in demand as the nation moves closer to the precipice. Real estate and private equity lawyers are also grappling with what might happen should a cliff-averting deal fail to materialize, with a potential increase in capital gains tax rates making December—historically an active month on the dealmaking front for a variety of reasons—even busier than usual when it comes to transactional work. 

"It's all tax-driven," Ballard Spahr national private equity and M&A practice leader Karen McConnell told the Phoenix Business Journal for a story about the year-end dealmaking drive on December 21, the same day The Am Law Daily reported that several Am Law 100 firms had landed roles on a string of private equity transactions totaling nearly $10 billion in value. 

Several partners working on those matters either declined to comment or did not immediately respond to The Am Law Daily's requests for comment on the impact the looming budget crisis may have had on the deals, but other outlets have noted that the threat of higher tax rates has been a driving force in a series of private equity transactions in December. And firms with well-established private equity clients—including Kirkland & Ellis, Latham & Watkins, Ropes & Gray, Simpson Thacher & Bartlett, and Weil, Gotshal & Manges—have been among the busiest this month.

Kirkland, for instance, is advising New York's Palladium Equity Partners in connection with the sale of the Wise Foods snack brand to Mexico's Arca Continental (represented by Weil) for an undisclosed sum. Kirkland is also counseling mid-market private equity firm Linden Capital Partners on its $314 million buyout of dental equipment manufacturer Young Innovations, which is being represented by McDermott Will & Emery.

Turning to Latham, two months after representing Beverly Hills–based private equity firm Platinum Equity on its $1.24 billion purchase of container company BWAY, the firm is advising Atlanta-based BWAY on its $265 million acquisition of Ropak Packaging from the Linpac Group and its lawyers from McKenna Long & Aldridge.

Latham is also representing Los Angeles–based private equity firm Leonard Green & Partners on its $805 million acquisition this month of a 25 percent stake in British retailer Topshop from billionaire Philip Green's Arcadia Group, which according to U.K. publication Legal Week is being advised by Magic Circle shop Linklaters. (Latham also advised Leonard Green on its $3 billion buy of J.Crew in 2010.)

As previously noted here, Latham took the lead last week on The Carlyle Group's $424 million purchase of a 47.5 percent stake in NGP Energy Capital Management from a unit of London-based banking giant Barclays. Jeffrey Ferguson, a former Latham lawyer and current general counsel at Carlyle, did not respond to a request for comment on whether Latham represented the private equity powerhouse this week on its $654.2 million sale of Qualicaps, the world's second-largest maker of pharmaceutical capsules, to Mitsubishi Chemical Holdings.

Ropes & Gray, meanwhile, is representing San Francisco-based, mid-market private equity firm Altamont Capital Partners on its acquisitions this month of Taco Bell franchisor Tacala, fellow fast food franchisee Boom Foods, and government security and investigations services provider Omniplex World Services. Paul Hastings, another firm busy advising mid-market private equity clients, is representing both Tacala and Boom Foods on their sale to Altamont. The firm is also advising GI Partners on its sale of the Plum Healthcare Group to Bay Bridge Capital Partners and handling GI's acquisition of data centers in San Diego. Paris-based Activa Capital has turned to Paul Hastings for counsel on its leveraged buyout of Aura Staffing.

Simpson is representing investors led by Siris Capital Group on their $862 million acquisition of Reston, Virginia–based electronics transmission services provider TNS, which is being advised by Gibson, Dunn & Crutcher. Earlier this month, Simpson helped private equity clients First Reserve and SK Capital Partners close a roughly $700 million buy of specialty chemicals company TPC Group that was agreed to this summer, according to our previous reports.

Private equity–owned Univar, one of the world's largest chemical distributors, has turned to White & Case for counsel on its $500 million acquisition this month of Magnablend, a chemical blender and supplier of substances used in the North American oil and gas business.

Wachtell, Lipton, Rosen & Katz picked up the work advising French retail group PPR in December on the $525 million sale of its Redcats mail order unit and plus-size fashion business OneStopPlusGroup to Boston-based private equity firms Charlesbank Capital Partners and Webster Capital. (Dechert also grabbed a role representing PPR this month in connection with its acquisition of Chinese fine jewelry maker Qeelin.)

Wachtell has also been busy of late in the real estate sector, which has also felt the impact of the uncertainty surrounding the fiscal cliff's potential tax penalties. The firm is advising real estate investment trust Ventas on its $242 million deal to jointly take control of Atria Senior Living with the management of the Louisville-based assisted care and senior housing company. (Ventas acquired Atria from a Lazard unit in a $3.1 billion deal in 2010, according to our previous reports.)

Bloomberg reports that Weil, Proskauer Rose, and Duane Morris are advising on an acquisition of non-traded REIT American Realty Capital Trust III by American Realty Capital Properties. Elsewhere in the real estate space, Simpson advised Carlyle this month on the closure of the second half of its $1 billion effort to sell prime retail space at 666 Fifth Avenue in Manhattan. And Hogan Lovells and offshore firm Mourant Ozannes are representing New York–based BlackRock, the world's largest money manager, on its purchase last week of 27 real estate investments valued at more than $543 million from a Deutsche Bank affiliate represented by Herbert Smith Freehills.

In a column last week for the San Jose Mercury News, Internet entrepreneur and Harvard Law School graduate Michael Fertik writes that the fiscal cliff could be a disaster for start-ups, of which several were snapped up this month by larger suitors.

Gibson Dunn represented AOL on its purchase of advertising technology firm Buysight earlier this month for an undisclosed amount, while mobile security start-up Zenprise tapped O’Melveny & Myers for counsel on its proposed sale to Citrix Systems. Weil is advising computer giant Dell on its acquisition of Austin-based data protection start-up Credant Technologies.

For the moment, it remains uncertain what type of transactional market lawyers from large firms can look forward to next year. Though M&A activity reached a 10-year low in 2012, according to figures released earlier this month by Thomson Reuters, there is hope that the sector will rebound in 2013 if legislators in Washington, D.C., can put aside political differences and reach an agreement that will provide some economic certainty.

"If we can have a rational solution to the fiscal cliff, we have the opportunity to have an improved M&A year in 2013," Cravath, Swaine & Moore corporate head Scott Barshay—who this month advised Delta Air Lines on an alliance with Virgin Atlantic Airways—told the Financial Times last week. "If we go over the cliff, then we're likely to have a down M&A year."